On November 25, the United States Court of Appeals for the Second Circuit upheld the dismissal of IKB Deutsche Industriebank AG’s suit against Bank of America. IKB alleged that BofA fraudulently misrepresented the quality of loans underlying mortgage backed securities sold in 2005 and 2006. The court held that the complaint’s generalized allegations that BofA knew of claimed mortgage defects by virtue of access to due diligence reports prepared by Clayton and BofA’s own due diligence procedures were not sufficient to plead fraudulent intent. The court also affirmed dismissal of IKB’s claim for fraud relating to representations about the transfer of mortgages to the issuing trust, holding that these representations constituted promises to perform in the future and thus were not the proper subject of a fraud claim absent allegations that there was an intent not to perform at the time the promises were made. Summary Order.
Court of Appeals for the Second Circuit
Second Circuit Affirms Dismissal of Untimely CDO Claims against Merrill Lynch
On November 21, the Court of Appeals for the Second Circuit affirmed the dismissal of a suit brought by South Korea‘s Woori Bank against Merrill Lynch & Co., Inc. and Bank of America Corp. on statute of limitations grounds. The bank brought claims for fraud, rescission, negligent misrepresentation and unjust enrichment on May 18, 2012 stemming from its $143 million investment in several collateralized debt obligations. The Second Circuit agreed with the lower court that publicity about Merrill Lynch’s CDOs, related lawsuits and government investigations sufficiently alerted Woori to any claims prior to May 2009. The bank’s claims were therefore time-barred under South Korea’s applicable three year statute of limitations. Decision.