Last month, a team of Goodwin litigators achieved a significant victory for client Countrywide Financial Corporation when the U.S. Court of Appeals for the Second Circuit affirmed dismissal of a securities fraud suit brought against Countrywide by SRM Global Fund Limited Partnership, a multibillion-dollar offshore hedge fund.
The suit alleged that Countrywide had concealed its true financial condition from investors in the months leading up to its $4 billion merger with Bank of America Corporation in July 2008. SRM alleged that it had purchased approximately 50 million shares of Countrywide common stock in 2007-08, and lost nearly $700 million when Countrywide’s stock price dropped in the wake of the capital markets crisis that began in the third quarter of 2007.
SRM argued in the federal district court for the Southern District of New York in Manhattan that Countrywide and its top executives failed to disclose that the Company’s liquidity and viability supposedly had disappeared in the summer of 2007. The federal district court granted Countrywide’s motion to dismiss the case, holding that SRM had not adequately alleged facts showing that Countrywide had failed to disclose material information or suggesting any intent to defraud.
SRM appealed the dismissal of its case, and the Second Circuit Court of Appeals affirmed the dismissal, ruling that SRM had not alleged facts showing even a single instance in which Countrywide had misled investors. In addition, the Court of Appeals adopted Countrywide’s argument that the complaint amounted to impermissible “fraud-by-hindsight” pleading.
To read the full opinion, please click here.