Federal Judge Nixes
Dismissal of Wells Fargo
Class Action
By Lynn Hume, Bond Buyer
March 26, 2010
¦
ADVERTISEMENT
WASHINGTON — A federal judge in Manhattan has refused to dismiss
class action claims filed by local governments alleging that Wells Fargo &
Co. and 15 other banks, broker-dealers and investment brokers conspired
to rig bids and fix prices of guaranteed investment and derivatives contracts
in the municipal market.
Judge Victor Marrero, of the U.S. District Court for the Southern District
of New York, denied the firms’ motion for dismissal in a 57-page order
issued Thursday and ordered the parties to appear at a pretrial conference
on April 30.
class action claims filed by local governments alleging that Wells Fargo &
Co. and 15 other banks, broker-dealers and investment brokers conspired
to rig bids and fix prices of guaranteed investment and derivatives contracts
in the municipal market.
Judge Victor Marrero, of the U.S. District Court for the Southern District
of New York, denied the firms’ motion for dismissal in a 57-page order
issued Thursday and ordered the parties to appear at a pretrial conference
on April 30.
Hinds County, Miss., and other municipal issuers had initially filed the class
action suit against more than 40 firms on Aug. 22, 2008. Most of the
defendants in the
suit filed a motion to
dismiss the suit, claiming
the issuers failed to make
specific allegations of
involvement in the
conspiracy. Marrero
dismissed the suit on
April 29, 2009, but
agreed to allow the local
governments to replead
their case.
action suit against more than 40 firms on Aug. 22, 2008. Most of the
defendants in the
suit filed a motion to
dismiss the suit, claiming
the issuers failed to make
specific allegations of
involvement in the
conspiracy. Marrero
dismissed the suit on
April 29, 2009, but
agreed to allow the local
governments to replead
their case.
The issuers filed a second
consolidated class action
suit against 16 of the firms on June 18, 2009, this time including more specific
information obtained from an unidentified confidential witness at Bank of
America, now Bank of America Merrill Lynch. The bank has been cooperating
with the plaintiffs in the suits and with the Justice Department’s criminal
investigation of these matters in return for indemnity against criminal charges.
The suit also contained allegations from the Internal Revenue Service and other
investigations.
consolidated class action
suit against 16 of the firms on June 18, 2009, this time including more specific
information obtained from an unidentified confidential witness at Bank of
America, now Bank of America Merrill Lynch. The bank has been cooperating
with the plaintiffs in the suits and with the Justice Department’s criminal
investigation of these matters in return for indemnity against criminal charges.
The suit also contained allegations from the Internal Revenue Service and other
investigations.
All but one of the defendant firms moved to dismiss the second suit. They
claimed the issuers failed to state an antitrust conspiracy claim, that the issuers’
claims were time-barred, and that Internal Revenue Code and Treasury regulations
precluded the antitrust claims.
claimed the issuers failed to state an antitrust conspiracy claim, that the issuers’
claims were time-barred, and that Internal Revenue Code and Treasury regulations
precluded the antitrust claims.
But Marrero refused to dismiss the suit, saying that the allegations “support a plausible
inference” that each of the remaining defendants “participated in the alleged conspiracy.”
The judge also said the second suit “cures the deficiencies” of the first one and “pleads
fraudulent concealment with sufficient particularity.”
inference” that each of the remaining defendants “participated in the alleged conspiracy.”
The judge also said the second suit “cures the deficiencies” of the first one and “pleads
fraudulent concealment with sufficient particularity.”
In rulings in previous cases, courts have found that the statute of limitations for antitrust
violations are “tolled” or halted if the plaintiff “can show fraudulent concealment,”
Marrero said.
violations are “tolled” or halted if the plaintiff “can show fraudulent concealment,”
Marrero said.
In addition, the judge said IRS regulatory enforcement “does not result in remedies for
the underlying conduct alleged here ... collusive bidding or price fixing.” As a result he
said, “IRS regulations do not implicitly preclude private enforcement.”
the underlying conduct alleged here ... collusive bidding or price fixing.” As a result he
said, “IRS regulations do not implicitly preclude private enforcement.”
The plaintiff issuers in this suit, in addition to Hinds County, include Baltimore, the
University of Mississippi Medical Center, the University of Southern Mississippi, the
Mississippi Department of Transportation, the University of Mississippi, the Bucks
County Water & Sewer Authority, the Central Bucks School District.
University of Mississippi Medical Center, the University of Southern Mississippi, the
Mississippi Department of Transportation, the University of Mississippi, the Bucks
County Water & Sewer Authority, the Central Bucks School District.
The defendants, besides Wells Fargo, include: Bank of America, Bear Stearns
& Co., JPMorgan Chase & Co., Morgan Stanley, National Westminster
Bank PLC, Piper Jaffray & Co., Societe Generale SA, UBS AG,
Wachovia NA, Natixis SA, Investment Management Advisory Group Inc.,
CDR Financial Products, Winters & Co., George K. Baum & Co.,
and Sound Capital Management Inc.
& Co., JPMorgan Chase & Co., Morgan Stanley, National Westminster
Bank PLC, Piper Jaffray & Co., Societe Generale SA, UBS AG,
Wachovia NA, Natixis SA, Investment Management Advisory Group Inc.,
CDR Financial Products, Winters & Co., George K. Baum & Co.,
and Sound Capital Management Inc.
Marrero’s ruling comes as Los Angeles and 13 other local governments in California
that filed 11 separate suits against Wells Fargo and more than 40 other firms are set to
file their opposition tomorrow against the firms’ motion to dismiss the suits. Technically
all of the suits — the ones by Hinds County, Miss., and other governments, and the ones
by the California localities — have all been consolidated.
that filed 11 separate suits against Wells Fargo and more than 40 other firms are set to
file their opposition tomorrow against the firms’ motion to dismiss the suits. Technically
all of the suits — the ones by Hinds County, Miss., and other governments, and the ones
by the California localities — have all been consolidated.
But the California localities’ suits currently are being treated separately because they
were filed beginning in July 2008 in California state courts and were later transferred to
the court in Manhattan.
were filed beginning in July 2008 in California state courts and were later transferred to
the court in Manhattan.
No comments:
Post a Comment