SRM Global Master Fund Limited Partnership v. The Bear Stearns Companies L.L.C. et al
Filing
42
OPINION granting (17 in 1:13-cv-02692-RWS) MOTION to Dismiss the Complaint (Docket Entry 1) filed by Deloitte & Touche L.L.P., (362 in 1:08-md-01963-RWS) MOTION to Dismiss the Complaint filed by Samuel L. Molinaro, Jr., Warren J. Specto r, James E. Cayne, The Bear Stearns Companies LLC, Alan D. Schwartz, (372 in 1:08-md-01963-RWS) MOTION to Dismiss filed by Garrett Bland, Joey Zhou, (374 in 1:08-md-01963-RWS) MOTION to Dismiss filed by Deloitte & Touche LLP, (14 in 1:13-cv-02692-RWS ) MOTION to Dismiss the Complaint filed by James Cayne, Samuel L. Molinaro, Jr., Warren Spector, The Bear Stearns Companies L.L.C., Alan D. Schwartz. Based on the conclusions set forth herein, Defendants' motions to dismiss are granted. (Signed by Judge Robert W. Sweet on 2/3/2014) (ft)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-x
IN RE BEAR STEARNS COMPANIES, INC.
SECURITIES, DERIVATIVE, AND ERISA
LITIGATION
08 MDL 1963
This Document Relates To:
Securities Act
, 08 Civ. 2793
--------------------------x
SRM GLOBAL MASTER FUND LIMITED
PARTNERSHIP,
Plaintiff,
13 Civ. 2692
-againstTHE BEAR STEARNS COMPANIES LLC (F/K/A
BEAR STEARNS COMPANIES INC.), ALAN D.
SCHWARTZ, SAMUEL L. MOLINARO, JR., JAMES
CAYNE, WARREN SPECTOR and DELOITTE &
TOUCHE LLP,
Defendants.
----- ------ ------ ----x
A P PEA RAN C E S:
BOIES, SCHILLER & FLEXNER, LLP
575 Lexington Avenue
New York, NY 10022
By:
Philip C. Korologos, Esq.
chard B. Drubel, Esq.
Matthew J. Henken, Esq.
KOREIN TILLERY, LLC
205 North Michigan Avenue
OPINION
cago, IL 60601
By: George A. Zelcs, Esq.
Stephen M. Til
,Esq.
Douglas R. Sprong, Esq.
Attorne
Defendant The Bear Stearns C
s LLC
PAOL, WEISS, RIFKIND, WHARTON & GARRISON LLP
1285 Avenue of the Ame cas
New York, NY 10019
Eric S. Goldstein, Esq.
Brad S. Karp., Esq.
Jessica S. Carey, Esq.
Jonathan Hurwitz,
Attorne s for Defendant Alan D. Schwartz
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
4 Times Square
New York, NY 10036
By: Susan Saltzstein, E
Attorne
for Defendant Samuel L. Molinaro
ALLEN & OVERY LLP
1221 Avenue of the Americas
New York, NY 10020
By:
Pamela R. Chepiga, Esq.
Atto
KRAMER LEVIN NAFTALIS & FRANKEL LLP
1177 Avenue of the Americas
New York, NY 10036
David S. Frankel, Esq.
Defendant Warren J.
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
1
ctor
Jr.
By:
David B. Anders, Esq.
loitte & Touche LLP
Attorne
CRAVATH, SWAINE & MOORE LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Thomas G. Rafferty, Esq.
Antony L. Ryan, Esq.
Rachel G. Skaistis, Esq.
2
Sweet, D.J.
The
The
Bear
Stearns
Schwart z,
(the
defendants
Samuel
Defendants" )
have
Bear
9 (b)
plaintiff
SRM Global Master
"Plaintiff").
12 (b) (6)
Based
and
to
to
di
the
D.
"Bear
Stearns
("Deloi tte")
Defendants,
the
Rules
Complaint
Fund Limited Partnersh
on
Alan
Spector
LLP
Federal
ss
(F /K/A
Warren
the
Stearns
pursuant
Procedure
the
and
the
moved
Cayne,
Touche
&
LLC
Stearns"),
(collectively,
Deloitte
with
"Defendants")
James
Defendants")
Companies
("Bear
Inc.)
Molinaro,
and
(collectively,
Bear Stearns
Companies
L.
" Individual
The
conclusions
set
of
the
Civil
fil
by
(" SRM"
forth
or
low,
Defendants' motions are granted.
