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The Litigation Daily last wrote about the massive consolidated securities class action against Bear Stearns way back in January 2009, when plaintiffs and defense lawyers were still just girding for a fight. Since then, plaintiffs have suffered plenty of defeats on motions to dismiss in other cases arising from the financial meltdown. But the Bear Stearns plaintiffs have managed to keep their case alive. In a 398-page opinion made public Friday (yes, 398 pages!), Manhattan federal district court judge Robert Sweet denied motions to dismiss the securities class action against Bear Stearns, Deloitte & Touche, and seven individual defendants. However, Judge Sweet dismissed a related derivative suit and ERISA suit. The securities class action plaintiffs alleged in their February 2009 complaint that Bear Stearns and various executives mislead investors from 2006 to 2008 about the value and risks of the company’s subprime investments before it collapsed. The plaintiffs also allege that Deloitte ignoredred flags about Bear Stearn’s financial statements and mortgage valuations. Judge Sweet devotes nearly 231 pages of his opinion to his reasoning for keeping the plaintiffs securities case alive. The decision rejects nearlyevery argument put forward by Bear Stearns and its lawyers at Paul, Weiss, Rifkind, Wharton & Garrison, including that the plaintiffs alleged “fraud by hindsight” because their losses stemmed from the housing market’s collapse. “The incantation of fraud-by-hindsight will not defeat an allegation of misrepresentations and omissions that were misleading and false at the time they were made,” Judge Sweet stated. The judge was similarly unmoved by the arguments of Deloitte and its lawyers at Cravath, Swaine & Moore, finding that the plaintiffs’ complaint “adequately alleges Deloitte’s recklessness, if not actual knowledge, based on its awareness of red flags and its duty to investigate.” “Deloitte believes that the claims asserted against it are meritless and intends to defend this case vigorously,” a Deloitte spokesperson told Reuters. Judge Sweet dismissed the derivative suit. The plaintiff lacked standing because he no longer held Bear Stearns stock, and he failed to make a demand on the bank’s board before he sued, the judge held. Judge Sweet dismissed the ERISA suit after finding, in part, that the defendants did not have a fiduciary duty to disclose information about Bear Stearns’s financial condition. Lead plaintiff State of Michigan Retirement Systems is represented by Berman DeValerio and Labaton Sucharow. Keller Rohrback and Barroway Topaz Kessler Meltzer & Check are interim co-lead counsel. David Brower of Brower Piven, lead lawyer for the derivative plaintiff told the Litigation Daily: “It’s a long opinion, and we’re still assessing our options. Obviously we’re disappointed in the ruling.” The other plaintiffs lawyers didn’t return calls or declined to comment. Neither Bear Stearns lawyer Eric Goldstein of Paul Weiss nor Max Shulman of Cravath, who represented Deloitte, was available for comment.

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