JPMorgan Chase lost a bid to block buyers of $10 billion worth of residential mortgage-backed securities it packaged in 2007 to proceed as a group with their lawsuit alleging the bank misled them.
U.S. District Judge J. Paul Oetken in Manhattan on Tuesday ruled that the claims of investors in nine separate offerings of the securities were similar enough for them to move forward as a class on the question of whether JPMorgan is liable for making false and misleading statements in the offering documents.
The ruling only applies to liability. Oetken said he was not convinced at this stage that there is a damages calculation that would cover the claims of all the investors included in the group.
JPMorgan last year agreed to a $13 billion settlement with the U.S. to resolve allegations the bank misled investors in mortgage-backed securities about the soundness and risks of the investments that helped bring on subprime-mortgage crisis of 2008.
"Because the class is currently certified for liability purposes, this phase of litigation will focus on the issue of whether defendants made material false statements or omissions in the offering documents that affected the value of the certificates owned by the plaintiff class members," the judge said.
Joe Evangelisti, a spokesman for New York-based JPMorgan, declined to comment on the ruling.
Class certification will allow individual investors who have not filed a lawsuit to be represented by the lead plaintiff in a single case because their experiences and legal claims are similar. Class-action status is less expensive for plaintiffs than filing multiple lawsuits and provides leverage in settlement negotiations.