On April 22, 2015, the Second Circuit vacated and remanded a district court’s decision dismissing on statute of limitations grounds claims Woori Bank brought against Citigroup Global Markets arising out of Woori’s purchase of $25 million in collateralized debt obligations. Woori asserted claims for fraud, fraudulent inducement, negligent misrepresentation, and unjust enrichment, alleging that Citi made misrepresentations in connection with its sale of the CDO to Woori. The district court dismissed the action as time-barred, holding that Woori had knowledge of its claim prior to May 2009, the date after which an action would be time-barred under the applicable South Korean statute of limitations. The Second Circuit reversed. It held that the news reports and pitch materials on which the district court had relied to establish Woori’s knowledge were not sufficient to put it on notice of its specific claim against Citi because none of them suggested that Citi acted fraudulently in connection with the CDO at issue. Summary Order.
Woori Bank
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.
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.