| CIFG Assur. N. Am., Inc. v Credit Suisse Sec. (USA)LLC |
| 2015 NY Slip Op 04558 [128 AD3d 607] |
| May 28, 2015 |
| Appellate Division, First Department |
[*1](May 28, 2015)
| CIFG Assurance North America, Inc.,Appellant, v Credit Suisse Securities (USA) LLC,Respondent. |
Quinn Emanuel Urquhart & Sullivan LLP, New York (Sean P. Baldwin ofcounsel), for appellant.
Orrick, Herrington & Sutcliffe LLP, New York (John Ansbro of counsel), forrespondent.
Order, Supreme Court, New York County (Jeffrey K. Oing, J.), entered on or aboutJuly 16, 2014, which granted defendant's motion to dismiss the complaint withoutprejudice, unanimously affirmed, without costs.
Plaintiff, a New York stock insurance company that provided financial guarantyinsurance on a credit default swap, alleges that defendant, a registered broker-dealer,induced it to provide the insurance by representing that the collateral for the loans wouldbe selected by a collateral manager, acting independently and in good faith in theinterests of long investors, and by further representing that the collateralized debtobligation's (CDO) notes had characteristics that merited their AAA/Aaa credit ratings.In September 2008, approximately two years after closing, an event of default occurredand plaintiff paid out $46 million under its guaranty. In November 2013, plaintiffcommenced this action alleging causes of action for fraud and violation of InsuranceLaw § 3105. The motion court properly determined that these claims aretime-barred.
As plaintiff concedes, because it filed its complaint more than six years after theCDO closed, the timeliness of its claims depends on whether it "discovered the fraud. . . or could with reasonable diligence have discovered it" more than twoyears before the filing of the complaint on November 15, 2013 (CPLR 213 [8]; see Sargiss v Magarelli, 12NY3d 527, 532 [2009]). "[W]here the circumstances are such as to suggest to aperson of ordinary intelligence the probability that he has been defrauded, a duty ofinquiry arises, and if he omits that inquiry when it would have developed the truth, andshuts his eyes to the facts which call for investigation, knowledge of the fraud will beimputed to him" (Gutkin vSiegal, 85 AD3d 687, 688 [1st Dept 2011] [internal quotation marksomitted]).
Plaintiff has failed to meet its burden of establishing that even with the exercise ofreasonable diligence, it could not have discovered the basis for its claims prior toNovember 15, 2011. Plaintiff was put on notice of defendant's fraud and scienter as earlyas 2008, but certainly by 2010, based on certain reports, made public, indicating thealleged actions that form the basis of plaintiff's claims. In addition, plaintiff was put onnotice of defendant's alleged fraudulent [*2]activities byother lawsuits commenced prior to November 2011. Because plaintiff possessedinformation suggesting the probability that it had been defrauded, and failed to conductan inquiry at that time, knowledge of the fraud is imputed (see Gutkin, 85 AD3dat 688). Concur—Tom, J.P., Renwick, Andrias, Richter and Gische, JJ.