Morgan Stanley 2014 Annual Report Download - page 43

large part to the Company’s subprime and other mortgage related losses, and also included allegations regarding
the Company’s disclosures, internal controls, accounting and other matters. On August 8, 2011, defendants filed
a motion to dismiss the second amended complaint, which was granted on January 18, 2013. On May 29, 2013,
the plaintiffs filed an appeal in the United States Court of Appeals for the Second Circuit (the “Second Circuit”).
On January 12, 2015, the Second Circuit affirmed the dismissal of the action.
On October 25, 2010, the Company, certain affiliates and Pinnacle Performance Limited, a special purpose
vehicle (“SPV”), were named as defendants in a purported class action related to securities issued by the SPV in
Singapore, commonly referred to as Pinnacle Notes. The case is styled Ge Dandong, et al. v. Pinnacle
Performance Ltd., et al. and is pending in the SDNY. The court granted class certification on October 17, 2013.
The second amended complaint, filed on January 31, 2014, alleges that the defendants engaged in a fraudulent
scheme to defraud investors by structuring the Pinnacle Notes to fail and benefited subsequently from the
securities’ failure, that the securities’ offering materials contained material misstatements or omissions regarding
the securities’ underlying assets and alleged conflicts of interest between the defendants and the investors, and
asserts common law claims of fraud, aiding and abetting fraud, fraudulent inducement, aiding and abetting
fraudulent inducement, and breach of the implied covenant of good faith and fair dealing. Plaintiffs seek damages
of approximately $138.7 million, rescission, punitive damages, and interest. On July 17, 2014, the parties reached
an agreement in principle to settle the litigation, which received preliminary court approval December 2, 2014.
The final approval hearing is scheduled for July 2, 2015.
Other Litigation. 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. The amended complaint, filed on September 28, 2010,
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. By orders
dated June 23, 2011 and July 18, 2011, the court denied defendants’ omnibus motion to dismiss plaintiff’s
amended complaint and on August 15, 2011, the court denied the Company’s individual motion to dismiss the
amended complaint. On March 7, 2013, the court granted defendants’ motion to strike plaintiff’s demand for a
jury trial.
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, filed on June 10, 2010,
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
August 11, 2011, plaintiff’s federal securities law claims were dismissed with prejudice. On February 9, 2012,
defendants’ demurrers with respect to all other claims were overruled. On December 20, 2013, plaintiff’s
negligent misrepresentation claims were dismissed with prejudice. On January 26, 2015, the plaintiff requested
dismissal with prejudice of all remaining claims against the Company in the Federal Home Loan Bank of San
Francisco v. Credit Suisse Securities (USA) LLC, et al. action.
On July 15, 2010, The Charles Schwab Corp. filed a complaint against the Company and other defendants in the
Superior Court of the State of California, styled The Charles Schwab Corp. v. BNP Paribas Securities Corp., et
al. The complaint alleges that defendants made untrue statements and material omissions in the sale to one of
plaintiff’s subsidiaries of a number of mortgage pass-through certificates backed by securitization trusts
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