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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 104
Commonwealth of Pennsylvania
Public School Employees'
Retirement System, &c., et al.,
            Plaintiffs,
Commerzbank AG, &c.,
            Appellant,
        v.
Morgan Stanley & Co.,
Incorporated, et al.,
            Respondents,
et al.,
            Defendants.


             Joseph D. Daley, for appellant.
             James P. Rouhandeh, for respondents.




STEIN, J.:
             In this case certified to us by the United States Court
of Appeals for the Second Circuit, we must determine whether a
reasonable factfinder could conclude that plaintiff Commerzbank
AG was assigned the right to bring a common-law fraud claim, and
therefore had standing to sue various defendants involved in the

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issuance of rated notes by the Cheyne structured investment
vehicle (SIV).   The notes in question were originally purchased
by Allianz Dresdner Daily Asset Fund (DAF), subsequently sold to
a branch of Dresdner Bank AG in 2007, and ultimately acquired by
Commerzbank through its merger with Dresdner in 2009.   Because
Commerzbank has failed to present any evidence of a communicated
intent by DAF and Dresdner to assign to Dresdner the right to sue
for fraud in connection with the transaction through which DAF
purchased the notes, we hold that Commerzbank has failed to raise
a question of fact regarding standing.
                                I.
           The facts and procedural history of this action are
explained in more detail in the underlying decisions of the
District Court (888 F Supp 2d 478 [SD NY 2012]; 910 F Supp 2d 543
[SD NY 2012]; 888 F Supp 2d 431 [SD NY 2012]; 269 FRD 252 [SD NY
2010]) and the Second Circuit (772 F3d 111 [2d Cir 2014], as
amended [Nov 12, 2014]).   As particularly relevant here,
defendants Morgan Stanley & Co., Incorporated and Morgan Stanley
& Co. International Limited (collectively, Morgan Stanley)
arranged and placed notes for the Cheyne SIV, which was launched
in 2005.   To attract investors, defendants Standard & Poor's
Ratings Services and the McGraw-Hill Companies, Inc.
(collectively, S & P) and Moody's Investors Service, Inc. and
Moody's Investors Service Ltd. (collectively, Moody's) --
nationally recognized statistical rating organizations -- were


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engaged to rate the notes.   Between 2005 and 2007, the Cheyne SIV
issued several classes of notes on a rolling basis.   These notes
received top credit ratings from Moody's and S & P, which ratings
were included in documents distributed to potential investors by
Morgan Stanley.    Investors who purchased the notes purportedly
relied on these ratings.
          The notes issued by the Cheyne SIV -- which included a
significant number of subprime residential mortgage-backed
securities -- were downgraded by S & P and placed on review for
downgrade by Moody's after the SIV breached its "Major Capital
Loss Test" in 2007.   That breach triggered "an irreversible
operating state requiring that a receiver be appointed to manage
the SIV in order to sell its assets and repay maturing
liabilities."   Allegedly, most, if not all, of the value of the
Cheyne SIV notes was eradicated.
          In 2009, this action was commenced against Morgan
Stanley and the rating agencies in the federal District Court of
the Southern District of New York by Abu Dhabi Commercial Bank
and other institutional investors that had purchased or acquired
Cheyne SIV notes and allegedly suffered damages as a result of
the Cheyne SIV's collapse.   Commerzbank -- which held Cheyne SIV
notes that it had purchased directly, in addition to the notes
that had originally been purchased by DAF and subsequently
acquired by Commerzbank -- eventually joined the action as a
named plaintiff.   Plaintiffs, including Commerzbank, asserted


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causes of action sounding in fraud, aiding and abetting fraud,
and negligent misrepresentation against Morgan Stanley and the
rating agencies.    More specifically, plaintiffs asserted that
defendant rating agencies, at the behest of Morgan Stanley,
knowingly issued fraudulently high ratings that did not reflect
the true risks of the Cheyne SIV notes.     As alleged in the
complaint, these ratings were unreliable, devoid of any
meaningful factual or statistical basis, and based on outdated
models and inaccurate information.      According to plaintiffs, when
Morgan Stanley distributed materials containing the ratings to
potential investors, it knew that the ratings were false and
misleading, and Morgan Stanley therefore made materially
misleading statements and omissions that led plaintiffs to
purchase Cheyne SIV notes, believing they were a safe investment.
          Following discovery, Morgan Stanley and the rating
agencies moved for summary judgment dismissing plaintiffs' fraud
claims and questioned, among other things, whether Commerzbank
had standing to sue for fraud on the Cheyne SIV notes originally
purchased by DAF and whether Morgan Stanley had made any
actionable misstatements.   Defendants also argued that plaintiffs
could not establish justifiable reliance on the ratings.     With
respect to the reliance element, the District Court limited
plaintiffs to a single three-page declaration to demonstrate
whether and how they had relied on the ratings when investing in
Cheyne SIV notes.   In the declaration submitted by plaintiffs,