I.
Prior Proceedings
In
the
immediate
in mid-March 2008,
a
actions were
against
of
New
fil
York
and
wake
Bear
series of securities
other
Defendants
in
jurisdictions
Stearns common stock and stock options,
Court
by
the
coordinated
or
Stearns'
Judicial
Panel
consolidated
on
pret
3
by
fraud putative class
the
Sout
rn
purchasers
and trans
Multidistrict
al
near-collapse
District
of
Bear
rred to this
Litigation
proceedings.
See
Trans
for
r
Order,
No.
In re Bear Stearns Cos.
08
MOL
1963
(J.P.M.L.
Aug.
consolidated on January 5,
Stearns
Cos.
1963 (RWS),
Lead
Inc.
Lead
Complaint
2008).
5,
ERISA
filed
the
ies that,
2008
actions
were
In re Bear
08
M.D.L.
On February 27,
Retirement
Systems
Consolidated
("Class Action Complaint")
14,
Those
Li ti .
2009).
Michigan
Plaintiff")
of "all persons and ent
March
&
(Jan.
of
& ERISA Liti .
Deriv.
(the "Class Action").
Der
State
Sec.
19,
2009
2009 WL 50132
Plaintiff
Action
Sec.
Inc.
No.
2009,
("Class
Class
Action
asserting claims on behalf
between December 14,
purchased
or
otherwise
publicly traded common stock or other equity secu
options of or guaranteed by Bear Stearns,
2006 and
acquired
t
s,
the
or call
or sold Bear Stearns
put options and were damaged thereby."
The
Court
Defendants'
motions
Bear Stearns Cos.
(S.D.N.Y.
Inc.
2011)
Deriv.
Sec.
[hereina
the
production
Defendants.
was
of
In May 2012,
approved by the
November 28,
over
er Bear Stearns I
2012
("
nine
the
Court
million
rt
s
in orders
2011.
the
In re
. The parties
scovery,
pages
of
resulting
documents
by
reached a
settlement that
and
judgments
final
ss Action Settlement").
4
dismiss
& ERISA Liti ., 763 F. Supp.
then spent over fourteen months conducting
in
to
ss action complaint on January 19,
consolida
2d 423
denied
(No.
dated
08 MOL 1963,
ECF Nos.
to
337-38,
persons
equi ty
who
Exs.
transacted
or
securities,
Settlement
10-11.)
Class").
in
call
(See
The
Settlement Class was
Bear
or
~
id.
Stearns
common
put
options
(the
3.)
SRM
ed
stock,
not
did
1
"
ass
r
Action
rticipate
in
any of the Class Action proceedings.
SRM
hedge
fund
is
that
approach in
a
highly
takes
'a
sophisticat
contrarian
"multi
and
illion
long term
dollar
investment'
'companies or sectors that have been through
riods
of stress and are out of favor with the market. '" SRM Global Fund
__________~_________~~____________~, No.
WL 2473595,
at *14
(S.D.N.Y.
June 17,
09 Civ.
2010)
5064 (RMB) , 2010
(quoting Tom
11 &
Katherine Burton, Wood's SRM Global Fell 30% in Janua
2007
Losses,
apps/news
(2d
Cir.
investment
BLOOMBERG
(Feb.
6,
2008),
http://www.bloombe
id=21070001&sid=aCPmITS71Z8k),
2011).
SRM
fund
(See Complaint
in
~
is
the
domiciled
Cayman
12, SRM, No.
aff'd
09 Civ.
.coml
and
5064
448
F.
App'x
istered
and
Islands,
to
as
a
private
in
Monaco.
is
(RMB)
based
116
(S.D.N.Y. May 29,
2009), ECF No.1; Carey Aff., Ex. 3.)
SRM
least
May
s been represented by its present counsel since at
2009,
recovery foe
when
SRM
Countrywide
s
Financial
losses that SRM allegedly suffered in
5
seeking
financial
crisis because of an investment in Countrywide.
No.
5064
09 C
(RMB)
(S.D.N.Y.
May 29,
(Comp
2009),
int,
ECF No.
1.)
in August
2012.
SRM
action on April 24, 2013
its
complaint
for
instant
t
("Complaint" or "Compl.").
instant
The
filed
SRM
ttlement
submitted a request for exclusion from the Class Action
Class
SRM,
motions
ard
and
marKed
of
were
the
same
fully
submitted on October 23, 2013.
