Securities Law Blog

In Manhattan, an investor lawsuit was dismissed against Canadian Imperial Bank of Commerce (CIBC) and four of its executives on March 17, 2010. Filed by Plumbers & Steamfitters Local 773 Pension Fund, the lawsuit was seeking class actions status on behalf of all the investors who bought CIBC shares in the U.S. between May 31, 2007 and May 29, 2008. The claimants alleged that CIBC committed securities fraud and misled investors about its mortgage-backed holdings.

U.S. District Judge William H. Pauley III threw out the case stating that the investors failed to adequately allege that the bank intended to defraud them. According to Judge Pauley, at no point did the plaintiff’s complaint make any reference to specific CIBC documents to discredit CIBC, nor did they demonstrate that CIBC possessed information that was contrary to their public statements. The Judge further asserted that given that the executives suffered large losses in their common stock holdings and compensation, it would be “nonsensical to impute dishonest motives” to them.

In his ruling, Judge Pauley wrote, “Knowledge of a general economic trend does not equate to harboring a mental state to deceive, manipulate, or defraud. CIBC, like so many other institutions, could not have been expected to anticipate the crisis with the accuracy the plaintiff enjoys in hindsight.”