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Case 1:11-cv-00733-WHP Document 134 Filed 02/27/12 Page 1 of 3
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Attorneys At Law




February 15,2012



Via Federal Express
Honorable William H. Pauley, III
United States District Court

for the Southern District of New York

500 Pearl Street

New York, NY 10007-1312


Pennsylvania Public School Employees' Retirement System v.
Bank of America Corp., et at, Civil Action No. ll-cv-00733-WHP

Dear Judge Pauley:

Lead Plaintiff, by its undersigned counsel, respectfully submits this letter, pursuant to

Your Honor's Individual Practices, to request a pre-motion conference with respect to an
intended motion to strike certain documents that defendants submitted in support of their
motions to dismiss. The grounds for the motion are that the challenged documents were not
referenced in the complaint, are hearsay and are not the proper subject ofjudicial notice, and
therefore may not be considered on a motion to dismiss. Tellabs, Inc. v. Makar Issues & Rights,
Ltd., 127 S. Ct. 2499,2509 (2007); ATSI Comm 'cns Inc. v. Shaar Fund, Ltd, 493 F.3d 87, 98 (2d
Cir. 2007); International Star Class Yacht Racing Ass 'n v. Tommy Hilfiger US.A., Inc., 146 F.3d
66, 70-71 (2d Cir. 1998). The challenged documents fall into the following general categories:

Excerpts From SEC Filings of Other Companies. BAC, the Executive Defendants,

and the Underwriter Defendants (as defined at ~~ 41-43 ofthe complaint) have submitted
excerpts from various public filings made by certain other public companies and trusts
(Bongiorno Exs. A, C, P, and Q, and MusoffExs. K, L, CC, and DD). The filings were not
referenced in the complaint and constitute irrelevant hearsay. Fed. R. Evid. 801(c), 802. For
example, defendants improperly rely upon two pre-class period prospectuses in which there are
no statements by BAC or by the Executive Defendants. See Bongiorno Exs. P and Q(and
MusoffExs. K and L). These documents are proffered to dispute Lead Plaintiff's factual
allegation that neither BAC nor the Executive Defendants disclosed to investors in the
Company's securities BAC's substantial use ofMERS in its SEC filings until after the class
period. The two prospectuses were filed not by BAC but by a limited purpose finance subsidiary
of Countrywide Financial Corporation, called "CWABS," and an indirect subsidiary ofBAC
formerly known as NationsBanc Montgomery Funding Corp. Defendants cannot retroactively
cure their own omissions about MERS by citing these disclosures. See In re Countrywide
Financial Corp. Sec. Litig., 588 F.Supp.2d 1132, 1160 (S.D. Cal. 2008) (securitization trust

3300 Two Commerce Square

* 2001 Market Street

* Philadelphia, PA 19103

Telephone 215.963.0600 * Facsimile 215.963.0838


Case 1:11-cv-00733-WHP Document 134 Filed 02/27/12 Page 2 of 3

Barrack, Rodos &> Bacine

Honorable William H. Pauley, III
February 15,2012
Page 2

prospectuses are intended for private investors, not purchasers of stock on the open market or in
public offerings).

News Articles, Press Reports and Commentary. Defendants also improperly rely upon

various news articles, other press and commentary about MERS, the financial crisis, or the
overall markets, to contend that, before the class period, investors were informed of the facts that
the complaint alleges were concealed. See Underwriter Defs. Mem. at 14-15 (Bongiorno Exs.
M, R, T, U, V, X, Z, AA, and BB) (contending that the Section 11 claim alleged is untimely
because investors were on notice of facts alleged to have been concealed); BAC Defs. Mem. at
5-8 (MusoffExs. P, Q, R, T, U, V, and W) (contending that mortgage registration through
MERS was disclosed before the class period). To the extent the Defendants offer these out-of­
court statements for their truth, they are excludable hearsay. Alvary v. United States, 302 F.2d
790, 794 (2d Cir. 1962). Moreover, to the extent they are being offered as proof of notice to the
market, there is an insufficient basis for the Court to consider them on a motion to dismiss
because "it is for the factfinder" - here the jury - "to determine whether a particular collection of
data was sufficiently aposematic to place an investor on inquiry notice." Young v. Lepone, 305
F.3d 1,9 (Ist Cir. 2002); Marks v. CDW Computer Ctrs., Inc., 122 F.3d 363,368-69 (7th
Cir.1997) (on motion to dismiss "it is abundantly clear that such a question would be one for the
trier of fact").

