Royal Bank of Scotland Group Plc won dismissal of a lawsuit filed by Seoul-based Woori Bank over losses from investments in collateralized debt obligations tied to the housing market.
A federal judge in New York ruled today that the South Korean lender failed to present a strong enough case against RBS. Woori Bank had alleged that it was duped into investing $80 million in CDOs that were exposed to risk from the subprime housing market, according to the order filed today by U.S. District Judge Harold Baer in Manhattan.
Woori lost most of the money in those investments, which were made from about 2006 through 2007, lawyers for the bank said in a complaint filed in May.
“The deals in this case are, like most deals of that time, somewhat suspect,” Baer said in today’s order. “Not all such deals are inherently fraudulent or misleading simply because they involved subprime mortgages and the sale of what are now worthless investments that were once pitched as safe.”
Christopher Lebsock, a San Francisco-based lawyer representing Woori, said in an e-mail that the bank’s legal team will review the order over the next several days and plans to send a letter to the court seeking permission to amend the case.
“It appears that the court was concerned with certain technical defects in the pleadings concerning RBS’s knowledge of its conduct,” Lebsock said in the e-mail.
In its complaint, Woori alleged that RBS was aware at the time at the time the investments were sold that the CDOs included a significant percentage of mortgages given to borrowers who were likely to default.
“Rather than disclosing these material facts to investors in the deals it arranged, defendants concealed them so that RBS could off-load some of the massive exposure to subprime RMBS that it carried on its own balance sheet to unsuspecting investors,” lawyers for the bank said in the filing, referring to residential mortgage-backed securities.
Woori’s suit alleged claims including fraud, negligent misrepresentation and unjust enrichment.
In his order today, Baer said amending the suit would be “an exercise in futility” and instructed the court clerk to close the case, indicating the ruling was final. He invited Woori to write a letter stating how it might change its suit if otherwise given permission to do so.
The case is Woori Bank v. Royal Bank of Scotland Group Plc, 1:12-cv-04254, U.S. District Court, Southern District of New York (Manhattan).