Morgan Stanley 2014 Annual Report Download - page 45

On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a
complaint against the Company and other defendants in the Court of Common Pleas in Ohio, styled Western and
Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint
was filed on April 2, 2012 and alleges that defendants made untrue statements and material omissions in the sale
to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential
mortgage loans. The amount of the certificates allegedly sold to plaintiffs by the Company was approximately
$153 million. The amended complaint raises claims under the Ohio Securities Act, federal securities laws, and
common law and seeks, among other things, to rescind the plaintiffs’ purchases of such certificates. On May 21,
2012, the Company filed a motion to dismiss the amended complaint, which was denied on August 3, 2012. The
Company filed a motion for summary judgment on January 20, 2015. Trial is currently scheduled to begin in
July 2015.
On November 4, 2011, the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Franklin Bank
S.S.B, filed two complaints against the Company in the District Court of the State of Texas. Each was styled
Federal Deposit Insurance Corporation as Receiver for Franklin Bank, S.S.B v. Morgan Stanley & Company
LLC F/K/A Morgan Stanley & Co. Inc. and alleged that the Company made untrue statements and material
omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by securitization
trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to
plaintiff by the Company in these cases was approximately $67 million and $35 million, respectively. The
complaints each raised claims under both federal securities law and the Texas Securities Act and each seeks,
among other things, compensatory damages associated with plaintiff’s purchase of such certificates. On June 7,
2012, the two cases were consolidated. The Company filed a motion for summary judgment and special
exceptions, which was denied in substantial part on April 26, 2013. The FDIC filed a second amended
consolidated complaint on May 3, 2013. The Company filed a motion for leave to file an interlocutory appeal as
to the court’s order denying its motion for summary judgment and special exceptions, which was denied on
August 1, 2013. On October 7, 2014, the court denied the Company’s motion for reconsideration of the court’s
order denying its motion for summary judgment and special exceptions and granted its motion for
reconsideration of the court’s order denying leave to file an interlocutory appeal. On November 21, 2014, the
Company filed a motion for summary judgment, which was denied on February 10, 2015. The Texas Fourteenth
Court of Appeals denied Morgan Stanley’s petition for interlocutory appeal on November 25, 2014. Trial is
currently scheduled to begin in July 2015.
On January 20, 2012, Sealink Funding Limited filed a complaint against the Company in the Supreme Court of
NY, styled Sealink Funding Limited v. Morgan Stanley, et al. Plaintiff purports to be the assignee of claims of
certain special purpose vehicles (“SPVs”) formerly sponsored by SachsenLB Europe. A second amended
complaint, filed on March 20, 2013, alleges that defendants made untrue statements and material omissions in the
sale to the SPVs of certain mortgage pass-through certificates backed by securitization trusts containing
residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold by the
Company was approximately $507 million. The second amended complaint raises common law claims of fraud,
fraudulent inducement, and aiding and abetting fraud and seeks, among other things, compensatory and/or
rescissionary damages as well as punitive damages associated with plaintiffs’ purchases of such certificates. On
May 3, 2013, the Company moved to dismiss the second amended complaint, and on April 18, 2014, the court
granted the Company’s motion. On May 1, 2014, the plaintiff filed a notice of appeal of that decision.
On January 25, 2012, Dexia SA/NV and certain of its affiliated entities filed a complaint against the Company in
the Supreme Court of NY, styled Dexia SA/NV et al. v. Morgan Stanley, et al. An amended complaint was filed
on May 24, 2012 and alleges that defendants made untrue statements and material omissions in the sale to
plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential
mortgage loans. The total amount of certificates allegedly issued by the Company and/or sold to plaintiffs by the
Company was approximately $626 million. The amended complaint raises common law claims of fraud,
fraudulent inducement, and aiding and abetting fraud and seeks, among other things, compensatory and/or
rescissionary damages as well as punitive damages associated with plaintiffs’ purchases of such certificates. On
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