January 30, 2012

Paul, Weiss Wins Dismissal of Securities Class Action Against Triad Guaranty Inc.

Today, Magistrate Judge Sharp of the Middle District of North Carolina granted our motion to dismiss a putative securities class action against our client Triad Guaranty Inc., an insurance company based in North Carolina, and certain of its officers and directors. Plaintiff alleged that Triad's statements concerning its capital position and financial future were false and misleading, claiming that defendants had manipulated internal risk models to justify lower prices on mortgage insurance in order to undercut competitors and achieve greater market share and short-term profits, allowing the company to keep loss reserves artificially low while exposing it to considerable risk in the event of a decline in the housing market. Magistrate Judge Sharp held that plaintiff had failed to allege facts suggesting that plaintiff's loss was caused by the alleged fraud rather than "simply by the 'historically unprecedented' contraction of the housing industry." Magistrate Judge Sharp further held that plaintiff's allegations concerning falsity and scienter were weak because the pricing scheme alleged "economically irrational conduct that would not support an inference of scienter." Plaintiff was granted leave to replead. The Paul, Weiss team included litigation partners Richard A. Rosen, who argued the motion to dismiss, and Robyn F. Tarnofsky.