AIG Update: District Court Denies All Motions to Dismiss

9/27/2010 - In an opinion issued on September 27, 2010 in the American International Group, Inc. (AIG) 2008 Securities Litigation, U.S. District Court Judge Laura Taylor Swain denied the 12 motions to dismiss the consolidated complaint filed by the lead plaintiff, BR&B client, the State of Michigan Retirement Systems. In the decision, the court held that the consolidated complaint adequately alleges material misstatements and omissions concerning AIG’s credit default swap portfolio as well as its securities lending program. The complaint alleged that the company’s credit default swap portfolio and its securities lending program resulted in tens of billions of collateral calls that ultimately forced the company to accept the $85 billion government bail-out in September 2008. The court upheld all of lead plaintiff’s claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for purchasers of AIG common stock and other publicly-traded securities during the period from March 16, 2006 through September 16, 2008.

In denying the motions to dismiss the 10(b) claims, the court held that the “various general disclosures cited by [the defendants] were insufficient to fulfill defendants’ disclosure obligations,” and that the facts alleged in the complaint support a strong inference of fraudulent intent on the part of the company and certain corporate executives at AIG and its London-based subsidiary, AIGFP. The court also held that the lead plaintiff had adequately alleged loss causation for the section 10(b) claims.

The court also upheld each of lead plaintiff’s claims brought under sections 11, 12(a)(2) and 15 of the Securities Act of 1933 for stock and bonds issued by AIG during the class period. The court held that because the State of Michigan retirement funds and other named plaintiffs purchased securities through each of the shelf registration statements at issue in the case, the plaintiffs are entitled to assert Securities Act claims for each of the offerings made during the class period. The court also held that each of the Securities Act claims was timely brought and that every defendant – the company, its board members and controlling executives, its outside auditor, PricewaterhouseCoopers, and the underwriter defendants – may be liable for the Securities Act claims asserted in the complaint. Clickhere for a copy of the court’s opinion.

This important decision in favor of investors allows lead plaintiff the State of Michigan Retirement Systems to move for certification of the case as a class action on behalf of investors in AIG during the class period and to commence formal discovery from the defendants.

If you have any questions about the court’s September 27, 2010, opinion and order, or about the case against AIG in general, please contact BR&B partner Jeffrey W. Golan via email at jgolan@barrack.com.