Jenner & Block

“Reimposing a Scienter Requirement in the Martin Act,” New York Law Journal

In this article, Partner Katya Jestin and Associate Matthew D.Cipolla examine the Martin Act in the context of New York Attorney General Eric Schneiderman's recent lawsuits against J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC related to fraud in the packaging of mortgage-backed securities, described as a “template” for future cases against other mortgage-backed securities sponsors and underwriters.  The Martin Act permits the New York Attorney General to bring civil and criminal suits alleging "fraud" and "fraudulent practices" regarding the offer, sale or purchase of securities.  While media attention has focused on the fact that the Act relieves the New York Attorney General’s office of having to prove reliance, damages and scienter and carries a statute of limitations of six years, the authors observe that “a quirk of New York's Civil Practice Law and Rules arguably reimposes the requirements of scienter, reliance and damages in order to extend the statute of limitations beyond three years.”