Morgan Stanley 2010 Annual Report Download - page 42

the case. There are currently 14 plaintiffs asserting individual claims related to securities issued by the SIV.
Plaintiffs have not alleged the amount of their alleged investments, and are seeking, among other relief,
unspecified compensatory and punitive damages.
On January 16, 2009, the Company was named as a defendant in an interpleader lawsuit styled U.S. Bank, N.A. v.
Barclays Bank PLC and Morgan Stanley Capital Services Inc., which is pending in the SDNY. The lawsuit
relates to credit default swaps between the Company and Tourmaline CDO I LTD (“Tourmaline”), in which
Barclays Bank PLC (“Barclays”) is the holder of the most senior and controlling class of notes. At issue is
whether, pursuant to the terms of the swap agreements, the Company was required to post collateral to
Tourmaline, or take any other action, after the Company’s credit ratings were downgraded in 2008 by certain
ratings agencies. The Company and Barclays have a dispute regarding whether the Company breached any
obligations under the swap agreements and, if so, whether any such breaches were cured. The trustee for
Tourmaline, interpleader plaintiff U.S. Bank, N.A., has refrained from making any further distribution of
Tourmaline’s funds pending the resolution of these issues and is seeking a judgment from the court resolving
them. On January 11, 2011, the court conducted a bench trial, but has not yet issued its ruling. As of
December 31, 2010, the Company believed that it was entitled to receivables from Tourmaline in an amount
equal to approximately $273 million.
On September 25, 2009, the Company was named as a defendant in a lawsuit styled Citibank, N.A. v.
Morgan Stanley & Co. International, PLC, which is pending in the SDNY. The lawsuit relates to a credit default
swap referencing the Capmark VI CDO, which was structured by Citibank, N.A. (“Citi N.A.”). At issue is
whether, as part of the swap agreement, Citi N.A. was obligated to obtain the Company’s prior written consent
before it exercised its rights to liquidate Capmark upon the occurrence of certain contractually-defined credit
events. Citi N.A. is seeking approximately $245 million in compensatory damages plus interest and costs. On
October 8, 2010, the court issued an order denying Citi N.A.’s motion for judgment on the pleadings as to the
Company’s counterclaim for reformation and granting Citi N.A.’s motion for judgment on the pleadings as to the
Company’s counterclaim for estoppel. The Company moved for summary judgment on December 17, 2010. Citi
N.A. opposed the Company’s motion and cross moved for summary judgment on January 21, 2011.
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and
another defendant in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v.
Morgan Stanley & Co. Inc., et al. An amended complaint was filed on September 28, 2010. The complaint
alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage
pass through certificates backed by securitization trusts containing residential mortgage loans. The total amount
of certificates allegedly sold to plaintiff by the Company was approximately $233 million. The complaint raises
claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiff’s
purchase of such certificates. On October 18, 2010, defendants filed a motion to dismiss the action.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed two complaints against the Company
and other defendants in the Superior Court of the State of California. These actions are styled Federal Home
Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al., and Federal Home Loan Bank of
San Francisco v. Deutsche Bank Securities Inc. et al., respectively. Amended complaints were filed on June 10,
2010. The complaints allege that defendants made untrue statements and material omissions in connection with
the sale to plaintiff of a number of mortgage pass through certificates backed by securitization trusts containing
residential mortgage loans. The amount of certificates allegedly sold to plaintiff by the Company in these cases
was approximately $704 million and $276 million, respectively. The complaints raise claims under both the
federal securities laws and California law and seek, among other things, to rescind the plaintiff’s purchase of
such certificates. On July 12, 2010, defendants removed these actions to the United States District Court for the
Northern District of California, and on December 20, 2010, the cases were remanded to the state court.
On June 10, 2010, the Company was named as a new defendant in a pre-existing purported class action related to
securities issued by a SIV called Rhinebridge plc (“Rhinebridge SIV”). The case is styled King County,
Washington, et al. v. IKB Deutsche Industriebank AG, et al. and is pending in the SDNY. The complaint asserts
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