Morgan Stanley 2014 Annual Report Download - page 44

containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff’s subsidiary by
the Company was approximately $180 million. The complaint raises claims under both the federal securities laws
and California law and seeks, among other things, to rescind the plaintiff’s purchase of such certificates. Plaintiff
filed an amended complaint on August 2, 2010. On September 22, 2011, defendants filed demurrers to the
amended complaint. On October 13, 2011, plaintiff voluntarily dismissed its claims brought under the Securities
Act. On January 27, 2012, the court substantially overruled defendants’ demurrers. On March 5, 2012, the
plaintiff filed a second amended complaint. On April 10, 2012, the Company filed a demurrer to certain causes of
action in the second amended complaint, which the court overruled on July 24, 2012. On November 24, 2014,
plaintiff’s negligent misrepresentation claims were dismissed with prejudice. An initial trial of certain of
plaintiff’s claims is scheduled to begin in August 2015.
On July 15, 2010, China Development Industrial Bank (“CDIB”) filed a complaint against the Company, styled
China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the
Supreme Court of the State of New York, New York County (“Supreme Court of NY”). The complaint relates to
a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The
complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges
that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew
that the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The
complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has
already lost under the credit default swap, rescission of CDIB’s obligation to pay an additional $12 million,
punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Company’s motion
to dismiss the complaint.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other
defendants in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of
America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected
amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff
of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage
loans and asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the
Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to
rescind the plaintiff’s purchase of such certificates. The defendants filed a motion to dismiss the corrected
amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the
court entered an order dismissing all claims related to one of the securitizations at issue. After that dismissal, the
remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was
approximately $78 million.
On April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other
defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of
Boston v. Ally Financial, Inc. F/K/A GMAC LLC et al. An amended complaint was filed on June 29, 2012 and
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 issued by the Company or sold to plaintiff by the Company was approximately $385
million. The amended complaint raises claims under the Massachusetts Uniform Securities Act, the
Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the
plaintiff’s purchase of such certificates. On May 26, 2011, defendants removed the case to the United States
District Court for the District of Massachusetts. On October 11, 2012, defendants filed motions to dismiss the
amended complaint, which were granted in part and denied in part on September 30, 2013. On November 25,
2013 and July 16, 2014, respectively, the plaintiff voluntarily dismissed its claims against the Company with
respect to two of the securitizations at issue. After these voluntary dismissals, the remaining amount of
certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately
$358 million.
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