Merrill Lynch Secures Summary Judgment in Structured Finance Fraud Case

May 8, 2020

Cleary Gottlieb represented Merrill Lynch in a summary judgment on May 8, 2020, in which Justice Andrea Masley of the New York Supreme Court Commercial Division granted in favor of Merrill Lynch on a common law fraud claim brought by an investor in a 2006 collateralized debt obligation (CDO) that had been arranged by Merrill Lynch.

Following a prior court order dismissing five of the plaintiff’s six claims, the parties proceeded to summary judgment on the plaintiff’s remaining fraud claim, which alleged that Merrill Lynch and the CDO’s collateral manager made material misrepresentations and omissions regarding the CDO. The court held that the plaintiff’s claim failed for two independent reasons. First, the plaintiff failed to present any evidence that the alleged misrepresentations, as opposed to the intervening events of the 2007-2009 financial crisis, caused the plaintiff’s loss. Second, the plaintiff, a special purpose vehicle, failed to present any evidence that it relied upon any of the alleged misstatements. The court did not reach the issue of the alleged misrepresentations and omissions.