The challenged news articles, press reports and commentary could not put anyone on

notice of the culpable conduct by BAC and the Executive Defendants as alleged during the class
period. For example, Bongiorno Ex. R was published 15 months prior to the class period and
mentions MERS, Countrywide (before it was acquired by BAC), and Wells Fargo; but it does
even not mention BAC. The article also contains factual statements that lead plaintiff hotly
disputes, such as "All ... practices and procedures in the handling of bankruptcy cases follow
applicable laws, and we stand behind our actions." Similarly, Bongiorno Ex. T reports a MERS
court victory and states that the MERS president was "pleased with the court's decision."
Neither ofthese articles may be deemed to have put anyone on notice that BAC and the other
defendants were liable for culpable conduct as alleged in the complaint. Defendants improperly
use these articles to make the argument that their version of the underlying facts is correct, an
issue that must be resolved at trial. See In re Stocker Yale, 453 F. Supp. 2d 345, 348 (D.N.H.
2006) (granting motion to strike market commentary because "editorial comments and analysis
contained in the commentary about overall trends in the security sector [are not] the kind of
information that is subject to judicial notice"); Alaska Elec. Pension Fund v. Pharmacia Corp.,
554 F.3d 342,350 (3rd Cir. 2009) ("Just as we require investors to act upon public information
indicating fraud, so, too, do we allow them to rely upon corporate statements discounting the
possibility of malfeasance."). "[R ]eassurances can dissipate apparent storm warnings if an
investor of ordinary intelligence would reasonably rely on them to allay the investor's concerns."
In re Merck & Co., Inc. Securities, Derivative & "ERISA" Litigation, 543 F.3d 150, 167 n.14 (3d

Case 1:11-cv-00733-WHP Document 134 Filed 02/27/12 Page 3 of 3

Barrack, Rodos &- Bacine

Honorable William H. Pauley, III
February 15,2012
Page 3

Cir. 2008) (internal citations and quotations omitted), aff'd, sub nom Merck & Co., Inc. v.
Reynolds, 130 S. Ct. 1784 (2010).

Complaints. The Underwriter Defendants also improperly rely upon complaints filed in
other cases that were neither mentioned nor relied upon in Lead Plaintiffs complaint. The Court
of Appeals cautioned that it would be unreasonable to expect an ordinary investor to be aware of
a lawsuit that was not referenced in contemporaneous news articles or regulatory filings. Staehr
v. Hartford Fin. Servs. Group, Inc., 547 F.3d 406,435 (2d Cir. 2008). Ignoring this precedent,
the defendants contend that the complaints, which allege violations of loan originations
standards, breaches of fiduciary duty and violations of MBS representations and warranties, and
that lenders' use ofMERS had resulted in fraudulent transfers, constituted notice to investors
about their claims here. (Bongiorno Exs. D, H, I, J, and Yo) Defendants' citation to these
materials also attempts to dispute Lead Plaintiffs specific factual allegations that defendants
concealed a known material risk that BAC had enormous exposure arising from repurchase
requests and demands that had not yet been followed by the formal commencement of litigation.
See ~~ 14,83-84,98-101, 131-33, 136(n)-(0), 155, 162, 180-81. Moreover, a "complaint is not
evidence" unless it contains admissions. Newton v. City ofNew York, 640 F.Supp.2d 426, 448

Other. Lead Plaintiff also seeks to strike certain financial industry securities trading data

(Bongiorno Ex. CC) and data from government reports (Musoff Exs. X and Y). That data were
not referred to in the complaint, are hearsay and are not the proper subject ofjudicial notice.
Tommy Hilfiger U.S.A., supra, 146 F.3d at 70-71. In sum, "[o]n fact questions the court should
not use the doctrine ofjudicial notice to go outside the record unless the facts are matters of
common knowledge or are capable of certain verification." Alvary, supra, 302 F.2d at 794. The
challenged documents do not meet this test.

Accordingly, Lead PlaintifIrespectfully requests a pre-motion conference with respect to

its intended motion to strike.

cc: All Counsel

Jeffrey A. Barrack