In a memorandum and order filed today, U.S. sourthern district of New York court judge Barbara Jones granted Morgan Stanley's motion to dismiss Retirement System of the Government of the Virgin Islands' class action suit against the bank.
The investors filed a case against Morgan Stanley back in December 24, 2009 as the arranger of a structured offering called Libertas CDO.
The plaintiffs bought triple-A notes issued by the CDO. They accused Morgan Stanley of collaborating with the major credit rating agencies to place top ratings on the CDO notes and of intentionally or recklessly misleading buyers in the said CDO.
Jones said that the plaintiff's argument fails first in terms of the allegation that Morgan Stanley colaborated with the rating agencies. This is because the plaintiffs did not offer anything about the alleged collaboration beyond a conclusory allegation. The accusations, the judge said, did not pertain specifically to the Libertas CDO.
The judge also said that the allegation that Morgan Stanley promoted false ratings through the offering memorandum and a March 2007 presentation fails as well.
This is because the offering memorandum clearly stated that it is not a statement made by Morgan Stanley, but was prepared by the co-issuers on the deal. This does not constitute a "materially false statement" to the plaintiffs, the judge said.
In terms of the 2007 presentation where the false triple-A ratings were supposedly falsely promoted, this document was neither attached nor referenced in the case filing. This is one of the reasons why the plaintiff failed to plead sufficient facts to constitute actionable misrepresentation or material omission by Morgan Stanley.
The judge also said that case has failed to prove unjust enrichment on the part of Morgan Stanley.
The name of this case is Employees’ Retirement System of the Government of the Virgin Islands v. Morgan Stanley & Co. and the case number is 09-cv-10532.
In related news, published reports said that a U.S. district court in New York Wednesday also dismissed a lawsuit filed by the Landesbank Baden-Wuerttemberg (LBBW) against Goldman Sachs and Societe Generale’s unit TCW Asset Management Co., where the bank claimed it lost at least $37 million after being misled about the risks of CDOs it bought.
The lawsuit alleged Goldman and TCW supposedly touted the notes of a called CDO Davis Square Funding VI as being safe and close to risk-free.
The court ruled that Goldman offered LBBW and other buyers with an offering circular that disclosed details about the risks inherent in these investments, adding that the plaintiff failed to state a claim for unjust enrichment, published reports said.