Carrington to Appeal RMBS-Related Lawsuit Judgment










Carrington Capital Management is appealing a judgment by the U.S. District Court for the District of Connecticut awarding a mortgage-backed securities investor at least $1.3 million in contractual damages.

The Greenwich, Conn.-based company on April 16 filed a notice of appeal in the case, according to a spokeswoman.

At issue in the lawsuit was investor Joseph Umbach’s ability to withdraw on Sept. 28, 2007 its investment in a single-family subprime MBS fund managed by Carrington in line with a July 11, 2007 request.

Umbach’s attorney could not be reached for comment.

The court had awarded at least $1.3 million in contract damages based on a net asset value statement prepared by Carrington representing the value of Umbach’s interest in the fund, according to a financial filing by Carrington last month. The court also awarded Umbach certain other additional interest.

Carrington had filed immunity and indemnification claims against Umbach, but the March 17 court decision dismissed these. The court also found that rescission was not an appropriate remedy for Umbach, but found that Umbach could amend his complaint to add contract damages as a remedy.

The company refused to honor Umbach’s “properly submitted” request to rescind investments because by August 2007 broad concern about the health of the subprime mortgage market had led to additional redemption requests it estimated it only had enough cash to meet a portion of, according to the court.

None of the limited partner investors except Umbach have sued Carrington, the court documents noted.

Prior to investing in the fund and after considering various offering documents on May 18, 2005, Umbach and Rose spoke by telephone and Rose agreed to exempt Umbach from a 12-month lockup period otherwise applicable to new investments.

“No genuine dispute exists that Umbach did not invest in the fund until he secured enhanced rights of redemption,” according to court documents.

Carrington on April 15 also issued a separate statement indicating it had been advised by Securities and Exchange Commission staff that an investigation of matters that included securities and a fund used in part for the acquisition and operation of a bankrupt boom-era subprime servicing platform has ended.

“Based on the information it has at this time, the staff does not intend to recommend any enforcement action by the SEC,” Carrington said. The SEC declined comment.

Carrington had previously disclosed that the SEC had subpoenaed the company in September 2013. Carrington acquired subprime mortgage company New Century Financial Corp.’s servicing platformin 2007.

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