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Commerzbank asserted that Dresdner purchased Cheyne SIV notes "at
par" from its affiliate, DAF, in October 2007, and that Dresdner
was acquired by Commerzbank in January 2009 which, under German
law, meant that all of Dresdner's "assets, liabilities, rights
and obligations passed automatically by operation of law to
Commerzbank and Dresdner ceased to exist as a legal entity."
          As pertinent here, the District Court granted
defendants' motion for summary judgment in part, dismissing
Commerzbank's claims insofar as they were based on the notes
purchased by DAF, and dismissing plaintiffs' fraud claim against
Morgan Stanley (888 F Supp 2d at 447-448, 478).   With respect to
standing, the Court held that, although Commerzbank may have
acquired all causes of action possessed by Dresdner, it had
provided no evidence that DAF, in the first instance, had
assigned to Dresdner any tort causes of action connected to the
notes (see id. at 447-448).   As for the dismissal of the fraud
claim against Morgan Stanley, the Court determined that the
ratings were attributable solely to the rating agencies (see id.
at 448-453).   In the absence of a fraudulent statement made by
Morgan Stanley, the Court held that Morgan Stanley could be
liable, at most, for aiding and abetting fraud (see id.).     The
Court also found that questions of fact precluded summary
judgment on Commerzbank's fraud claims against the rating
agencies and its aiding and abetting cause of action against
Morgan Stanley based on the notes purchased directly by


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Commerzbank (see id. at 458-468, 477-478).
          Commerzbank moved for reconsideration of the standing
issue and proffered, as pertinent here, two additional
declarations to support its contention that DAF had assigned its
fraud claims to Dresdner.   More specifically, Commerzbank
provided a declaration from Christopher Williams, former
Secretary of and Senior Counsel to Dresdner Advisors (DAF's
investment advisor) and former Senior Counsel to the branch of
Dresdner that purchased the notes from DAF.   Williams explained
that DAF did not typically enter into written agreements when
purchasing or selling securities.   He further explained that,
when the Cheyne SIV notes were downgraded in 2007, DAF was
prohibited from continuing to hold them by federal rules
promulgated under the Investment Company Act of 1940.    "[I]n
order to ensure DAF's compliance" with such rules, Dresdner
therefore purchased the notes from DAF for cash "at par" for
$121,078,069.   DAF ceased operations 10 months later and was
terminated in January 2009.   Williams asserted that, to the best
of his knowledge, DAF and Dresdner believed that any causes of
actions or claims related to the notes would automatically
transfer with them.
          Commerzbank also submitted a declaration by Brian
Shlissel, Managing Director of Allianz Global Investors Fund
Management LLC, which administered DAF as a series of a
Massachusetts business trust known as Allianz Global Investors


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Managed Accounts Trust, of which Shlissel was the President and
Chief Executive Officer.   Shlissel similarly attested to the
foregoing facts regarding DAF's sale of the notes to Dresdner,
and he asserted that the parties to the sale believed that any
causes of action related to the notes would automatically
transfer to Dresdner with the notes themselves.
          The District Court denied Commerzbank's motion for
reconsideration, declining to consider its additional submissions
(888 F Supp 2d at 490-491).   Commerzbank appealed.
          The Second Circuit held that the District Court abused
its discretion by refusing to consider Commerzbank's supplemental
papers, but determined that resolution of the standing issue
would require it to pass on an open question of New York law;
namely, whether proof of a subjective, uncommunicated intent to
transfer a whole interest in a note -- in the absence of limiting
language -- suffices to transfer an assignor's tort claims
related to such note under New York law (772 F3d at 121).1
Accordingly, the Second Circuit certified to us the question
whether, "[b]ased on the declarations and documentary evidence
presented by Commerzbank, . . . a reasonable trier of fact



     1
        The Second Circuit did not reach the merits of
Commerzbank's motion to ratify its claim by a successor entity to
DAF under Federal Rules of Civil Procedure rule 17 (a) (3), but
commented that the motion, which must be made within a
"reasonable time" of the standing objection, was not made until
over one year after defendants' answers raised the standing issue
(772 F3d 111, 122 n 5 [2d Cir 2014], as amended [Nov 12, 2014]).

