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King County, Washington v. IKB Deutsche Industriebank AG

United States District Court, S.D. New York

January 3, 2013

KING COUNTY, WASHINGTON, and Iowa Student Loan Liquidity Corporation, Plaintiffs,
v.
IKB DEUTSCHE INDUSTRIEBANK AG, IKB Credit Asset Management, GmbH, Moody's Investors Service, Inc., Moody's Investors Service Limited, The McGraw Hill Companies, Inc. (d/b/a Standard & Poor's Ratings Services), Fitch, Inc., Morgan Stanley & Co. Incorporated, and Morgan Stanley & Co. International Limited, Defendants.

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[Copyrighted Material Omitted]

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Daniel S. Drosman, Esq., Jessica T. Shinnefield, Esq., Darryl J. Alvarado, Esq., Anne L. Box, Esq., James A. Caputo, Esq., Patrick J. Coughlin, Esq., Nathan R. Lindell, Esq., David C. Walton, Esq., X Jay Alvarez, Esq., Christina A. Royce, Esq., Robbins Geller Rudman & Dowd LLP, San Diego, CA, Luke O. Brooks, Esq., Jason C. Davis, Esq., Robbins Geller Rudman & Dowd LLP, San Francisco, CA, Samuel H. Rudman, Esq., Jarrett S. Charo, Esq., David A. Rosenfeld, Esq., Robert M. Rothman, Esq., Robbins Geller Rudman & Dowd LLP, Melville, NY, for Plaintiffs King County, Washington and Iowa Student Loan Liquidity Corporation.

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

Dean I. Ringel, Esq., Andrea R. Butler, Esq., Floyd Abrams, Esq., Jason M. Hall, Esq., Brian T. Markley, Esq., Tammy L. Roy, Esq., Adam N. Zurofsky, Esq., Cahill Gordon & Reindel LLP, New York, NY, for Defendant The McGraw Hill Companies, Inc. d/b/a Standard & Poor's Rating Services.

Mario Aieta, Esq., James J. Coster, Esq., Dai Wai Chin Fenman, Esq., Joshua M. Rubins, Esq., Justin E. Klein, Esq., James J. Regan, Esq., Joshua M. Rubins, Esq., Aaron M. Zeisler, Esq., Satterlee Stephens Burke & Burke LLP, New York, NY, for Defendants Moody's Investors Service Limited and Moody's Investors Service, Inc.

Andrew J. Ehrlich, Esq., Martin Flumenbaum, Esq., Donna M. Ioffredo, Esq., Roberta A. Kaplan, Esq., Mark S. Silver, Esq., Tobias J. Stern, Esq., Julia Tarver-Mason Wood, Esq., Paul, Weiss, Rifkind,

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Wharton & Garrison LLP, New York, NY, for Defendant Fitch, Inc.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

Institutional investors King County, Washington (" King County" ) and Iowa Student Loan Liquidity Corporation (" ISL" ) bring this action to recover losses stemming from the October, 2007 collapse of Rhinebridge, a structured investment vehicle (" SIV" ). Plaintiffs assert claims of common law fraud, negligent misrepresentation, and aiding and abetting fraud against: The McGraw Hill Companies, Inc. d/b/a Standard & Poor's Rating Services (" S & P" ); Moody's Investors Service, Inc. and Moody's Investors Service Ltd. (together, " Moody's" ); Fitch, Inc. (" Fitch," and, with S & P and Moody's, the " Rating Agencies" ); Morgan Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited (together, " Morgan Stanley" ). Defendants now move for summary judgment. For the reasons set forth below, defendants' motions are granted in part and denied in part.

II. BACKGROUND

A. Facts

Familiarity with the facts is presumed.

B. Procedural History

In a related action (" the Abu Dhabi action" ) arising out of the collapse of a different SIV (" the Cheyne SIV" ), King County and fifteen other plaintiffs brought similar claims against the defendants in this action (with the exception of Fitch, which did not issue a rating for the Cheyne SIV, and is therefore not a defendant in that action). In early 2012, defendants in the Abu Dhabi action moved for summary judgment on all claims. In a lengthy Opinion and Order in which I dismissed some causes of action and the claims of some plaintiffs, I ruled on many of the legal questions at issue in this action.[1] In two subsequent opinions, I granted partial reconsideration of the summary judgment opinion,[2] and ruled on an order to show cause as to why the negligent misrepresentation claim against Morgan Stanley should not be dismissed.[3]

The summary judgment briefing schedule in this action was triggered by the issuance of the Abu Dhabi summary judgment opinion— this was done so that the parties would not waste their (and the Court's) time addressing arguments the Court has already rejected.[4] Accordingly, this summary judgment opinion leans heavily on the Abu Dhabi summary judgment opinion.

III. LEGAL STANDARDS

A. Summary Judgment

" Summary judgment is designed to pierce the pleadings to flush out those cases that are predestined to result in a directed verdict." [5] Thus, summary judgment

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is only appropriate " if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." [6] " For summary judgment purposes, a ‘ genuine issue’ exists where the evidence is such that a reasonable jury could decide in the non-moving party's favor." [7] " ‘ A fact is material when it might affect the outcome of the suit under governing law.’ " [8] " [T]he burden of demonstrating that no material fact exists lies with the moving party ...." [9] " When the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the non[-]movant's claim." [10]

In a summary judgment setting, " [t]he burden is on the moving party to demonstrate that no genuine issue respecting any material fact exists." [11] " When the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence ... on an essential element of the nonmovant's claim." [12] In turn, to defeat a motion for summary judgment, the non-moving party must raise a genuine issue of material fact.[13] The non-moving party " ‘ must do more than simply show that there is some metaphysical doubt as to the material facts,’ " [14] and cannot " ‘ rely on conclusory allegations or unsubstantiated speculation.’ " [15]

In deciding a motion for summary judgment, a court must " ‘ construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant.’ " [16] However, " ‘ [c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.’ " [17] " ‘ The role of the court ...


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