Bloomberg reports that Dexia filed the suit in New York State Supreme Court in Manhattan in January 2012 over 29 residential mortgage-backed securities bought by its unit FSA Asset Management from Morgan Stanley for $626m in 2006 and 2007.
The securities were assigned to Dexia and two entities in June 2009 and had been downgraded to junk status by the time the suit was filed.
Morgan Stanley asked Justice Eileen Bransten to dismiss the case, saying that Dexia didn’t have the right to sue because the transaction assigned only ownership and contractual rights, not claims. Morgan Stanley also argued that FSA couldn’t bring fraud claims because it received face value for the securities and didn’t suffer damages.
Bransten agreed with Morgan Stanley in a ruling dated 16th October FSA Asset Management didn’t assign fraud claims to Dexia and didn’t suffer damages, the judge ruled.
'FSAM suffered no losses on the RMBS it purchased; it received exactly the purchase price upon the sale to the Dexia plaintiffs', Bransten wrote. “'here is also no allegation that pass-through payments due to FSAM as holders of the participation certificates were missed. To the extent FSAM did receive pass-through payments, the RMBS were profitable to them, and there can be no claim of damages'.
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