II. Allegations of the Complaint
The
allegations
Bear
Complaint
as
Stearns'
the
contains
Class
collapse
is
opinion in Bear Stearns I,
Action
set
many
Complaint.
forth
in
763 F. Supp.
The
facts
detail
2d 423.
in
Bear
Deloitte
(i)
"the value of
bacKed
(ii)
(iii)
securities
"the
adequacy
[Bear Stearns']
and
of
"the quality of
2; see also
Defendants
other
its
"fraudulently
mortgages,
rivat
liquidity
[Bear Stearns']
• 'JI'JI 39237.)
6
2008,
the
overstated":
mortgage-and asset
financial
and
Court's
SRM alleges that,
2006 through approximately March 12,
and
regarding
this
from December 14,
Stearns
factual
capital
instruments;"
reserves;"
risk management."
and
(CompI.
'JI
SRM alleges losses of two types.
it
"owned shares
of
Bear
[Stearns]
rst, SRM alleges that
stock at
March 2007," and "continued to invest in
near
collapse.
~
(Compl.
12.)
r
Following
st
as
early as
[Stearns]" until its
Bear
Stearns'
near
collapse, it sold its "investment in Bear [Stearns]" between Ap
1,
2008 and June 2,
2008,
than $200 million."
request
r
(CompL
ion
exc
and thereby "incur[red]
from
~
6.)
the
sses of more
According to Defendants,
Class
Action
1
SRM's
Settlement
Class
states that SRM had made its last purchase of Bear Stearns common
stock
on
September
24,
common stock on the
2007
same
decreased significantly.
Ex.
and
y,
sold
all
fore
of
its
Bear
Bear Stearns'
Stearns
stock price
(Def. Bear Stearns Br., at 6; Carey Aff.,
9.)
Second,
SRM
alleges
losses
from
its
"purchase [
of]
security-based swaps representing approximately 3.5 million shares
of
Bear
Stearns
September 24,
(Id.
~
Smith Inc.
stock"
("Bear
2007 and March 12,
13.) SRM purcha
UBS Secu
&
common
ies LLC
2008
Stearns
Swaps")
between
(the "Swap Transactions").
its Bear Stearns Swaps by placing orders
("UBS")
and Merrill Lynch,
(Id.
("Merrill Lynch")
~
14.)
Pierce,
Fenner
SRM's Bear Stearns
Swaps were "total return swaps," which are synthetic instruments
designed to mimic
all
aspects
(i. e.,
7
the
"total
return")
of
a
stock as though the stock had been purchased itself.
rns
Swaps
were
the
Stearns common stock.
functional
(Opp.,
lent
equ
of
SRM' s
shares
Bear
of
Bear
at 4 -5. ) 1 SRM alleges that
Bear
Stearns S\vaps were inflated to precisely the same extent and by
Y t
cis
Stearns
same
misrepresentations
itself,
stock
and
when
and
Bear
omissions
Stearns'
as
stock
Bear
price
ed, so did the value of SRM's Bear Stearns Swaps.
colI
Delo
Stearns,
se
and
te
it
was
provided
s t
t
contained
audit,
outside
auditor
audit-related,
tax
2 0 0 6 and
Bear
and
other
2 0 0 7.
SRM
Deloi tte "consented to and caused the incorporation
reference
financial
independent
r n s dun g f i s cal yea r s
ces to Bear
all
the
of
its
statements
unqualified
r
scal
op
ons
years
on
Bear[
and
2006
srepresentations and omissions that cau
Stearns']
2007"
which
SRM loss.
( Comp 1. 'JI 23.)
SRM alleges that its losses
SRM's
reliance on Bear Stearns
occurred,
Defendants'
in part,
due to
Ise and misleading
Citations to "Def. 3ear S'::earns Br." refer to the Bear Stearns Defendan'::s'
Memorandum of Lav, in Support of their Motion to Dismiss. Citations to "Def.
Deloi tte Br." refer to Deloi tte' s Memorandum of Law in Support of Its ~lo'::ion
to Dismiss.
Ci'::ations to "Opp." refer to SRM's Memorandum of Law in
ition. Citations to "Bear Stearns Reply" and "Deloitte
refer to
the Bear Stearns Defendants'
and Deloitte's Reply Meworandum of Laws,
respectively.
1
8
representations
Risk
")
Stearns
and
amounts.
knew the
stated
omissions
(Compl.
Securities
rega
ng
59,
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