UBS AG (UBS:US) won dismissal of a fraud claim filed against the bank by HSH Nordbank AG over losses on a collateralized debt obligation linked to the U.S. subprime- mortgage market.
A New York state appeals court in Manhattan today dismissed the fraud claim against Zurich-based UBS, reversing an October 2009 ruling by state Supreme Court Justice Richard Lowe that allowed it to proceed.
The appeals court said HSH Nordbank, a regional German bank that was bailed out during the financial crisis, was “explicity warned” of the risks in the transaction and could have uncovered any misrepresentation by doing its own due diligence.
“If we were to affirm the denial of the motion to dismiss this fraud claim, we would be judging the sufficiency of a claim asserted by a 140 billion euro commercial bank by a standard more lenient than the one by which this court has judged similar claims made by individual investors against their retail brokers,” Justice David Friedman said in the ruling.
HSH Nordbank, based in Hamburg, sued UBS in February 2008, accusing the bank of fraud, breach of contract and other claims over losses on the investment, a CDO called North Street 2002-4.
HSH Nordbank said in the lawsuit that its predecessor, Landesbank Schleswig-Holstein (LSCH), invested $500 million in the CDO with UBS in March 2002. HSH Nordbank, which was created in June 2003 by the combination of Hamburgische Landesbank (HLAB) and Landesbank Schleswig-Holstein, said it lost almost all of the investment.
The case is HSH Nordbank AG v. UBS AG (UBSN), 600562/2008, New York Supreme Court (Manhattan).
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