525 F. App'x 16
2d Cir.2013Background
- Liberty sues Goldman as lead underwriter for Fannie Mae securities offerings in Sept. and Dec. 2007, seeking $62.5 million in losses.
- Allegations claim Goldman drafted/disseminated offering documents that misrepresented Fannie Mae’s capital adequacy and failed to disclose inadequate write-downs and loss reserves for ~ $700 billion in risky mortgages.
- Liberty asserts violations of Rule 10b-5 and corresponding state securities and consumer protection laws, plus common law fraud and negligent misrepresentation.
- District court dismissed Liberty’s seven claims for failure to plead an actionable misstatement or omission.
- The panel agrees, ruling that the claims rely on hindsight and that later disclosures cannot render earlier statements fraudulent absent more showing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Liberty plausibly pled an actionable misstatement or omission | Liberty contends misrepresentations about capital thresholds and reserves were objectively false at the time. | Goldman argues the statements were predictive/business judgments not actionable misstatements. | No; pleadings rely on hindsight, not misstatement. |
| Whether subsequent events can rescue a claims alleging fraud at the time of the misstatement | Subsequent write-downs support that initial statements were false. | Post-hoc disclosures do not prove falsity of earlier statements absent reliable inference. | No; later write-downs attenuate but do not establish fraud. |
Key Cases Cited
- Denny v. Barber, 576 F.2d 465 (2d Cir. 1978) (fraud claims cannot be based on hindsight)
- Acito v. IMCERA Grp., Inc., 47 F.3d 47 (2d Cir. 1995) (failure to foresee harms does not equal fraud)
- Plumbers & Steamfitters Local 773 Pension Fund v. Canada Imperial Bank of Commerce, 694 F. Supp. 2d 287 (S.D.N.Y. 2010) (rejects predatory timing of write-downs claims)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (fraud may be inferred from substantial write-offs, but context matters)
- Rothman v. Gregor, 220 F.3d 81 (2d Cir. 2000) (significant write-offs can bear on falsity timing)
- S.E.C. v. Gabelli, 653 F.3d 49 (2d Cir. 2011) (fraud claims involve self-concealing conduct and later disclosure)