Second Circuit Affirms Dismissal of Securities Fraud Lawsuit Against Danske Bank and Former CFO

Paul, Weiss achieved a significant victory when the Second Circuit affirmed the dismissal with prejudice of all claims in a securities class action brought against our client Henrik Ramlau-Hansen, the former CFO of Danske Bank.

The appeal involved claims by purchasers of Danske Bank American Depository Receipts (ADRs) against Danske Bank and its directors and officers. The plaintiffs alleged that Danske Bank and the individual defendants had made a series of misrepresentations relating to a purported $230 billion money laundering scheme involving Danske Bank’s Estonian branch. Last year, Judge Valerie Caproni of the Southern District of New York dismissed with prejudice the plaintiffs’ third amended complaint.

In its ruling, the Second Circuit held that Danske Bank had no duty to disclose the “uncharged, unadjudicated wrongdoing” of the alleged money laundering scheme. The court also held that the alleged misstatements made in 2014 and 2015 could not have been material in 2018—when the named plaintiffs made their first purchases of ADRs—because, in light of subsequent disclosures about the money laundering issues, those statements had become “stale and immaterial.” As the court explained, “materiality can have a half-life.” Additionally, the court held that another statement was not actionable because it was made after the plaintiffs’ last purchase. Finally, the court held that the remaining statements were too generic to induce reliance, and that the plaintiffs had failed to allege “scheme liability.” The Second Circuit did not reach Judge Caproni’s other grounds for dismissal, including the plaintiffs’ noncompliance with Rule 9(b) and failure to allege scienter.

The Paul, Weiss team included litigation partners Daniel Kramer and Jeffrey Recher.