Cases & Deals

Deutsche Bank defends against lawsuit by Arco Capital Corporation

Client(s) Deutsche Bank AG, New York Branch

Jones Day represents Deutsche Bank AG in an action alleging misconduct in connection with an emerging market collateral loan obligation ("CLO"), which as a synthetic CLO involved credit default swap agreements in which Deutsche Bank was the CLO issuer's swap counterparty. An investor in notes issued by the CLO, Arco Capital Corporation Ltd. ("Arco"), initially filed suit in federal court alleging that Deutsche Bank violated the U.S. federal securities laws and breached the credit default swap agreements. In June 2013, the court dismissed the U.S. federal securities law claims on statute of limitation grounds. Arco filed an amended complaint in federal court, and in November 2013, the court again dismissed the U.S. federal securities law claims with prejudice on similar statute of limitation grounds as well as for failure to properly plead any U.S. federal securities law claim. The federal court declined to exercise supplemental jurisdiction over the state law breach of contract claims.

Following the dismissal of the federal action, in March 2014, Arco brought suit in New York state court for breach of the credit default swap agreements, adding the CLO issuer as co-plaintiff. In July 2014, the court dismissed the suit in its entirety on the grounds that both Arco and the issuer lacked standing to bring the claims. In January 2015, the court dismissed the amended complaint with prejudice on similar grounds, finding that Arco was contractually barred from maintaining suit and the issuer had lost its standing when it assigned the swap agreements to another party. In April 2015, plaintiffs filed a notice of appeal to the First Department.

Arco Capital Corporation Ltd. v. Deutsche Bank AG, Case No. 1:12-CV-07270 (S.D.N.Y.) (RWS)