Intesa Sanpaolo, S.P.A. v. Credit Agricole Corporate & Investment Bank: Understanding the Importance of Timeliness with Respect to 10(b) Claims
In Intesa Sanpaolo, S.P.A. v. Credit Agricole Corporate & Inv. Bank, No. 12 Civ. 2683 (RWS), 2013 BL 244911 (S.D.N.Y. Sept. 10, 2013), the U.S. District Court for the Southern District of New York granted defendants’ 9(b) and 12(b)(6) motions to dismiss claims brought by Intesa Sanpaolo, S.P.A. (“Intesa”) under Section 10(b) of the Securities and Exchange Act of 1934 (“Exchange Act”) and related state law claims for fraud and aiding and abetting fraud.
On February 13, 2013, Intesa filed its second amended complaint to cure the timeliness issue with respect to its initial complaint against Credit Agricole Corporate and Investment Bank, Credit Agricole Securities (U.S.A), Inc., The Putnam Advisory Company LLC, Magnetar Capital LLC, and Magnetar Capital Fund LP (collectively, “Defendants”). The court previously dismissed Intesa’s 10(b) claims because they were time-barred pursuant to 28 U.S.C. § 1658(b) (“Section 1658 (b)”).
Pursuant to Section 1658(b), federal securities claims must be filed no later than the earlier of “(1) two years after the discovery of the facts constituting the violation; or (2) five years after such violation.” In dismissing Intesa’s initial motion, the court indicated that a 10(b) claim might possibly be timely if misrepresentations existed in underlying documents to the swap agreement at issue.
Intesa contended that it cured the timeliness issue in its second amended complaint for three reasons. First, it asserted that various agreements were incorporated by reference into the swap contract because the agreements were referenced in the contract. However, the court noted that incorporation requires more than reference alone. Incorporation requires the language to also “clearly communicate that the purpose of the reference is to incorporate the referenced material into the contract.” Because the contract at issue lacked such language of purpose, the court rejected this contention.
Second, Intesa contended that an April 20, 2007 phone call in which a Putnam employee made potential misrepresentations remedied the timeliness issue. Because the statement was a general statement of optimism, it was not actionable unless the “plaintiff . . . demonstrate[d] that the opinion was not honestly held.” Intesa never alleged that the Putnam employee did not honestly hold his optimistic opinion. Consequently, the court rejected Intesa’s second contention.
Third, Intesa contended that it remedied the untimeliness issue of its original complaint because the Defendants provided Intesa with misrepresented valuations in March, April, and May of 2007. However, the March and April valuations occurred more than five years after Intesa filed the complaint and were statutorily barred. Additionally, the May valuation was received “after Intesa had already engaged in the swap transaction.” Therefore, the court concluded as a matter of law that Intesa could not have relied on the allegedly misrepresented May 2007 valuation for the purpose of purchasing the swap contract.
As a result, the court granted with prejudice the Defendants’ motions to dismiss and declined supplemental jurisdiction over the state law claims.
The primary materials for this case may be found on the DU Corporate Governance website.