Broker-Dealer Litigation - Greenberg Traurig LLP

L.
MBIA Ins. Corp. v. Credit Suisse Sec. (USA) LLC, 927 N.Y.S.2d 517 (N.Y. Sup. 2011).
The court denied the defendants’ motion to dismiss the plaintiff’s indemnification and
reimbursement claims in a case involving issues with mortgage-backed securities. The
defendants’ sole argument for dismissal was that the claims were dependent on two breach of
contract claims, both of which defendants argued should also be dismissed. As the court did not
dismiss the breach of contract claims, the court also declined to dismiss the indemnification and
reimbursement claims. The court further noted that the plaintiff had a contractual right to
indemnification and reimbursement for some of the alleged conduct. On reconsideration, 2011
WL 4865133 (N.Y. Sup. Oct. 7, 2011), the court reinstated plaintiff’s fraudulent inducement
claims and demands for punitive and consequential damages without revisiting the
indemnification and reimbursement claims.
M. Statute of Limitations
1. Federal Securities Claims
M.1
First Bank P.R., Inc. v. La Vida Merger Sub, Inc., 638 F.3d 37 (1st Cir. 2011).
The First Circuit affirmed the dismissal of a securities fraud action. The district court
held that plaintiff’s claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule
10b–5 were time barred under the two-year statute of limitations in 28 U.S.C. § 1658(b)(1). The
First Circuit held that the Supreme Court’s recent decision in Merck & Co. v. Reynolds, 130 S.
Ct. 1784 (2010), did not require reversal because the plaintiff had actual notice of the allegedly
fraudulent merger at issue more than two years prior to filing suit.
City of Pontiac Gen. Emps.’ Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011).
M.1
The Second Circuit reversed the dismissal of a proposed securities fraud class action
arising out of the defendant corporation’s accounting for a transaction as income rather than a
loan. The district court had concluded that the plaintiffs’ claims under the Securities Exchange
Act of 1934 were barred by the applicable two-year statute of limitations because the proposed
class was on inquiry notice of the alleged fraud more than two years before the suit was filed.
Applying the Supreme Court’s decision in Merck & Co. v. Reynolds, 130 S. Ct. 1784
(2010), the Second Circuit held that a plaintiff is deemed to have discovered one of the facts
constituting a securities fraud violation, thereby triggering the statute of limitations, when the
plaintiff can plead that fact with sufficient detail to withstand a motion to dismiss. The court also
held that even though it had previously affirmed the district court’s ruling regarding inquiry
notice, the law of the case doctrine did not preclude re-litigation of this issue because Merck
changed the law. The court further held that since a securities fraud claim cannot accrue until the
plaintiff purchases or sells the relevant security, the two-year limitations period did not begin to
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