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Citigroup Wins Dismissal of Auction Rate Securities Suit

Justice Jeffrey K. Oing of the New York Supreme Court issued an order dismissing on statute of limitations grounds claims brought by All Children's Hospital (ACH) against Paul, Weiss client Citigroup Global Markets Inc. (CGMI). CGMI served as the underwriter and broker-dealer for $92.2 million of auction rate securities (ARS) that ACH issued in September 2007, and Citibank. N.A. served as counterparty for a related interest rate swap. ACH asserted four causes of action, each of which arose out of the same general theory of liability: that CGMI misled ACH about the risks of ARS and CGMI's role in the ARS market. In his ruling, Justice Oing held that New York's borrowing statute mandated the application of Florida's statute of limitations (ACH is located in St. Petersburg, Florida), and that under those statutes of limitations all of ACH's claims were time-barred.

Prior to filing its summons and complaint in New York Supreme Court in December 2014, ACH had sought to bring the same claims in arbitration before the Financial Industry Regulatory Authority. CGMI, represented by Paul, Weiss, successfully moved to enjoin the arbitration based on a forum selection clause in the broker-dealer agreement between the parties, and ACH voluntarily dismissed its appeal of the injunction after CGMI won a favorable ruling from the Second Circuit in a related appeal argued by litigation partner Audra Soloway.

The Paul, Weiss team includes litigation partners Andrew Ehrlich, who argued the motion to dismiss, and Audra Soloway.

POSTED ON August 24, 2016 » Learn More About This Practice

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