In a sweeping decision issued today, the Honorable James Graham of the United States District Court for the Southern District of Ohio denied in virtually every respect motions to dismiss over $1.6 billion in claims filed against Credit Suisse First Boston ("CSFB") by investors who formerly held "AAA" rated notes issued by now-defunct National Century Financial Enterprises of Columbus, Ohio ("NCFE"). The largest group of investors is represented by Gibbs & Bruns L.L.P. of Houston.
The Court's ruling is highly significant for purchasers of asset-backed notes, an area of keen recent interest in light of the sub-prime loan crisis. The court categorically rejected Credit Suisse's argument that disclaimers included in the offering memorandum required the dismissal of Plaintiffs' fraud claims: "the disclaimers in the offering materials ... do not preclude Plaintiffs from showing that they justifiably relied on Credit Suisse's alleged misrepresentations." The opinion held that CSFB's disclaimer stating that it had done no independent investigation of its own "would seem beyond credulity," particularly to investors who knew that CSFB "had helped devise the note programs [and] helped draft the offering materials." The Court noted that "it would defeat the securities laws if parties could escape liability for their own deliberate misrepresentations by including boilerplate disclaimers into offering materials."
Among the investor plaintiffs were major banks, mutual funds, and insurance companies, along with the State of Arizona and a number of Arizona government entities. Kathy Patrick of Gibbs & Bruns, lead counsel for plaintiffs who held over $1.6 billion in NCFE notes, said that her clients feel vindicated: "Our clients are very pleased that the Court has rejected Credit Suisse's efforts to avoid responsibility for its actions by relying on technicalities. The securities laws require sellers of securities to tell the truth. We look forward to presenting these claims to a jury."
