Court Rejects CSFB’s Motion to Dismiss Claims Arising from Collapse of AAA Rated Asset-Backed Notes issued by NCFE
HOUSTON, December 20, 2007 – 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 LLP 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 CSFB’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.”