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MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE.

The First Department, in a full-fledged opinion by Justice Richter, determined (1) plaintiff’s misrepresentation cause of action was properly dismissed because of a lack of specificity in the allegations, (2) the cause of action should not have been dismissed with prejudice, (3) and the specificity provided in the appellate briefs may support an amended complaint. Plaintiff, a stock insurance company, alleged it was induced to insure collateralized debt obligations (CDO’s) by misrepresentations made by Bear Stearns:

[P]laintiff CIFG Assurance North America, Inc., a stock insurance company, alleges that Bear Stearns & Co. Inc., a predecessor of defendant J.P. Morgan Securities LLC, made material misrepresentations that induced CIFG to provide financial guaranty insurance in connection with two collateralized debt obligations (CDOs). According to CIFG, Bear Stearns had on its books a large number of high-risk residential mortgage-backed securities (RMBSs), and embarked on a scheme to rid itself of these toxic assets by offloading them into the two CDOs, and marketing the CDOs’ securities to investors. * * *

… [T]he claim should not have been dismissed with prejudice, but rather, CIFG should be given the opportunity to replead. A request for leave to amend a complaint should be “freely given, and denied only if there is prejudice or surprise resulting directly from the delay, or if the proposed amendment is palpably improper or insufficient as a matter of law” … . CIFG Assur. N. Am., Inc. v J.P. Morgan Sec. LLC, 2016 NY Slip Op 08029, 1st Dept 11-29-16

 

INSURANCE LAW (STOCK INSURANCE, MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/SECURITIESMISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE/FRAUD (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/COLLATERALIZED DEBT OBLIGATIONS (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)/RESIDENTIAL MORTGAGE-BACKED SECURITIES  (MISREPRESENTATION CAUSE OF ACTION AGAINST BEAR STEARNS RE COLLATERALIZED DEBT OBLIGATIONS AND RESIDENTIAL MORTGAGE-BACKED SECURITIES SHOULD NOT HAVE BEEN DISMISSED WITH PREJUDICE)

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STATEMENT IN SUMMONS WITH NOTICE ABSOLUTELY PRIVILEGED. SCAFFOLD DID NOT HAVE A SAFETY RAILING, PLAINTIFF ENTITLED TO SUMMARY JUDGMENT...