924 F. Supp. 2d 528
S.D.N.Y.2013Background
- Intesa filed an amended complaint asserting federal securities fraud and state-law fraud, aiding and abetting fraud, and civil conspiracy against Calyon/Credit Agricole, Putnam, and Magnetar entities.
- The FAC centers on the Pyxis ABS CDO 2006-1, a $180 million investment blamed on Magnetar’s control of collateral and a designed-to-fail portfolio.
- Intesa alleges a “Magnetar Scheme” where Magnetar secretly controlled collateral, bet against Pyxis, and profited while Pyxis failed.
- Intesa alleges emails documenting a side letter and knowledge by Calyon and Putnam of Magnetar’s bets and manipulations.
- Pyxis issued six classes of notes including $180 million of Class A-1 notes; downgrade to CCC/C caused a $180 million credit event forcing Intesa to pay protection and lose its investment.
- The court considered whether Intesa’s claims could proceed under Rule 12(b)(6) and Rule 9(b), and applied 28 U.S.C. § 1658(b) to determine time-bar status.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Intesa’s §10(b) claims are timely under §1658(b). | Intesa argues discovery occurred in 2011, delaying the two-year window. | Calyon asserts discovery occurred by 2010 due to public articles; five-year window also applies. | §10(b) claims time-barred; both two-year and five-year deadlines apply and expired. |
| When did discovery and the violation occur for §1658(b)? | Discovery of scienter facts occurred in July 2011 (Emails surfaced then). | Discovery occurred earlier via public articles; subject to earlier dates. | Discovery date July 21, 2011; five-year deadline expired prior to filing. |
| Did the five-year post-violation deadline bar the claims even if the two-year period did not? | Intesa contends the five-year period should be tied to the Pyxis transaction (April 24, 2007). | Court rejected continuing-omission theory and tied five-year window to misrepresentation/omission timing. | Five-year deadline expired for Calyon (March 2012) and Putnam (October 2011); claims untimely. |
| Should the state-law claims be heard given the federal-time-bar ruling? | State claims may be preserved under supplemental jurisdiction. | With federal claims time-barred, there is no basis to exercise supplemental jurisdiction. | State-law claims dismissed; supplemental jurisdiction declined. |
Key Cases Cited
- City of Pontiac Gen. Employees’ Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011) (discovery for §1658(b) purposes and the two-year window start)
- Merck & Co., Inc. v. Reynolds, 559 U.S. 633 (2010) (clarifies discovery and strong inference for scienter under §1658(b))
- ECA, Local 134 IBEW Joint Pension Trust of Chicago v. JPMorgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (requires strong inference of motive or conscious misbehavior or recklessness)