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Barclays Can’t Be Sued Over SIVs, New York Court Rules

New York’s highest court upheld the dismissal of a lawsuit filed by Oddo Asset Management accusing Barclays Plc of using structured investment vehicles as a “dumping ground for toxic assets.”

Oddo, a fund management unit of Paris-based Oddo & Cie, sued London-based Barclays in state court in Manhattan in 2008, claiming Britain’s second-biggest bank by assets transferred subprime mortgage-backed securities to two SIVs it had created at “inflated prices.”

Justice Barbara Kapnick, the trial-level judge, dismissed all of Oddo’s claims in April 2010, saying that the fund manager was a “sophisticated entity” that knew the risks of investing in debt securities. An appellate court in Manhattan later upheld the dismissal, a decision that was endorsed by the Court of Appeals in Albany today.

“In hindsight, it is apparent that a greater degree of vigilance was necessary from all concerned before soliciting funds for, committing funds to, and rating esoteric entities with little understood risks, such as the SIV-Lites -- whose fate was dependent almost exclusively on subprime residential and commercial mortgage-backed securities,” Chief Judge Jonathan Lippman wrote in a consensus opinion.

The case is Oddo Asset Management v. Barclays Bank, 109547/08, New York Supreme Court (Manhattan).

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