On April 26, 2013, Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York entered judgment on the pleadings in favor of Cravath's client, PricewaterhouseCoopers LLP ("PwC"), and dismissed in their entirety the claims against PwC in In re AIG 2008 Securities Litigation.
Plaintiffs filed this class action in 2008, arising out of losses that American International Group, Inc. ("AIG") incurred in the financial crisis relating to exposure to the subprime mortgage market through its credit default swap portfolio and securities lending program. On May 19, 2009, lead plaintiff, the State of Michigan Retirement System, filed an amended consolidated complaint on behalf of purchasers of AIG securities from March 16, 2006, to September 16, 2008. Lead plaintiff asserted claims under Section 10(b) of the Securities Exchange Act against AIG and certain AIG officers, relating to purchases of AIG securities during the class period. Separately, lead plaintiff asserted claims under the Securities Act against AIG, the officers and directors who signed AIG's registration statements, the underwriters for the securities, and PwC, which served as AIG's independent auditor, relating to $13.35 billion in common stock and equity units and $13.1 billion in bonds that AIG issued during the class period. On September 27, 2010, Judge Swain denied all defendants' motions to dismiss. In re AIG 2008 Securities Litigation, 741 F. Supp. 2d 511 (S.D.N.Y. 2010).
On October 12, 2011, PwC and certain other defendants moved under Rule 12(c) for judgment on the pleadings in light of the intervening Second Circuit decision in Fait v. Regionals Financial Corp., 655 F.3d 105 (2d Cir. 2011), which holds that, when accounting standards require the exercise of judgment, they are statements of opinion, and securities law claims based on such statements require an allegation that the defendants did not honestly believe the statements when made. Following argument on April 2, 2013, Judge Swain granted the motion for judgment on the pleadings. Judge Swain held that disclosures allegedly required by generally accepted accounting principles ("GAAP")--here, significant concentrations of credit risk under FAS 107 and guarantees under FIN 45--were matters of judgment, and consequently lead plaintiff's Securities Act claims, which expressly disclaimed fraud and intentional or reckless misconduct, should be dismissed as to all defendants relating to disclosures under GAAP. Judge Swain held further that PwC's audit opinions on AIG's financial statements and internal controls over financial reporting were statements of opinion, and the claims against PwC should therefore be dismissed in their entirety.
Other actions against PwC arising out of the events at AIG during the financial crisis were previously dismissed. On February 6, 2012, Judge Deborah A. Batts of the U.S. District Court for the Southern District of New York dismissed the claims against all defendants in Mimms v. PricewaterhouseCoopers, LLP, No. 11 Civ. 30 (DAB), a purported derivative action by beneficiaries of an AIG ERISA plan, on the ground that ERISA does not provide a right of action for derivative suits against non-fiduciaries, such as PwC. On November 9, 2011, the California Court of Appeal for the Second District affirmed the dismissal of claims against all defendants in Harris v. AIG, No. BC414205 (L.A. Cnty. Super. Ct.), a purported class action by AIG policyholders under California's Unfair Competition Law, Bus, & Prof. Code § 17200, et seq., on the ground that the policyholders suffered no injury in fact, and therefore lacked standing.
The Cravath team included partner Antony Ryan and associates Misty Archambault and Deborah Fox.