902 F. Supp. 2d 471
S.D.N.Y.2012Background
- Plaintiff is the New York branch of Bayerische Landesbank, a German bank, and the court treats the NY branch as having standing to sue as its parent.
- The court considers Morrison v. National Australia Bank Ltd. to determine whether certain financing transactions involved United States status for purposes of securities law.
- Plaintiff alleges that BarCap and SSGA manipulated Markov’s collateral, and that the notes were marketed and sold in New York with involvement by BayernLB.
- The London branch’s involvement is questioned; the complaint alleges Markov notes were purchased by the New York branch, not the London branch.
- The court concludes certain claims (fraud-related counts) are plausibly pleaded and that some claims require factual development beyond a motion to dismiss.
- The court grants some dismissals (e.g., State Street Corp on controlling-person liability and certain fiduciary claims) but allows others to proceed and grants leave to replead.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of the NY branch to sue | BayernLB NY branch has legal identity and standing. | Not explicitly stated as challenged; court rules on standing. | Standing exists; dismissal denied. |
| Application of Morrison to Markov | Transactions plausibly involve US factors; Morrison not defeated. | Depends on whether US status applies; broad reliance on Morrison. | Morrison dismissal denied pending further proof. |
| Fraud claims (Counts 1, 3, 4, 5) viability | Allegations show misrepresentation and control over collateral. | Rebuttal based on deficiences or misapplication of law. | Counts 1, 3, 4, 5 survive at least on pleadings. |
| State Street Corp. as controlling person under §20(a) | SSGC participated or was aware of fraud; controlling person liability alleged. | Allegations are conclusory and insufficient to prove controlling conduct. | Count 2 dismissed against State Street Corporation. |
| Fiduciary duties and aiding/abetting (Counts 7-8) viability | SSGA held itself out in fiduciary role and possessed superior expertise. | Allegations do not establish fiduciary relationship or aiding/abetting. | Counts 7-8 dismissed. |
Key Cases Cited
- Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009) (pleading standard: plausibility required for fraud and other claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for complaint dismissal)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (factual allegations must state a plausible claim)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (requires specific identification of reports for intent in fraud pleadings)
- Landesbank Baden-Wurttemberg v. Goldman, Sachs & Co., 478 F. App’x 679 (2d Cir. 2012) (summary order; not precedential; specificity requirement for due diligence reports)
- Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d 42 (2d Cir. 2012) (New York branch has no separate legal identity from parent for standing)
- Space Coast Credit Union v. Barclays Capital, Inc., 2012 WL 946882 (S.D.N.Y. 2012) (plausibility of misrepresentation claims in CDO context (summary order) [note: WL cited but not official reporter; included for context])
- Edge Mgmt. Consulting, Inc. v. Blank, 25 A.D.3d 364 (N.Y. App. Div. 2006) (third-party beneficiary contract requirement)
- Abercrombie v. Andrew College, 438 F. Supp. 2d 243 (S.D.N.Y. 2006) (mere expertise insufficient to create fiduciary duties)
- Kalin v. Xanboo, Inc., 526 F. Supp. 2d 392 (S.D.N.Y. 2007) (particularized facts required for controlling-person liability)
- Mechigian v. Art Capital Corp., 612 F. Supp. 2d 1421 (S.D.N.Y. 1985) (fiduciary duties and expertise-based relationships)
- Sharp Int’l Corp. v. State St. Bank & Trust Co. (In re Sharp Int’l Corp.), 403 F.3d 43 (2d Cir. 2005) (controlling person and aiding/abetting framework)