On September 19, Justice Alan D. Scheinkman of the New York Supreme Court for Westchester County granted in part MBIA’s motion for leave to amend its complaint against J.P. Morgan in an action related to a Bear Stearns RMBS transaction that MBIA insured. In May, the court granted summary judgment in favor of J.P. Morgan on the sole claim of fraud in the original complaint. In that decision, however, the court noted that while MBIA could not demonstrate fraud, there may have been unpleaded causes of action for fraudulent concealment and/or relief available under Section 3105 of the New York Insurance Law. MBIA then sought to file an amended complaint containing those two new claims and an amended fraud claim. As all of these claims were viable at the time of the original complaint, J.P. Morgan argued that the claims were precluded by the doctrine of res judicata based on the court’s summary judgment decision. The court rejected this argument and held that res judicata only applied to the pleaded fraud claim and not to the new claims. As to the substance of MBIA’s amended claims, the court granted leave to file an amended complaint on the fraudulent concealment claim alone, dismissing the previously pleaded fraud claim and MBIA’s Section 3105 claim. Order.
Fraud
Asset Management Fund Sues Bank of America, Merrill Lynch, Countrywide, and Others for $478 Million
On March 1, 2012, Asset Management Fund filed a summons with notice in New York state court against Bank of America, Merrill Lynch, Countrywide, Credit Suisse, Goldman Sachs, and others. Asset Management Fund alleges that it purchased $239 million in RMBS from defendants, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions. The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract. Asset Management Fund is seeking approximately $478 million in damages, including punitive damages, and alternatively seeks rescission. Summons.
JPMorgan Sued for $314 Million by Deutsche Zentral-Genossenschaftsbank
On March 1, 2012, Deutsche-Zentral Genossenschaftsbank (“DZ Bank”) filed a summons with notice in New York state court against Bear Stearns, JPMorgan Chase, and related entities. DZ Bank alleges that it purchased $157 million in RMBS from defendants, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions. The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract. DZ Bank is seeking approximately $314 million in damages, including punitive damages, and alternatively seeks rescission. Summons.
JPMorgan Sued for $228 Million by Principal Life Insurance
On March 1, 2012, Principal Life Insurance Company filed a summons with notice in New York state court against JPMorgan Chase and related entities. Principal alleges that it purchased $114 million in RMBS from JPMorgan, and that the offering documents in connection with the sales of those securities contained material misstatements and omissions. The summons asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and breach of contract. Principal is seeking approximately $228 million in damages, including punitive damages, and alternatively seeks rescission. Summons.
TIAA Sues Deutsche Bank for Fraud in New York State Court
On August 1, 2011, Teachers Insurance and Annuity Association of America (“TIAA”) filed a complaint against Deutsche Bank and certain of its affiliates for common law fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation in the Supreme Court of the State of New York. TIAA alleges that Deutsche Bank made several false representations regarding the quality of the loans contained in the subprime RMBS it securitized and sold to TIAA, despite the fact that members of Deutsche Bank’s trading desk allegedly made disparaging internal statements concerning the quality of Deutsche Bank’s RMBS and developed a short position against those securities. According to TIAA, the loans underlying the RMBS were riskier than Deutsche Bank represented in several aspects, including originators’ adherence to underwriting guidelines, loan-to-value ratios, credit ratings of the RMBS certificates, and status of title transfer. Complaint.