Manhattan Supreme Court Justice Shirley Kornreich has dismissed a fraud claim in a $296 million suit brought against Credit Suisse by insurer MBIA. MBIA sued Credit Suisse for allegedly failing to adhere to its own underwriting standards for the mortgage-backed securities that MBIA insured. Justice Kornreich initially refused to dismiss the suit. But in April she ruled for Credit Suisse in a similar suit brought by Ambac, and she said she planned to reconsider her decision in the MBIA case. On Wednesday, she handed down her new ruling, MBIA Insurance Corporation v. Credit Suisse Securities (USA) LLC, 603751/2009, this time granting partial summary judgment for Credit Suisse on MBIA’s fraud claim and striking MBIA’s request for punitive and consequential damages.
An MBIA spokesman said the insurer planned to appeal the decision, in which the judge explained that she was dismissing the fraud claim because it duplicated its breach of contract claims. She also stated the fraud claim should be dismissed because Credit Suisse had disclosed that some loans were not up to its strict underwriting standards, yet MBIA, a sophisticated entity, failed to investigate or protect itself by negotiating for warranties. Without a fraud claim MBIA cannot seek punitive damages or try its case to a jury.
