Landesbank Baden-Wurttemberg v. Goldman, Sachs & Co.
478 F. App'x 679
2d Cir.2012Background
- Landesbank Baden-Wurttemberg appeals after district court dismissed Landesbank's common law fraud, negligent misrepresentation, and unjust enrichment claims related to Davis Square Funding VI notes.
- The Davis Square notes were marketed through an Offering Circular that disclaimed a special relationship and urged Landesbank to assess risks as a sophisticated investor.
- The complaint alleges Goldman and TCW knew information undermining the notes’ triple-A ratings but failed to disclose it.
- New York law requires proof of a material misrepresentation, falsity, intent to induce reliance, justifiable reliance, and damages for fraud.
- Landesbank also asserts negligent misrepresentation and unjust enrichment against Goldman and TCW.
- The district court dismissed the claims under Rule 12(b)(6); the Second Circuit affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there a plausible claim of fraud? | Landesbank contends defendants had motive/opportunity and knew or should have known statements were false. | No specific facts showing motive or knowingly false statements; allegations are inadequate under Rule 9(b). | No plausible fraud claim; pleadings fail to show strong inference of intent. |
| Was there justifiable reliance for negligent misrepresentation? | Landesbank relied on defendants’ representations despite disclaimer of fiduciary/ advisory role. | No justified reliance given the Offering Circular and Landesbank’s own sophistication and access to information. | Reliance not justifiable; relationship was arm’s-length buyer-seller with no special trust. |
| Does Landesbank state a claim for unjust enrichment? | Defendants were unjustly enriched at Landesbank's expense. | No cognizable enrichment claim; no restitution warranted under the facts. | Unjust enrichment claim fails; district court properly dismissed. |
Key Cases Cited
- Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553 (N.Y. 2009) (elements of fraud and strict pleading requirements)
- ECA & Local 134 IBEW Joint Pension Trust of Chi. v. JP Morgan Chase Co., 553 F.3d 187 (2d Cir. 2009) (pleading standards for fraud claims)
- Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (strong inference of fraudulent intent required)
- O’Brien v. Nat’l Prop. Analysts Partners, 936 F.2d 674 (2d Cir. 1991) (motive and opportunity or conscious misbehavior standard)
- Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) (strong circumstantial evidence of intent allowed inference)
- Dall. Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775 (2d Cir. 2003) (closer duty of care and justifiable reliance in negligent misrepresentation)
- Warner Theatre Assocs. Ltd. P’ship v. Metro. Life Ins. Co., 149 F.3d 134 (2d Cir. 1998) (special knowledge and reliance considerations)
- Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168 (2d Cir. 2004) (factors for strong inference of fraud)
- San Leandro Emergency Med. Grp. Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801 (2d Cir. 1996) (reliance and information disclosure standards)