For the second time in four months, a state court judge in Manhattan has allowed a Dutch pension fund to proceed with fraud claims against banks that sold residential mortgage-backed securities ahead of the subprime crisis. But the judge threw the banks a lifeline, ruling that the fund is bound by strict Dutch time limits that could eventually undermine its case against Credit Suisse Group AG and possibly other defendants.

The decision comes in one of five New York state court suits that Grant & Eisenhofer filed in the past 15 months on behalf of Stichting Pensioenfonds ABP, a huge retirement fund in the Netherlands with about $356 billion in assets under management.

ABP alleged that major banks collectively sold the fund billions of dollars worth of RMBS based on false and misleading statements in offering documents about the quality of the underlying mortgage loans. In addition to Credit Suisse, the defendants are Deutsche Bank AG, Morgan Stanley, JPMorgan Chase & Co., and Goldman Sachs Group Inc.

On Dec. 7, Acting Supreme Court Justice Melvin Schweitzer (See Profile) ruled in Stichting Pensioenfonds ABP v. Credit Suisse Group, 653665-2011, that the Dutch fund, represented by Geoffrey Jarvis of Grant & Eisenhofer, could go forward with fraudulent inducement and aiding and abetting fraud claims against Credit Suisse.

Schweitzer dismissed negligent misrepresentation and punitive damages claims.

The 27-page decision partly echoes a ruling issued in July by Justice Jeffrey Oing allowing some of ABP’s claims against Deutsche Bank subsidiaries to move forward. But the Credit Suisse decision represents the first time a New York state court has applied Dutch statute of limitations law in an RMBS case. The Dutch time limits are much more restrictive, requiring “prompt notice” once plaintiffs have information that could trigger a claim.

Oing bypassed the choice-of-law question in his July decision in the Deutsche Bank case. Schweitzer, in contrast, asked both sides in the Credit Suisse case to focus exclusively on whether New York or Dutch time limits should apply when he held oral arguments in September.

Ultimately, the judge sided with Credit Suisse’s lawyer, Michael Reynolds of Cravath, Swaine & Moore, finding that the more limited Dutch guidelines should prevail. In the hearing, Reynolds noted that the Dutch law requires a filing by a plaintiff within months of learning of an alleged fraud. In this case, he argued, ABP waited years to file.

Schweitzer, while finding that Dutch “prompt notice” guidelines should apply, nevertheless concluded that it should be up to a jury to determine whether ABP met the Dutch standard of promptness and allowed the case to proceed.

Zachary Rosenbaum, who heads the capital markets litigation practice at Lowenstein Sandler, said the judge’s decision was significant.

“You’re now starting to see in New York state courts decisions on preliminary pleadings motions in the RMBS cases 
that are up-holding the substance of the common law fraud claims,” said Rosenbaum, who is not involved in the case.

ABP’s relationship with Grant & Eisenhofer goes back at least to the early 2000s, when name partner Jay Eisenhofer first represented the fund in securities litigation against Bristol-Myers Squibb Co. The firm went on to represent the fund in the Royal Dutch Shell securities class action opt-out litigation.

The banks have called on a battery of Wall Street firms, including Cravath, for JPMorgan; Davis Polk & Wardwell for Morgan Stanley; Sullivan & Cromwell for Goldman; and Paul, Weiss, Rifkind, Wharton & Garrison for Deutsche 
Bank.

Both Cravath’s Reynolds and Jarvis of Grant & Eisenhofer declined to comment.

On Dec. 11, ABP announced that it had struck a confidential settlement with JPMorgan.

@|Julie Triedman is a reporter for The Litigation Daily. She can be contacted at jtriedman@alm.com.