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Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc.

United States District Court, S.D. New York

October 5, 2012

ABU DHABI COMMERCIAL BANK, King County, Washington, SEI Investments Company, SEI Investment Strategies, LLC, The Bank of N.T. Butterfield & Son Limited, SFT Collective Investment Fund, Deutsche Postbank AG, Global Investment Services Limited, Gulf International Bank B.S.C., National Agricultural Cooperative Federation, State Board of Administration of Florida, Commonwealth of Pennsylvania Public School Employees' Retirement System, Bank Sinopac, Bank Hapoalim B.M., Commerzbank AG, and KBL European Private Bankers S.A., Plaintiffs,
v.
MORGAN STANLEY & CO. INCORPORATED, Morgan Stanley & Co., International Limited, Moody's Investors Service, Inc., Moody's Investors Service Ltd., Standard and Poor's Ratings Services and The McGraw Hill Companies, Inc., Defendants.

Page 544

Patrick J. Coughlin, Esq., Daniel S. Drosman, Esq., Jessica T. Shinnefield, Esq., Jarrett S. Charo, Esq., Darryl J. Alvarado, Esq., X. Jay Alvarez, Esq., David C. Walton, Esq., Robbins Geller Rudman & Dowd LLP, San Diego, CA, Samuel H. Rudman, Esq., Robbins Geller Rudman & Dowd LLP, Melville, NY, Luke O. Brooks, Esq., Jason C. Davis, Esq., Robbins Geller Rudman & Dowd LLP, San Francisco, CA, for Plaintiffs.

Marc I. Gross, Esq., Pomertantz Haudek Grossman & Gross LLP, New York, NY, for Plaintiff State Board of Administration of Florida.

James P. Rouhandeh, Esq., Antonio J. Perez-Marques, Esq., William R. Miller, Jr., Esq., Jessica L. Freese, Esq., Christopher J. Roche, Esq., Andrew D. Schlichter, Esq., Davis Polk & Wardwell LLP, New York, NY, for Defendants Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited.

Joshua M. Rubins, Esq., James J. Coster, Esq., Mario Aieta, Esq., Dai Wai Chin Feman, Esq., Justin E. Klein, Esq.,

Page 545

Aaron M. Zeisler, Esq., Satterlee Stephens Burke & Burke LLP, New York, NY, for Defendants Moody's Investors Service, Incorporated and Moody's Investors Service Limited.

Floyd Abrams, Esq., Dean I. Ringel, Esq., Tammy L. Roy, Esq., Andrea R. Butler, Esq., David Owen, Esq., Adam N. Zurofsky, Esq., Cahill Gordon & Reindel LLP, New York, NY, for Defendants Standard & Poor's Rating Services and The McGraw-Hill Companies, Incorporated.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

Plaintiffs are institutional investors asserting claims of fraud, aiding and abetting fraud, and negligent misrepresentation against Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited (together, " Morgan Stanley" )— the arranger/placement agent of the Structured Investment Vehicle (" SIV" ) in which plaintiffs invested— and the agencies that rated the notes issued by the SIV. In my August 17, 2012 summary judgment Opinion and Order, I dismissed plaintiffs' fraud claims against Morgan Stanley because: (1) plaintiffs had not identified any actionable misstatement attributable to Morgan Stanley; and (2) the existence of an actionable misstatement attributable to Morgan Stanley was an essential element of plaintiffs' fraud claims against it. Although Morgan Stanley had not yet moved for summary judgment on plaintiffs' negligent misrepresentation claim, I ordered plaintiffs to show cause as to why their negligent misrepresentation claims against Morgan Stanley should not be dismissed in light of my finding that Morgan Stanley made no actionable misstatement to plaintiffs. This Order to Show Cause presented a simple question: under New York law, may a plaintiff maintain a negligent misrepresentation claim against a defendant to whom no actionable misstatement can be attributed? Because the answer to this question is " yes," plaintiffs' negligent misrepresentation claim against Morgan Stanley is not dismissed.

II. BACKGROUND

Familiarity with the facts and the procedural ...


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