Stephen Barrett (Of Counsel-New York) obtained summary judgment in the Southern District of New York on behalf of Wilson Elser's clients, two officers of a large regional bank accused of fraud in connection with a loan transaction. The plaintiff is an investment firm specializing in subordinated and other high-risk debt offerings. Our clients extended a seven-figure loan to a consumer lending company. When the lending company sought additional capital, the bank made an introduction to the plaintiff's firm because of its specialized offerings. The lending company ultimately failed and could not repay the loan from our clients' bank and the subordinated loan from the plaintiff. The plaintiff then sued our clients, alleging they fraudulently induced the plaintiff to make the subordinated debt offering to the lending company.
After successfully narrowing the scope of the plaintiff's claims via a pre-answer motion to dismiss, the parties engaged in extensive discovery related to the various loan instruments at issue. After obtaining the complete record, Stephen filed a lengthy, detailed motion for summary judgment. In a comprehensive 32-page opinion, the district court judge accepted our clients' arguments in their entirety. The court held that the plaintiff failed to identify any potentially fraudulent statements and, in any event, could not have reasonably relied on any such statements considering the plaintiff's affirmative obligation to conduct due diligence regarding its loan offering. The complaint was dismissed with prejudice, and the plaintiff declined to file an appeal.
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