Deutsche Bank Subprime Case Pulled From Abyss

     MANHATTAN (CN) — Handed a Supreme Court lifeline, shareholders behind consolidated lawsuits accusing Deutsche Bank of misleading them on $5.4 billion in subprime securities can advance part of their claims, a federal judge ruled.
     In 2009, the final year of the subprime mortgage crisis, six class-action lawsuits poured into Manhattan Federal Court alleging securities fraud on stock offerings sold during the first year the housing market plunged.
     After three unsuccessful attempts to advance the lawsuit, the U.S. Supreme Court’s unrelated decision last year in the case of pharmaceutical giant Omnicare also opened a window for the Deutsche shareholders.
     In the Omnicare case, the Cincinnati-based subsidiary of CVS Health was accused of misleading shareholders about how a rash of whistleblower lawsuits alleging false claims to Medicare and Medicaid would affect the company.
     Omnicare hoped that couching their optimistic forecasts with “we think” and “we believe” would immunize the company from liability, but Justice Elena Kagan mocked such corporate incantations as “those magic words.”
     “Thus, Omnicare’s view would punch a hole in the statute for half-truths in the form of opinion statements,” she wrote.
     On Aug. 7, 2015, an attorney for one of Deutsche Bank’s shareholders asked U.S. District Judge Deborah Batts to revisit his clients’ case in light of the high court’s ruling.
     The bid succeeded on Monday, as Batts revived claims over Deutsche Bank’s November 2007 and February 2008 securities offerings.
     Here, Batts said, the shareholders “sufficiently alleged that defendants have failed to disclose [the] known trend and the manner in which it might reasonably be expected to materially impact [the] company’s overall financial position.'”
     “Defendants have not identified or directed the court to any disclosures that may satisfy DB’s duty under Item 303 for the November 2007 and February 2008 offerings,” the 100-page opinion states.
     But the judge found the German bank’s disclosures passed muster for the May and June 2007 offerings.
     Reuters reported that the claims given the green light involve $2.55 billion in securities, and those dismissed add up to $2.9 billion.
     Attorneys for Deutsche and one of the shareholders did not respond to emailed requests for comment Tuesday.

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