Morgan Stanley 2010 Annual Report Download - page 40

parties, including certain present and former directors and officers, under the Employee Retirement Income
Security Act of 1974 (“ERISA”). In February 2008, these actions were consolidated in a single proceeding,
which is styled In re Morgan Stanley ERISA Litigation. The consolidated complaint relates in large part to the
Company’s subprime and other mortgage related losses, but also includes allegations regarding the Company’s
disclosures, internal controls, accounting and other matters. The consolidated complaint alleges, among other
things, that the Company’s common stock was not a prudent investment and that risks associated with its
common stock and its financial condition were not adequately disclosed. Plaintiffs are seeking, among other
relief, class certification, unspecified compensatory damages, costs, interest and fees. On December 9, 2009, the
court denied defendants’ motion to dismiss the consolidated complaint.
On February 12, 2008, a plaintiff filed a purported class action, which was amended on November 24, 2008,
naming the Company and certain present and former senior executives as defendants and asserting claims for
violations of the securities laws. The amended complaint, which is styled Joel Stratte-McClure, et al. v.
Morgan Stanley, et al., is currently pending in the SDNY. Subject to certain exclusions, the amended complaint
asserts claims on behalf of a purported class of persons and entities who purchased shares of the Company’s
common stock during the period June 20, 2007 to December 19, 2007 and who suffered damages as a result of
such purchases. The allegations in the amended complaint relate in large part to the Company’s subprime and
other mortgage related losses, but also include allegations regarding the Company’s disclosures, internal controls,
accounting and other matters. Plaintiffs are seeking, among other relief, class certification, unspecified
compensatory damages, costs, interest and fees. On April 27, 2009, the Company filed a motion to dismiss the
amended complaint.
On May 7, 2009, the Company was named as a defendant in a purported class action lawsuit brought under
Sections 11, 12 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), alleging, among other
things, that the registration statements and offering documents related to the offerings of approximately $17
billion of mortgage pass through certificates in 2006 and 2007 contained false and misleading information
concerning the pools of residential loans that backed these securitizations. The plaintiffs sought, among other
relief, class certification, unspecified compensatory and rescissionary damages, costs, interest and fees. This
case, which was consolidated with an earlier lawsuit and is currently styled In re Morgan Stanley Mortgage
Pass-Through Certificate Litigation, is pending in the SDNY. On August 17, 2010, the court dismissed the
claims brought by the lead plaintiff, but gave a different plaintiff leave to file a second amended complaint. On
September 10, 2010, that plaintiff, together with several new plaintiffs, filed a second amended complaint which
purports to assert claims against the Company and others on behalf of a class of investors who purchased
approximately $4.7 billion of mortgage pass through certificates issued in 2006 by seven trusts collectively
containing residential mortgage loans. The second amended complaint asserts claims under Sections 11, 12 and
15 of the Securities Act, and alleges, among other things, that the registration statements and offering documents
related to the offerings contained false and misleading information concerning the pools of residential loans that
backed these securitizations. The plaintiffs are seeking, among other relief, class certification, unspecified
compensatory and rescissionary damages, costs, interest and fees. On October 11, 2010, defendants filed a
motion to dismiss the second amended complaint.
Beginning in 2007, the Company was named as a defendant in several putative class action lawsuits brought
under Sections 11 and 12 of the Securities Act, related to its role as a member of the syndicates that underwrote
offerings of securities and mortgage pass through certificates for certain non-Morgan Stanley related entities that
have been exposed to subprime and other mortgage-related losses. The plaintiffs in these actions allege, among
other things, that the registration statements and offering documents for the offerings at issue contained various
material misstatements or omissions related to the extent to which the issuers were exposed to subprime and
other mortgage-related risks and other matters and seek various forms of relief including class certification,
unspecified compensatory and rescissionary damages, costs, interest and fees. The Company’s exposure to
potential losses in these cases may be impacted by various factors including, among other things, the financial
condition of the entities that issued the securities and mortgage pass through certificates at issue, the principal
amount of the offerings underwritten by the Company, the financial condition of co-defendants and the
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