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LBBW Luxemburg S.A. v. Wells Fargo Securities LLC

United States District Court, S.D. New York

March 31, 2014

LBBW LUXEMBURG S.A., Plaintiff,
v.
WELLS FARGO SECURITIES LLC, f/k/a WACHOVIA CAPITAL MARKETS LLC, and FORTIS SECURITIES LLC, Defendants

Page 505

[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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For LBBW Luxemburg S.A., Plaintiff: Amir H Alavi, PRO HAC VICE, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, P.C., Houston, TX; David Warden, John Zavitsanos, Sean R. Gorman, PRO HAC VICE, Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, PC, Houston, TX; Sharadchandra Anantha Samy, The Law Offices of Sharad A. Samy LLC, Darien, CT.

For Wells Fargo Securities LLC, formerly known as Wachovia Capital Markets LLC, Defendant: Jayant W. Tambe, LEAD ATTORNEY, Alexander Pearson McBride, Howard Fredrick Sidman, Jones Day (NYC), New York, NY.

For Fortis Securities LLC, Defendant: Jay B. Kasner, LEAD ATTORNEY, Scott D. Musoff, Skadden, Arps, Slate, Meagher & Flom LLP (NYC), New York, NY. Gary John Hacker, Skadden, Arps, Slate, Meagher & Flom, LLP (IL), Chicago, IL.

Page 508

OPINION AND ORDER

J. PAUL OETKEN, United States District Judge.

This case arises from Plaintiff's September 2006 investment in a collateral debt obligation (" CDO" ) that was backed by securitized subprime mortgages. Plaintiff's investment performed poorly when the market for those securities collapsed, and Plaintiff now seeks to recover its losses under various contract and tort theories including breach of fiduciary duty, negligent representation, fraud, and constructive fraud. Plaintiff, LBBW Luxemberg S.A. (" LBBW" ), is a regional European bank that previously operated as Landesbank Rheinland-Pfalz International S.A. (" LRI" ). Defendant Wells Fargo Securities LLC (" Wells Fargo" ) is the successor to Wachovia Capital Markets (" Wachovia" ), a banking entity which, among other functions, structured the CDO and warehoused the collateral through an affiliate.[1] Defendant Fortis Securities LLC (" Fortis" ) worked with Wachovia to solicit LRI's investment in the CDO transaction.

Wells Fargo and Fortis have separately filed motions to dismiss, along with affidavits and exhibits in support of those motions. LBBW has moved to strike some of those exhibits. For the reasons that follow, the motions to dismiss are granted in part and denied in part; the motion to strike is denied.

I. Legal Standard

Because state law claims are brought under the Court's diversity jurisdiction, federal pleading standards and New York's contract and tort laws apply.

To defeat these motions to dismiss, LBBW must satisfy the applicable pleading standards in Rules 8(a) and 9(b). Under Rule 9(b) " [i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." To satisfy the particularity requirement in an omission case, " the complaint must still allege: (1) what the omissions were; (2) the person responsible for the failure to disclose; (3) the context of the omissions and the manner in which they misled the plaintiff; and, (4) what defendant obtained through the fraud." Odyssey Re ...


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