Loreley Fin. (Jersey) No. 28, Ltd. v. Merrill Lynch, Pierce, Fenner & Smith Inc.

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Loreley Fin. (Jersey) No. 28, Ltd. v Merrill Lynch, Pierce, Fenner & Smith Inc. (2021 NY Slip Op 04413) Loreley Fin. (Jersey) No. 28, Ltd. v Merrill Lynch, Pierce, Fenner & Smith Inc. 2021 NY Slip Op 04413 Decided on July 15, 2021 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and subject to revision before publication in the Official Reports. Decided and Entered: July 15, 2021 Before: Renwick, J.P., Gische, Moulton, Mendez, JJ. Index No. 652732/11 Appeal No. 13595 Case No. 2020-03832 [*1]Loreley Financing (Jersey) No. 28, Limited, Plaintiff-Appellant, vMerrill Lynch, Pierce, Fenner & Smith Incorporated, et al., Defendants-Respondents, Auriga CDO, Ltd, Defendant. Meister Seelig & Fein LLP, New York (James M. Ringer of counsel), for appellant. Cleary Gottlieb Steen & Hamilton LLP, New York (Roger A. Cooper of counsel), for respondents. Order, Supreme Court, New York County (Andrea Masley, J.), entered on or about May 8, 2020, which, insofar as appealed from, granted the motions of defendants Merrill Lynch, Pierce, Fenner & Smith Inc., Merrill Lynch International Inc., Merrill Lynch & Co., Inc., and 250 Capital LLC for summary judgment dismissing the first amended complaint, reversed, on the law, without costs, the motions denied, and plaintiff's fraud claim reinstated to the extent it relies on an omission as opposed to a representation. Dismissal of the fraud claims, on the grounds that plaintiff did not raise issues of fact on the fraud elements of loss causation and justifiable reliance on misrepresentations, was not warranted. As to loss causation, Supreme Court found that plaintiff could not establish that its loss was caused by anything other than the intervening events of the 2008-2009 financial crisis. Plaintiff argues, among other things, that there were no intervening events between defendants' fraud and the loss because it suffered the out-of-pocket loss on the very day in December 2006 when it bought the Auriga securities at an inflated price. Plaintiff, however, is judicially estopped from arguing that it suffered a loss at the inception of the transaction because, in successfully defeating a prior motion to dismiss the fraud claim on the pleadings, plaintiff argued that it suffered a loss in 2008 at the earliest (see Loreley Fin. [Jersey] No. 28, Ltd. v Merrill Lynch, Pierce, Fenner & Smith Inc., 117 AD3d 463 [1st Dept 2014]). Even if plaintiff was not judicially estopped, plaintiff's argument, that it suffered a loss at the inception of the transaction, is untenable as a matter of law because plaintiff has to prove not only that defendants' misrepresentation caused plaintiff to buy the Auriga securities at an inflated price, but also that the fraud caused the eventual price decline. Other cases involving collateralized debt obligations (CDOs) (see e.g. Basis PAC-Rim Opportunity Fund [Master] v TCW Asset Mgt. Co., 149 AD3d 146 [1st Dept 2017], lv denied 30 NY3d 903 [2017]) — indeed, a case involving another "constellation," Magnetar-influenced CDO like Auriga (see Loreley Fin. [Jersey] No. 3 …

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