International Fund Management S.A. v. Citigroup Inc.
822 F. Supp. 2d 368
S.D.N.Y.2011Background
- Plaintiffs in four related actions are investors in Citigroup securities, bringing Securities Act, Exchange Act, NY common law, and UK law claims arising from alleged misrepresentations and omissions.
- Plaintiffs allege Citigroup and affiliates violated securities laws related to CDOs, SIVs, Alt-A RMBS, ARS, mortgage lending, solvency, and capital adequacy.
- Defendants moved to dismiss under Rule 12(b)(6); the actions are consolidated with related class actions in this district.
- The Court previously addressed similar claims in related Securities and Bond actions and adopts that reasoning where applicable.
- Key issues include pleading adequacy, timeliness under the Securities Act, and various affirmative defenses under Exchange Act and UK law.
- The Court's ruling grants in part and denies in part the motion to dismiss, with several claims arising under Securities Act pre-consolidation SIVs and ARS, and UK/NY common law claims, dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Securities Act pleading adequacy for pre-consolidation SIV and ARS claims | SIV/ARS misstatements and omissions were pled adequately. | SIV and ARS pre-consolidation claims fail as to misstatement/omission. | Securities Act pre-consolidation SIV and ARS claims dismissed. |
| Securities Act timeliness and American Pipe tolling | WorldCom/American Pipe tolling preserves claims; class action tolling extends repose. | Tolling does not apply to the repose period for these claims. | American Pipe tolling is available; the challenged claims are timely. |
| Section 10(b) CDO claims post-April 18, 2008 | Citigroup misrepresented CDO holdings beyond Feb 2007–Apr 2008. | Post-April 2008 CDO allegations insufficiently pled with scienter. | CDO claims after April 18, 2008 dismissed (no adequate scienter). |
| Section 10(b) Alt-A RMBS and ARS claims | Alt-A RMBS and ARS misstatements/omissions support Section 10(b) claims. | Alt-A RMBS omitted specifics; ARS lacks scienter and actionable omission. | Alt-A RMBS claims dismissed; ARS claims dismissed for lack of scienter and omissions. |
| UK Misrepresentation Act/deceit and reliance | UK reliance presumed in misrepresentation/ deceit claims. | No adequate reliance established for UK claims. | UK Misrepresentation Act and deceit claims dismissed for lack of actual reliance. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading plausibility standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (facial plausibility pleading standard)
- American Pipe & Construction Co. v. Utah, 414 U.S. 538 (U.S. 1974) (class action tolling applicable to later members)
- Crown Cork & Seal Co. v. Parker, 462 U.S. 345 (U.S. 1983) (tolling rationale for class actions)
- In re WorldCom Sec. Litig., 496 F.3d 245 (2d Cir. 2007) (class tolling and pleading standards in securities actions)
- Lampf, Pleva, Lipkind, Prus & Petigrow v. Gilbertson, 501 U.S. 350 (U.S. 1991) (statute of repose tolled by class actions (American Pipe context))
- Morrison v. Nat’l Australia Bank Ltd., 130 S. Ct. 2869 (S. Ct. 2010) (limits Section 10(b) claims for foreign offerings)
- Norges Bank v. Citigroup, not provided in official reporter (S.D.N.Y. 2011) (case cited for reliance standards in UK/foreign claims)
- Suprema Specialties, Inc. Sec. Litig., 438 F.3d 256 (3d Cir. 2006) (Rule 8 pleading standard and fraud exceptions)