Dexia Holdings, Inc., et al. v. Deutsche Bank AG

Court: U.S. District Court, Southern District of New York
Case Number: 11-cv-5672-JSR
Case Contacts: Gerald H. Silk, David Wales, Lauren McMillen Ormsbee, Rebecca E. Boon

This direct action asserts claims against Deutsche Bank AG, Deutsche Bank Securities, Inc., ACE Securities Corp., Deutsche Alt-A Securities, Inc. and DB Structured Products, Inc. (collectively, "Deutsche Bank" or "Defendants") related to the underwriting and sale of residential mortgage-backed securities ("RMBS") to Plaintiffs Dexia SA/NV, Dexia Holdings, Inc., FSA Asset Management LLC, and Dexia Crèdit Local SA (collectively, "Dexia" or "Plaintiffs").

On July 13, 2011, Dexia filed a Complaint in the Supreme Court of the State of New York alleging claims for fraud and other claims arising out of Dexia's over $1 billion investment in triple-A RMBS underwritten and sold by Deutsche Bank.  Dexia invested in these securities in reliance upon Deutsche Bank's representations attesting to their quality, that they were backed by loans that had been prudently underwritten and secured by collateral in accordance with underwriting guidelines of the companies originating the underlying mortgage loans, and that Deutsche Bank had performed due diligence in verifying the quality of the loans.  Unbeknownst to Dexia, Deutsche Bank's traders internally referred to such RMBS, including the Deutsche Bank RMBS purchased by Dexia, as "pigs" and "crap."  Armed with the knowledge of their true quality, Deutsche Bank then used its own capital bet against these RMBS and the U.S. housing market in general, eventually developing a $10 billion "short" position that paid off when the Deutsche Bank RMBS (and similar securities) declined in value.

On August 15, 2011, the case was removed to the U.S. District Court for the Southern District of New York.  Defendants filed their motion to dismiss the complaint on October 19, 2011.  On February 7, 2012 the Honorable Jed S. Rakoff granted defendants’ motion to dismiss, in part without prejudice, and in part with prejudice.  A written opinion is forthcoming.

A Notice of Voluntary Dismissal with Prejudice as to All Defendants was filed with the Court on July 23, 2013.