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UBS loses Motion to Dismiss in Lehman Brothers Securities and ERISA Litigation

On July 27, 2011, Judge Lewis A. Kaplan of the Southern District Court of New York denied UBS Financial Service Inc.’s Motion to Dismiss a class action complaint filed by investors of Lehman Brothers “Principal Protection Notes” (“Lehman Note”).  See In re: Lehman Brothers Securities and ERISA Litigation, Index No. 09-MD-2017 (LAK), document no. 263. UBS attempted to dismiss the class action complaint by asserting that despite UBS broker’s representations to Lehman Note investors that the Lehman Notes were a safe and conservative investment, with no risk of loss of principal, those investors were warned of the inherent risks of the Lehman Notes through written disclosures contained in pricing supplements and offering materials. The Court rejected this argument since statements in the Lehman Note offering materials regarding the risks associated with investing in the Lehman Notes were offset by more prominently and frequently cited statements regarding principal protection. Specifically the Court held, “the Court can not conclude as a matter of law that the repeated and emphasized statements about principal protection were offset sufficiently, as a matter of by, by the inconspicuous and scattered warnings . . . about Lehman’s solvency.” See In re: Lehman Brothers Securities and ERISA Litigation, Index No. 09-MD-2017 (LAK), document no. 263, p.98.