Switzerland’s second largest bank could ultimately be liable for billions dollars in damages to investors after the New York Supreme Court rejected legal efforts by Credit Suisse to dismiss a lawsuit that accuses the company of fraud in selling residential mortgage-backed securities before the last national recession.
The USA Today reported on Dec. 26 that New York Supreme Court Justice Marcy Friedman denied the motion, concluding in a Dec. 24 ruling that many of the bank’s arguments against the lawsuit filed in 2012 by New York Attorney General Eric Schneiderman’s office were without merit.
Schneiderman argued in his initial court complaint that Credit Suisse led investors to believe the bank had carefully evaluated — and would continue to monitor — the quality of the loans underlying their residential mortgage-backed securities. “In fact, defendants systematically failed to adequately evaluate these loans, and kept investors in the dark about the inadequacy of their review procedures,” the lawsuit alleged.
Bloomberg News reported that Friedman’s threshold-level ruling allows the matter to go forward as both sides marshal additional evidence and legal arguments. Credit Suisse said it would appeal this particular decision and continue to defend itself in this case.
Credit Suisse had argued that the New York case should be dismissed because the statute of limitations had expired before the lawsuit was filed. The bank also contended that the state’s allegations were preempted by the Federal National Securities Market Improvement Act of 1996 and argued that Schneiderman’s office had failed to state a legal cause of action. Schneiderman filed the action under New York’s Martin Act
JPMorgan Chase, Citigroup and Bank of America have previously agreed to pay multi-billion-dollar settlements to settle similar allegations in other lawsuits filed by New York, other states and the U.S. Department of Justice.
