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.
IKB Deutsche Industriebank AG
German Bank Sues Goldman Sachs and Citigroup for a Total of $210 Million
On September 5, 2012, German bank IKB Deutsche Industriebank AG filed summonses with notice against Goldman Sachs and Citigroup in the Supreme Court of the State of New York, New York County claiming $210 million in losses. In two separate actions, the bank alleges that Goldman Sachs and Citigroup provided offering materials that misrepresented or omitted material information about the originators’ underwriting practices, the transfer of loans to the relevant trusts, and the ability of the trusts to recoup interest and principal on the loans. IKB asserted claims for fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, rescission, restitution, and mutual mistake. Goldman Sachs Complaint. Citigroup Complaint.
IKB Brings Two RMBS Lawsuits Against Bank of America and Related Entities
On May 15, 2012, IKB Deutsche Industriebank AG and an IKB affiliate filed two lawsuits against Bank of America and related entities in the New York Supreme Court. The first, in which several Countrywide entities are also defendants, arises out of IKB’s alleged investment in 29 RMBS certificates worth $200.3 million issued by Countrywide. The second, in which several Merrill Lynch entities are also defendants, arises out of IKB’s alleged investment in 13 RMBS certificates worth $56.2 million issued by Bank of America and Merrill Lynch. The summonses with notice filed in the suits are substantively identical. In each, IKB alleges that the offering materials for the RMBS in which it invested contained material misrepresentations and omissions regarding the underwriting standards used to originate the underlying mortgage loans, the statistical characteristics of the loans, the securities’ credit ratings, the legal validity of the assignment of the underlying mortgage loans to the issuing trusts, and the entitlement of the trusts to receive principal and interest payments on the loans. IKB asserts causes of action for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims. IKB seeks actual and punitive damages, rescissory damages, and fees and costs. IKB-BofA/Merrill Summons. IKB-BofA/Countrywide Summons.