Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 ...

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 1 of 8Responsive to Dkt. No. 779 in No. 09-md-0217-LAK(Dkt. No. 182 in No. 09-cv-02363-LAK)UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORKIn re:LEHMAN BROTHERS SECURITIESAND ERISA LITIGATIONCivil Action 09 MD 2017 (LAK)ECF CASEThis Document Applies Only to:American National Insurance Companyeta!. v. Richard S. Fuld, Jr., eta!.,No. 1 :09-cv-02363-LAKJURY TRIAL DEMANDEDRESPONSE AND MEMORANDUM IN OPPOSITION TO CHARLES SCHWAB & CO.,INC'S OBJECTIONS TO DECLARATION OF ERIC J. KIRKPATRICK IN SUPPORTOF PLAINTIFFS' OPPOSITION TO MOTION TO DISMISSTHE LAW OFFICES OF ANDREW J. FRISCHAndrew J. Frisch40 Fulton Street23rd FloorNew York, New York 10038Telephone: (212) 285-8000Facsimile: (646) 304-0352GREER, HERZ & ADAMS LLPAndrew MytelkaM. David LeBlancRoni S. MihalyEric J. KirkpatrickOne Moody Plaza, 18'h FloorGalveston, Texas 77550Telephone: ( 409) 797-3200Facsimile: (409) 766-6484Counsel for Plaintiffs American National Life Insurance Company of Texas, ComprehensiveInvestments Services, Inc., and The Moody Foundation

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 2 of 8American National Life Insurance Company of Texas, Comprehensive InvestmentServices, Inc., and The Moody Foundation ("Plaintiffs") file this response to Defendant CharlesSchwab & Co., Inc.'s ("Schwab") objections to Plaintiffs' exhibits A through G, which werefiled in opposition to the pending motion to dismiss the Second Amended Complaint.Schwab correctly states that, generally, motions to dismiss are decided upon the fourcomers of the complaint; however, there are exceptions Schwab does not set out. Courts willconsider not only the complaint, but also any document attached to the complaint or incorporatedby reference, as well as legally required public disclosure documents, and documents possessedby or known to the plaintiff and upon which the plaintiff relied in drafting the complaint. In re:Lehman Bros. Sec. and ERISA Litig., 799 F. Supp. 2d. 258, 272 (2011). Courts may also takejudicial notice in appropriate circumstances. See Mangiafico v. Blumenthal, 471 F.3d 391, 398(2d Cir. 2006).Schwab's objections typically apply when a defendant seeks to bolster its request fordismissal with evidence. In those cases, courts have long been loathe to consider such attemptswithout first affording a plaintiff the protections of summary judgment practice-such as noticeand the ability to respond in kind, with evidence. Cartee Indus., Inc. v. Sum Holding L.P., 949F.2d 42, 47 (2d Cir. 1991) 1 However, the typical problem encountered when a court reviewsevidence extraneous to a complaint-lack of notice to the plaintiff-is absent when that evidencewas known to the plaintiff when drafting the complaint. See id. at 48 ("Where plaintiff has actualnotice of all the information ... and has relied upon these documents in framing the complaintthe necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated.").Therefore, where a plaintiff either knew about certain documents or had them in its possession,1Cartee Industries involved Plaintiffs who relied upon documents in framing their complaint, and then objected tothe use of those same documents in support of the defendants' motion to dismiss. Cartee Indus., Inc., 949 F.2d at 44.

