The original Complaint alleges that Deutsche Bank violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by deceiving investors about the investment characteristics of auction rate securities and the auction market in which these securities traded. Auction rate securities are either municipal or corporate debt securities or preferred stocks which pay interest at rates set at periodic "auctions." Auction rate securities generally have long-term maturities or no maturity dates.
The Complaint alleges that, pursuant to uniform sales materials and top-down management directives, Deutsch Bank offered and sold auction rate securities to the public as highly liquid cash-management vehicles and as suitable alternatives to money market mutual funds. According to the Complaint, holders of auction rate securities sold by Deutsche Bank and other broker-dealers have been unable to liquidate their positions in these securities following the decision on February 13, 2008 of all major broker-dealers including Deutsche Bank to "withdraw their support" for the periodic auctions at which the interest rates paid on auction rates securities are set.
The Complaint alleges that Deutsche Bank failed to disclose the following material facts about the auction rate securities it sold to the class: (1) the auction rate securities were not cash alternatives, like money market funds, but were instead, complex, long-term financial instruments with 30 year maturity dates, or longer; (2) the auction rate securities were only liquid at the time of sale because Deutsche Bank and other broker-dealers were artificially supporting and manipulating the auction rate market to maintain the appearance of liquidity and stability; (3) Deutsche Bank and other broker-dealers routinely intervened in auctions for their own benefit, to set rates and prevent all-hold auctions and failed auctions; and (4) Deutsche Bank continued to market auction rate securities as liquid investments after it had determined that it and other broker dealers were likely to withdraw their support for the periodic auctions and that a "freeze" of the market for auction rate securities would result.
On October 9, 2008, Judge Loretta A. Preska signed the Order appointing Allison Armour as lead plaintiff and approving lead plaintiff’s selection of Girard Gibbs LLP and Stueve Siegel Hanson, LLP, as co-lead counsel and Seeger Weiss LLP as liaison counsel. On January 9, 2009, the plaintiffs filed a First Amended Class Action Complaint. On April 16, 2009, the plaintiffs filed a Second Amended Complaint. On June 16, 2009, Judge Preska signed the Order granting the withdrawal of Allison Armour as lead plaintiff and substituting and appointing Plaintiff Pivot Point Capital Master LP as lead plaintiff. On July 29, 2009, the defendants filed a motion to dismiss the Second Amended Complaint. On March 24, 2010, Judge Alvin K. Hellerstein signed the Summary Order granting the defendants’ motion to dismiss without prejudice. The plaintiff has leave to replead by April 23, 2010.
On April 23, 2010, the plaintiff filed a Third Amended Complaint. On June 22, 2010, the defendants filed a motion to dismiss the Third Amended Complaint. On December 9, 2010, Judge Alvin K. Hellerstein signed the Order granting the Defendants' motion and order the complaint dismissed with prejudice. Judgment was entered the same day, and the case was closed. On January 7, 2011, the plaintiff filed an appeal from the judgment in the Second Circuit Court of Appeals. On February 25, 2011, the Court entered the order from the U.S. Court of Appeals. The appeal was withdrawn.