Judge Harold Baer Jr.

RBS Wins Dismissal of South Korean Bank Case

On December 27, 2012, Judge Harold Baer, Jr. of the United States District Court for the Southern District of New York dismissed an action brought by Woori Bank against RBS Securities and related entities claiming fraud, negligent misrepresentation, and unjust enrichment.  Woori alleged that defendants knowingly marketed CDOs based on RMBS that had a greater risk than their ratings suggested, and that RBS fraudulently and negligently induced Woori to buy those CDOs.  Further, Woori alleged that RBS concealed or failed to properly disclose their efforts to manipulate LIBOR rates.  The court dismissed the fraud claim because Woori’s allegations did not specifically connect RBS’s alleged knowledge of problems or suspect behavior to the transactions at issue.  Further, the court found that Woori was unable to show with sufficient specificity any facts that demonstrated RBS had created an inherently unfair transaction by failing to disclose information and accordingly dismissed the negligent misrepresentation claim.  Decision.

Judge Certifies Class in Lawsuit Against Dynex Capital for Over $630 Million in Mortgage-Backed Securities

On March 7, 2011, Judge Harold Baer, Jr. of the U.S. District Court for the Southern District of New York certified a class of plaintiffs bringing claims under Section 10(b) and 20(a) of the Exchange Act against Dynex Capital, Inc. on the basis that Dynex Capital allegedly made material misstatements and omissions regarding underwriting standards, market conditions, loss reserves, and delinquencies in connection with the sale of bonds that are MBS collateralized by pools of mobile home loans. Judge Baer certified the class to include all purchasers of two MBS, even though the lead plaintiff purchased from only one tranche of one MBS. Unlike several other federal district judges, Judge Baer certified the class for purchasers of both MBS even though individual plaintiffs who purchased other tranches have different repayment rights and damages. Judge Baer also rejected Dynex Capital’s argument that the element of reliance was not sufficiently pled on the basis that the fraud-on-the-market doctrine does not apply because the market for the bonds at issue was inefficient. In finding that an efficient market existed, the court noted that trading volume of these MBS securities was sufficient , market makers for these securities existed, and there was sufficient price reaction to the disclosure of material information concerning these securities. Decision.