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 3 of 8and relied upon those documents in framing its complaint--even when those documents werenot public records, attached to the complaint, or incorporated by reference-the Second Circuithas found such documents were integral to the complaint, and appropriately considered in amotion to dismiss. Id.; In re: Lehman Bros. Sec. and ERISA Litig., No. 08-Civ 5523 (LAK), 799F. Supp. 2d. 258 (2011) ("In addition, a document that is integral to a complaint in the sense thatthe plaintiff had actual notice of and relied upon it in framing the complaint, is properlyconsidered, albeit not for the truth of the matters asserted, notwithstanding that it has not beenattached to or incorporated by reference to the complaint.").As the Second Circuit has recognized, and as the United States Supreme Court has madeclear, complaints carmot be dismissed unless it is undeniable that a plaintiff can prove no facts tosupport a claim. Cartee Indus., Inc., 949 F.2d at 47; see also Bell Atl. Corp. v. Twombly, 550U.S. 544, 556, 127 S. Ct. 1955, 1965, 167 L. Ed. 2d 929 (2007) ("... of course, a well-pleadedcomplaint may proceed even if it strikes a savvy judge that actual proof of those facts isimprobable ...."). Here, each of the challenged exhibits was referenced by the LehmanBankruptcy Examiner, Anton Valukas, in his report. See In re Lehman Brothers, No. 08-13555(JMP) (Bankr. S.D.N.Y.) (Doc. No. 7531 filed March 11, 201 0) ("Examiner's Report"). 2 Notonly have Plaintiffs stated a claim, but their allegations are in line with conclusions made by theBankruptcy Examiner based upon his investigation.Specifically, the Bankruptcy Examiner cited to the challenged exhibits and, as shownbelow, these citations comport with Plaintiffs' allegations:2The Bankruptcy Examiller included more than 8,000 footnotes in his nine-volume report; that report is maintainedonline through the Web site of Jenner & Block, L.L.P., at http://jenner.com/lehman/. The Bankruptcy Courtordered, in connection with the Examiner's discharge, that he perform all acts necessary to transition themaintenance of the CaseLogistix database of documents assembled to a neutral vendor. See In re Lehman Brothers,No. 08-13555 (JMP) (Bankr. S.D.N.Y.) (Doc. No. 10169 filed July 13, 2010). Through the Jenner & Block Website, the report is not only available, but every citation is hyperlinked to retrieve the document(s) cited.2

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 4 of 8Exhibit Examiner's PropositionAParagraph(s) in SecondAm. Complaint"By July 2007, after the Bear Stearns' funds'implosion, some Lehman executives were concerned ~ 173that Lehman might not be able to fund all of its ~ 371-72commitments." Examiner's Report at 123 (Vol. 1)"Lehman had a maximum cumulative outflow funding ~~ 130, 134, 136, 139model designed to ensure that Lehman had sufficient ~~ 142-45cash sources to meet the expected cash outflows in a ~ 159B stressed market environment. Under that model, in July ~ 162, 1652007, the firm's "[L]iquidity Pool one year forward ~ 168position [was] short $(0.4) billion." Examiner's Report ~ 170-171at 124 (Vol. 1) ~ 189Citation to Federal Reserve Bank of New York reportc~ 100discussing deficits in Lehman's liquidity pool and~ 146plans to improve liquidity. Examiner's Report at 1488~ 160, 164-65(vol. 4)"Although Lehman's Alt-A mortgages were never as ~ 118risky as subprime mortgages, its Alt-A mortgages ~~ 177-184D [through Aurora] became increasingly risky towards ~237-240the end of 2006 and the beginning of 2007 ." ~ 343Examiner's Report at 83 (Vol. 1) ~ 364E [same proposition as Exhibit D] [same]"The Office of Thrift Supervision ("OTS") criticizedFGLehman's decision to enter into the Archstonetransaction in excess of its risk appetite limits."Examiner's Report at 113 (Vol. 1)"At the same time, other participants in the Alt-Aindustry were reporting default rates and late paymentdata that indicated that '[t]he credit deterioration [inAlt-A] has been almost parallel to the one of thesubprime market."' Examiner's Report at 88 (Vol. 1)~83~ 170~ 345-348~ 114-118~ 121A court may take judicial notice of facts that are of public record and are capable ofdetermination by resort to sources whose accuracy carmot be reasonably questioned. SeeMangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006) (finding no error in district court'sreliance on docket sheet in separate case where docket sheets are public records of which thecourt could tal(e judicial notice); Southmark Prime Plus, L.P. v. Falzone, 776 F. Supp. 888, 892(D. Del. 1991) (finding contents of court records that may be judicially noticed include briefs3

