Justice David Saxe
Asserting negligence as well as breaches of fiduciary duty and the Connecticut Unfair Trade Practices Act (CUTPA), Aetna Life alleged that to prop up Lehman Brothers Holding Inc.'s (LBHI) financial position before its 2008 collapse, Appalachian Asset Management Corp. and others arranged for removal of $48.65 million in high-grade securities from a trust account held for Aetna's benefit, and their replacement with toxic, "sticky" subprime-mortgage-backed securities—from LBHI's inventory—worth a small fraction of that amount. Other than negligence claims against individual defendants state court denied dismissal of Aetna's claims. First Department ruled the negligence claims should be reinstated but that denial of the CUTPA claim's dismissal should be upheld. It could not determine if the "substitution" at issue was a transaction covered by CUTPA rather than the Connecticut Uniform Securities Act. Assuming CUTPA's application, a claim thereunder was adequately stated. The circumstances supported a possible finding that fiduciary obligations to Aetna initially undertaken by Lehman Re were later undertaken by Appalachian, which then assumed a duty of care to Aetna in connection with the management of the trust account's assets.
