| Loreley Fin. (Jersey) No. 3, Ltd. v Morgan Stanley & Co.Inc. |
| 2017 NY Slip Op 00551 [146 AD3d 683] |
| January 26, 2017 |
| Appellate Division, First Department |
[*1]
| Loreley Financing (Jersey) No. 3, Limited, et al.,Respondents, v Morgan Stanley & Co. Incorporated et al., Appellants, etal., Defendants. |
Davis Polk & Wardwell LLP, New York (James P. Rouhandeh of counsel), forMorgan Stanley appellants.
Shearman & Sterling LLP, New York (K. Mallory Brennan of counsel), forCountrywide appellants.
Meister Seelig & Fein, LLP, New York (James M. Ringer of counsel), forrespondents.
Orders, Supreme Court, New York County (Jeffrey K. Oing, J.), entered July 29,2016, which, to the extent appealed from, denied the motions of defendants MorganStanley & Co. LLC (formerly know as Morgan Stanley & Co. Inc.), MorganStanley & Co. International plc (formerly know as Morgan Stanley & Co.International Ltd.), Morgan Stanley Capital Services Inc., Countrywide Alternative AssetManagement Inc., and Countrywide Securities Corp. (defendants) to dismiss plaintiffs'fraud claim, unanimously affirmed, with costs.
Defendants contend that plaintiffs cannot establish justifiable reliance because theyfailed to make any inquiry after receiving the final offering memorandum, which warned,"Delinquencies and losses on, and claims for repurchase of, mortgage loans originated bysome mortgage lenders have . . . resulted from fraudulent activities ofborrowers, lenders and appraisers[,] including misstatements of income and employmenthistory . . . and overstatements of the appraised value of mortgageproperties." However, a plaintiff is required to make "additional inquiry" only if it "hashints of [a misrepresentation's] falsity" (ACA Fin. Guar. Corp. v Goldman, Sachs & Co., 25 NY3d1043, 1044 [2015] [internal quotation marks omitted]). The disclosure in the finaloffering memorandum would not have given plaintiffs hints of the falsity of defendants'representation that defendant Countrywide Alternative Asset Management "wouldemploy a detailed, loan-level, credit-driven analysis to select only the best collateraleligible for" the deal in question. On the contrary, plaintiffs allege, "Countrywide hadrepeatedly represented that the 'difficulties' of 'some mortgage lenders' did not includeCountrywide and that Countrywide was uniquely equipped [to] analyze andrecognize—and thus avoid—such issues in the collateral that [*2]it would select."
In a footnote in their reply brief, defendants contend that their statements aboutCountrywide were mere puffery. Assuming that this contention can be considered, wefind it unavailing. Concur—Acosta, J.P., Mazzarelli, Feinman and Webber,JJ.