In re Parmalat Securities Litigation, This document relates to: 06 Civ. 0383, 06 Civ. 3109.
| Decision Date | 08 August 2007 |
| Docket Number | This document relates to: 06 Civ. 0383, 06 Civ. 3109.,No. 04 MD 1653(LAK).,04 MD 1653(LAK). |
| Citation | 501 F.Supp.2d 560 |
| Parties | In re PARMALAT SECURITIES LITIGATION. |
| Court | U.S. District Court — Southern District of New York |
Leo R. Beus, Adam C. Anderson, Beus Gilbert PLLC, Herbert P. Minkel, Jr., Esq., for Plaintiffs.
Daniel F. Kolb, Sharon Katz, Davis Polk & Wardwell, for Defendants Deloitte & Touche USA LLP and Deloitte & Touche LLP.
Richard A. Martin, E. Joshua Rosenkranz, Erik S. Groothuis, Mark A. Picard, Heller Ehrman LLP, for Defendant Deloitte & Touche S.p.A.
Michael J. Dell, Michael S. Oberman, Timothy P. Harkness, Kramer Levin Naftalis & Frankel LLP, for Defendant Deloitte Touche Tohmatsu.
Bruce R. Braun, Linda T. Coberly, Winston & Strawn LLP, Margaret Maxwell Zagel, Ronald P. Gould, Grant Thornton LLP, for Defendant Grant Thornton LLP.
James L. Bernard, Katherine L Puzone, Michele S. Carino, Marisa Brahms, Stroock & Stroock & Lavan LLP, for Defendant Grant Thornton International.
A. Robert Pietrzak, Thomas McC. Souther, Daniel A. McLaughlin, Joseph B. Tompkins, Jr., Alan C. Geolot, Mark P. Guerrera, Sidley Austin LLP, for Defendants Bank of America Corp., Bank of America, NA., Bank of America National Trust & Savings Association, Banc of America Securities LLC, Banc of America Securities Ltd., and. Bank of America International Ltd.
Michael S. Feldberg, Todd S. Fishman, Lanier Saperstein, Laura Martin, Allen & Overy LLP, for Defendants Credit Suisse, Credit Suisse International, and Credit Suisse Securities (Europe) Ltd.
Dennis E. Glazer, Nancy B. Ludmerer, Elliot Moskowitz, Antoinette G. Ellison, Davis Polk & Wardwell, for Defendant Banca Nazionale del Lavoro S.p.A.
Michael C. Lambert, Richard A. Bertocci, Andreas Seuffert, Gilmartin, Poster & Shafto LLP, for Defendant Banca Intesa S.p.A.
International dairy conglomerate Parmalat S.p.A. and its affiliates ("Parmalat") collapsed in scandal and filed for bankruptcy in Italy in late 2003. These actions are brought on behalf of the successors of two bankrupt Parmalat subsidiaries against a number of banks and accounting firms principally for helping conceal Parmalat's true financial condition, thus causing the subsidiaries to incur debt in reliance on misrepresentations of Parmalat's financial health. Before the Court are defendants' motions to dismiss the second amended complaints in both actions.
The complaints in these two actions are substantially the same. The only relevant differences are that the complaint in. Smith v. Bank of America1 names Banca Intesa as a defendant and asserts a cause of action against certain other defendants for aiding and abetting a fraudulent conveyance, while the complaint in Pappas v. Bank of America2 does not. Accordingly, the following allegations are drawn from both complaints unless otherwise indicated.
Parmalat USA Corp. ("Parmalat USA") was a wholly owned subsidiary of Parmalat. It had no operations or employees of its own, but was the sole owner of Farmland Dairies LLC ("Farmland"), which was in the business of processing, selling, and distributing dairy products in the United States.3 According to the complaints, both Parmalat USA and Farmland (the "Companiesr) were insolvent and completely financially dependent on Parmalat.4
The Companies filed for bankruptcy in this district on February 24, 2004, following Parmalat's collapse.5 On March 10, 2004, the bankruptcy court confirmed a liquidation plan for Parmalat USA and a modified reorganization plan for Farmland. Plaintiff G. Peter Pappas was appointed the administrator of Parmalat USA's Plan of Liquidation. Plaintiff Gerald K. Smith was appointed the litigation trustee of Farmland Dairies LLC Litigation Trust.6
Deloitte Touche Tohmatsu ("DTT") is a Swiss association headquartered in New York and the umbrella firm for the international accounting enterprise commonly known as "Deloitte."7
Deloitte & Touche USA LLP and its subsidiary, Deloitte & Touche LLP (collectively, "Deloitte USA") are Delaware limited liability partnerships. Together they constitute the United States member firm of the Deloitte organization.8 Deloitte USA audited Parmalat USA's financial statements from 1999 to 2002.9
Deloitte & .Touche, S.p.A. ("Deloitte Italy") is an Italian limited liability entity and the Italian member firm of DTT.10 It audited Parmalat's consolidated financial statements from 1999 to 2002.11
Grant Thornton International ("GTI") is an Illinois corporation headquartered in London and the umbrella organization for Grant Thornton entities throughout the world. Grant Thornton LLP ("GT USA") is an Illinois limited liability partnership and the United States member firm of GTI. Grant Thornton S.p.A. ("GT Italy") is an Italian limited liability entity and the Italian member firm of GTI.12 GT Italy audited the financial statements of Parmalat's off-shore subsidiary, Bonlat Financing Ltd. ("Bonlat") from 1999 to 2002.13
Bank of America Corp. ("BA Corp.") is a Delaware corporation and the parent of Bank of America, N.A. ("BANA"), a: national banking association based in North Carolina and successor of Bank of America National Trust & Savings Association ("BANTSA"). Banc of America Securities Ltd. ("BAS Ltd.") is a United Kingdom limited liability investment bank and BANA's wholly owned subsidiary. Its predecessor was Bank of America International Ltd. (BAI). Banc of America Securities LLC ("BAS LLC"), also a subsidiary of BA Corp., is a Delaware limited liability investment bank and brokerage firm based in North Carolina.14
While the complaints are not entirely clear, it appears that there are three Credit Suisse defendants.
