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Second Circuit Affirms Summary Judgment in Case Brought by Seven Norwegian Municipalities

Paul, Weiss achieved a victory for Citigroup when the Second Circuit Court of Appeals affirmed by summary order the U.S. District Court's grant of summary judgment in favor of our clients Citigroup Global Markets Inc. (CGMI) and Citigroup Alternative Investments LLC (CAI). The case was brought in August 2009 by seven Norwegian municipalities for common law fraud and negligent misrepresentation following their investment in a Citi municipal bond arbitrage fund that lost value during the 2007 financial crisis. After months of discovery, much of which took place in Norway, CGMI and CAI prevailed on summary judgment on the grounds that plaintiffs could not prove reliance because Citi had no direct communication with the municipalities about the investment, and their own broker, Terra Securities, altered Citi's marketing materials by removing the risk disclosures; and that plaintiffs could not prove causation because Terra's acts were the cause of plaintiffs' losses. After oral argument on January 30, the Second Circuit issued its summary order less than 3 weeks later. The court agreed with the district court that the misrepresentations made to the municipalities by Terra were not the same, "in substance or repackaged form," as the statements made by Citi in its marketing materials because many relevant risk disclosures were omitted: "Terra did not convey any of this information, among other cautions, to any plaintiff in marketing the Notes, thus placing the risk of investing in a drastically different light."

The Paul, Weiss team included litigation partners John Baughman, Brad Karp and Daniel Leffell and counsel Karen King and Daniel Levi.

February 18, 2014

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