A US lawsuit filed in July that named Eksportfinans ASA of Norway as a defendant, along with 29 other retail structured product providers and distributors, has been voluntarily dropped, SRP has confirmed. A pre-trial conference had been scheduled for next week before a district court judge.
The lawsuit was filed in the Southern District of New York on behalf of Leona Miller of California, who invested in reverse convertibles linked to Merck & Co. The note was issued by Eksportfinans.
The suit accused Eksportfinans of providing offering materials that were false and misleading in February 2007. The complaint, filed by San Diego-based lawyers Ronald A Marron, alleged that the defendant failed to disclose that the securities did not provide downside protection, that there was unlimited downside risk with no potential for capital growth, and that the prospectus did not warn of the credit risk of Eksportfinans as issuer.
The lawsuit also named 29 other securities firms and banks as defendants and was intended to potentially be granted class-action status by the court. That would have applied any monetary awards in this case to all investors of structured securities between November 2006 and July 2010. The lawsuit charged that the 29 other 'sales agent defendants failed to make a reasonable investigation or possess reasonable grounds for the belief that the statements contained in the offering materials were accurate and complete in all material aspects.'
Court records show that Miller purchased the reverse convertibles on 18 May 2008 for $20,000, but later received $14,500 back after the security knocked in and a forced exchange took place on 25 November 2008.
A person familiar with the situation, who spoke on condition of anonymity, said a new case will be filed on behalf of Miller that solely names the securities firm that sold the reverse convertible. Marron told SRP back in July that the notes were sold by a broker with the last name of Balducci who worked at Wachovia Securities (now part of Wells Fargo Advisors).
Even if the lawsuit is refiled, there's a good chance the district court may throw it out the second time around, as the one-year statute of limitations clock is likely to have run out for this investor, the personal familiar with the case noted.
Marron, Miller's attorney, had not responded to a request for comment as SRP went to press, while an official at Eksportfinans declined to comment.