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Lawsuit Alleging Lehman Brothers’ Substitution of Toxic Securities for High Value Securities Can Go Forward

In a full-fledged opinion by Justice Saxe, the First Department determined plaintiff Aetna Life Insurance Company had sufficiently alleged causes of action stemming from Lehman Brothers’ alleged removal of high-grade securities from a trust account and replacement of those securities with toxic subprime-mortgage-backed securities. The First Department summarized the facts and its rulings as follows:

Aetna asserts that defendants [replaced the high value securities with toxic securities] as part of an effort to prop up Lehman Brothers’ financial position in the final days prior to its 2008 collapse. The complaint alleges causes of action for breach of the Connecticut Unfair Trade Practices Act (CUTPA) (Conn Gen Stat § 42-110b[a] et seq.); breach of fiduciary duty; negligence; and recklessness. We affirm the determination of the motion court holding that the allegations are sufficient to support each of the causes of action, and modify only to the extent of denying dismissal of the negligence claims against the individual defendants.  Aetna Life Ins Co v Appalachian Asset Mgt Corp, 2013 NY Slip Op 05506, 1st Dept 7-30-13

 

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