Ropes & Gray Secures Second Circuit Victory in Securities Class Action

A Ropes & Gray team led by New York-based securities litigation partner Bob Fischler persuaded the U.S. Court of Appeals for the Second Circuit to affirm the dismissal of a suit brought against clients CBRE Realty Finance, a real estate investment trust, and certain of its officers and directors, under sections 11, 12(a)(2), and 15 of the Securities Act of 1933.

In their second amended complaint, the plaintiffs, purportedly representing a class of CBRE shareholders that bought in the company’s 2006 IPO and thereafter, alleged that the IPO registration statement failed to disclose that an entity to which CBRE had loaned $51.5 million to finance real estate projects was in financial peril and that the loans were impaired. The district court granted a motion to dismiss filed by Ropes & Gray under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. After the court denied their motion for reconsideration and for leave to file a third amended complaint, the plaintiffs appealed to the Second Circuit.

Mr. Fischler argued the appeal on June 1, 2011. In the court’s opinion, authored by Chief Judge Dennis Jacobs, the Second Circuit adopted Ropes & Gray’s argument that plaintiffs failed adequately to allege that the omissions concerning the allegedly impaired loans were material. The court held that plaintiffs failed adequately to allege (1) that any impairment of the loans would have been “quantitatively” important to investors in the context of the company’s $1.1 billion investment portfolio; or (2) that “qualitative” factors, including stock price drops following public disclosures that the loans were in trouble and the potential impact of the loans on particular segments of CBRE’s business, rendered the omissions material. In addition to affirming the dismissal of the second amended complaint, the court also affirmed the district court’s denial of leave to amend on the ground that the proposed amendment would have been futile.

Ropes & Gray has one of the largest and most experienced securities litigation practices in the country. Law360 named Ropes & Gray one of the top five securities litigation practices in 2010 and Chambers USA: America’s Leading Lawyers for Business honored the practice in its 2011 nationwide rankings.