CMFG Life Ins. Co. v. RBS Securities, Inc.

Dist. Ct. erred in granting defendant’s motion for summary judgment in action seeking rescission with respect to series of plaintiff’s purchases of mortgage-backed securities from defendant, where plaintiff alleged that defendant made material misrepresentations as to whether underlying mortgage loans complied with applicable underwriting guidelines. Record showed that approximately 40.8% of underlying mortgage loans had violated underwriting guidelines that materially increased credit risk of loans, and reasonable fact finder could find under course-of-dealing evidence that plaintiff’s decision-maker actually relied on guidelines-compliance representations that were reasonably expected to be included in defendant’s prospectuses when purchasing instant securities. Record also contained question of fact as to whether defendant’s representative repeatedly assured plaintiff’s decision-maker that extensive due diligence had been performed on relevant loan pools, and that said assurances did not amount to mere puffery. Dist. Ct. also erred in finding that instant rescission action was subject to Wisconsin’s 6-year limitations period applicable to contracts, since instant rescission action sought to disaffirm subject contracts and not sue upon them.