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 5 of 8and petitions because such materials cannot be reasonably disputed, and their accuracy cannotreasonably be questioned).The exhibits were not entered in this case to prove the truth of the matter asserted. Rather,they show the context surrounding the Complaint. The Supreme Court has instructed that"determining whether a complaint states a plausible claim is context-specific, requiring thereviewing court to draw on its experience and common sense." Ashcroft v. Iqbal, 556 U.S. 662,129 S. Ct. 1937, 1940, 173 L. Ed. 2d 868 (2009); see, e.g., Tellabs, Inc. v. Makar Issues &Rights, Ltd., 551 U.S. 308, 323, 127 S. Ct. 2499,2510, 168 L. Ed. 2d 179 (2007) (in reviewingcomplaint for sufficient allegation of scienter, remarking "The strength of an inference cannot bedecided in a vacuum. The inquiry is inherently comparative: How likely is it that one conclusion,as compared to others, follows from the underlying facts?").These exhibits may properly be considered by the Court in determining that Plaintiffshave pled sufficient facts to state a claim in their Second Amended Complaint.CONCLUSIONBased on the foregoing, Plaintiffs respectfully request the Court overrule Schwab'sobjections in their entirety, and consider Plaintiffs' exhibits (which were cited and relied upon bythe Examiner, Anton Valukas) in opposition to the pending motion to dismiss Plaintiffs' claims.Plaintiffs request all further reliefto which they may be entitled, whether at equity or law.4

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 6 of 8Dated: March 19, 2012Respectfully submitted,By:/s/ Andrew J. MytelkaGreer, Herz & Adams, L.L.P.Andrew J. MytelkaAttorney-in-ChargeState Bar No. 14767700M. David LeBlancState BarNo. 00791090Roni S. MihalyState Bar No. 24027899Eric J. KirkpatrickState BarNo. 24031215One Moody Plaza, 18th FloorGalveston, Texas 77550(409) 797-3200 (Telephone)( 409) 766-6424 (Facsimile)The Law Office of Andrew J. FrischAndrew J. Frisch40 Fulton Street, 23rd FloorNew York, New York 10038(212) 285-8000(646) 304-0352 Facsimileafrisch@andrewfrisch.comATTORNEYS FOR PLAINTIFFSAMERICAN NATIONAL LIFE INSURANCECOMPANY OF TEXAS, COMPREHENSIVEINVESTMENT SERVICES AND THE MOODYFOUNDATION5

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 7 of 8CERTIFICATE OF SERVICEI hereby certify that on March 19, 2012, I authorized the electronic filing of the foregoingwith the Clerk of the Court using the CM/ECF system which will send notification of such filingto the e-mail addresses denoted on the attached Electronic Mail Notice List, and I hereby certifythat I caused to be mailed the foregoing document or paper via the United States Postal Serviceto the non-CM/ECF participants indicated on the attached Manual Notice List.I certify under penalty of perjury under the laws of the United States of American that theforegoing is true and correct. Executed on March 19, 2012.Is! Eric J. KirkpatrickEric J. KirkpatrickE-mail: ekirkpatrick@greerherz.com6

Case 1:09-md-02017-LAK-GWG Document 819 Filed 03/19/12 Page 8 of 81:09-cv-02363-LAK Notice has been delivered by other means to:Frank KennamerBingham, McCutchen, LLP(SanFran)3 Embarcadero Center,San Francisco, CA 94111Martin J. AuerbachDornbush, Mande1starn & Silverman747 Third AvenueNew York, NY 10017Robert A. LewisBingham, McCutchen, LLP(SanFran)3 Embarcadero Center,San Francisco, CA 94111