Credit Suisse Group ("CSG") is a Swiss global financial services company with a branch office in New York City. According to the complaints, an entity called Credit Suisse First Boston ("CSFB") was its wholly owned subsidiary and investment banking and asset management arm until 2005 when it merged with Credit Suisse ("CS"), which the complaints describe as CSG's private banking division. The complaints appear to name CS as a defendant. If, in fact, that was the intention and if, as plaintiffs suggest, CS is an unincorporated division of CSG, CSG would be a defendant. The Court notes, however, that CSG's Report on Form 6-K for August 2007 describes. CS as a whollyowned subsidiary. In addition, counsel for the Credit Suisse defendants have appeared on behalf of CS rather than CSG. In consequence, the Court concludes that the plaintiffs sued CS, not CSG. In view of the outcome of these motions, however, any uncertainty ultimately is immaterial.
The other two Credit Suisse defendants are Credit Suisse First Boston International ("CSFBI"), a London-based bank, and Credit Suisse Securities (Europe) Limited ("CSSEL"), a London-based broker-dealer.15
Banca Nazionale del Lavoro S.p.A. ("BNL") is an Italian banking conglomerate. It has branches in the United States, including New York and Chicago, and describes itself as one of the world's 100 largest banks. BNL's subsidiary, Ifitalia S.p.A. ("Ifitalia"), is an Italian bank and factoring Company.16
Smith's complaint names also Banca Intesa ("Intesa"), one of Italy's largest banking companies, which provides a variety of commercial banking services.17 Its subsidiary, Nextra Investment Management SGT ("Nextra"), serves as Intesa's asset management and investment banking arm.18
The complaints are long, rambling, repetitious, and disorganized.19 Their gist, however, can be summed up as follows.
Plaintiffs allege that the Companies were insolvent and completely financially dependent on Parmalat at all relevant times.20 For example, the notes to Parmalat USA's consolidated financial statements for 2002 stated that the company's ability to maintain its then-current debt arrangement, obtain additional financing from third-party lenders, and continue as a going concern was dependent on Parmalat's ability to guarantee Parmalat USA's debt to third parties and Parmalat's forbearance from calling debts owed to it by Parmalat USA.21
Because of this dependence on Parmalat, plaintiffs claim, certain "innocent decision makers" at the Companies relied on representations that Parmalat was financially healthy in (1) causing Parmalat USA to incur more than $20 million in debt guaranteed by Parmalat,22 and (2) causing Farmland to take out a loan in the form of a sale-leaseback transaction, whereby it transferred its dairy processing plants and equipment to a third party and leased them back under leases guaranteed by Parmalat.23
Plaintiffs allege, however, that Parmalat in fact was in financial ruin when the Companies entered into these transactions. Certain of Parmalat's officers, directors, and other employees allegedly had looted the company for years and fraudulently concealed the company's true financial condition in its financial statements.24 Plaintiffs allege that the Companies therefore incurred debt that they were unable to repay once Parmalat collapsed in 2003, thus deepening their insolvency. In addition, the proceeds of the sale-leaseback transaction allegedly were looted by Parmalat insiders.25
According to plaintiffs, the innocent decision makers would have prevented the Companies from incurring these liabilities in the first instance, reported the fraudulent acts being committed by Parmalat's insiders, and filed for bankruptcy at an earlier date if they had known the truth about Parmalat's financial condition.26
Defendants are charged principally with assisting the Parmalat fraud or otherwise with being complicit in a scheme to hide Parmalat's financial condition....
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