Realty Finance Co. Wins Dismissal Of Suit Over IPO

Realty Finance Co. Wins Dismissal Of Suit Over IPO - 7/30/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Realty Finance Co. Wins Dismissal Of Suit Over IPO
Julie Zeveloff

Securities Law 360. July 30, 2009
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EXCERPT: CBRE Realty Finance Inc. has won a bid to dismiss a proposed shareholder class action accusing the company of failing to disclose, on the eve of its initial public offering, that the recipient of a $51 million loan was on the verge of defaulting. Judge Stefan R. Underhill of the U.S. District Court for the District of Connecticut on Wednesday granted CBRE's motion to dismiss the suit, finding that the lead plaintiffs had failed to show that the alleged omission was material, as the loan to real estate developer Triton Real Estate Partners Inc. was collateralized. Judge Underhill dismissed the plaintiffs' claims under sections 11, 12(a)(2) and 15 of the Securities Act of 1933, which are not subject to the same heightened pleading standards of a securities fraud claim and may therefore be tougher to get dismissed early on. “The plaintiffs' failure to adequately plead the materiality of the omissions they allege is a failure to allege that, at the time CBRE's registration statement and prospectus issued, any default on Triton's loans would translate into a loss to CBRE,” the opinion said. “According to the plaintiffs' own complaint, the loans were collateralized,” said Robert S. Fischler of Ropes & Gray LLP, who represents CBRE in the matter. “There were no allegations to show that the collateral was worth less than the loans at time of the IPO.” “Even if the loans were in trouble, as long as the collateral was intact, there was no financial risk to the entity,” Fischler said. “So it wouldn't have been important for investors to know anything about it.” CBRE — now Realty Finance — made its initial public offering in 2006, allowing the company to raise $144 million, according to Wednesday's ruling.

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