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[could] find that DAF validly assigned its right to sue for
common law fraud to Dresdner in connection with its sale of
Cheyne SIV notes" (id. at 125).2   Further, if we answer the first
question in the affirmative, the Second Circuit asked us to
determine whether, "based on the record established in the
summary judgment proceedings in the district court, . . . a
reasonable trier of fact [could] find Morgan Stanley liable for
fraud under New York law" (id.).
          We accepted certification (24 NY3d 1028 [2014]), and
now answer the first question in the negative.   We, therefore,
have no occasion to pass on the second.
                               II.
          Commerzbank contends that its proffered evidence
precludes the granting of summary judgment in defendants' favor
on the issue of whether Commerzbank has standing to pursue a
fraud claim arising out of DAF's purchase of the Cheyne SIV notes
that Commerzbank subsequently acquired.   According to
Commerzbank, any fraud claims possessed by DAF were assigned to
Dresdner in light of the "unqualified" nature of DAF's sale of
its "whole interest" in the notes to Dresdner.   Commerzbank also
argues that the Williams and Shlissel declarations are sufficient
to demonstrate the intent of DAF and Dresdner to assign to
Dresdner all causes of action associated with the notes.


     2
        Commerzbank's standing to sue with respect to the notes
that it purchased directly is not at issue.

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Finally, relying on Banque Arabe et Internationale
D'Investissement v Maryland Nat. Bank (57 F3d 146 [2d Cir 1995])
and International Design Concepts, LLC v Saks Inc. (486 F Supp 2d
229 [SD NY 2007]), Commerzbank asserts that the circumstances
surrounding the 2008 sale of the Cheyne SIV notes provide a
sufficient basis upon which a factfinder could conclude that,
when the notes were transferred, the parties to the sale intended
to assign any potential fraud claims related thereto.   We find
these arguments unpersuasive.
           To be sure, fraud claims are freely assignable in New
York (see Banque Arabe, 57 F3d at 151-153; Glen Banks, 28 NY
Prac, Contract Law § 15:4; see also General Obligations Law §
13-101).   It has long been held, however, that the right to
assert a fraud claim related to a contract or note does not
automatically transfer with the respective contract or note (see
Argyle Capital Mgt. Corp. v Lowenthal, Landau, Fischer & Bring,
261 AD2d 282, 283 [1st Dept 1999], lv denied 93 NY2d 817 [1999];
Tycon Tower I Inv. Ltd. Partnership v Burgee Architects, 234 AD2d
748, 749 [3d Dept 1996], lv denied 90 NY2d 804 [1997]; Ettar
Realty Co. v Cohen, 163 AD 409, 411 [1st Dept 1914]; Fox v
Hirschfeld, 157 AD 364, 365-368 [1st Dept 1913]; Weylin Hotel
Corp. v Ritter, 114 NYS2d 158, 159 [Sup Ct, NY County 1952], affd
280 AD 785 [1st Dept 1952]; see also State of Cal. Pub.
Employees' Retirement Sys. v Shearman & Sterling, 95 NY2d 427,
436 [2000]; Banque Arabe, 57 F3d at 151).   Thus, where an


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assignment of fraud or other tort claims is intended in
conjunction with the conveyance of a contract or note, there must
be some language -- although no specific words are required --
that evinces that intent and effectuates the transfer of such
rights (see State of Cal. Pub. Employees' Retirement Sys., 95
NY2d at 432; Tycon Tower I Inv. Ltd. Partnership, 234 AD2d at
749; see also Banque Arabe, 57 F3d at 151-152; see generally Leon
v Martinez, 84 NY2d 83, 88 [1994]).    Without a valid assignment,
"only the . . . assignor may rescind or sue for damages for fraud
and deceit" because "the representations were made to it and it
alone had the right to rely upon them" (Nearpark Realty Corp. v
City Inv. Co., 112 NYS2d 816, 817 [Sup Ct, NY County 1952]; see
Fox, 157 AD at 365-368; see also Banque Arabe, 57 F3d at 151;
Fraternity Fund Ltd. v Beacon Hill Asset Mgt., LLC, 479 F Supp 2d
349, 373 [SD NY 2007]).
           Our review of the record fails to reveal any proof of
an assignment of fraud or, more generally, tort causes of action.
Crucial to our analysis, Commerzbank concedes that there was no
"explicit" assignment of DAF's common law fraud claims to
Dresdner in connection with DAF's sale of the notes.   Rather,
Commerzbank contends that the transfer of the notes was
"unqualified" and, therefore, implicitly included claims related
thereto.   At its core then, Commerzbank's argument amounts to
little more than an assertion that, in the absence of language to
the contrary, DAF's tort claims necessarily transferred to


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Dresdner with the notes.   However, this is contrary to the law in
New York, which requires either some expressed intent or
reference to tort causes of action, or some explicit language
evidencing the parties' intent to transfer broad and unlimited
rights and claims, in order to effectuate such an assignment
(compare Banque Arabe, 57 F3d at 152 [assignment of interest and
rights in "transaction," rather than contract, broad enough to
encompass tort claims] and International Design, 486 F Supp 2d at
237 [assignment language expressly stated "without limitation"]
with State of Cal. Pub. Employees' Retirement Sys., 95 NY2d at
435-436 [assignment of rights and interests arising out of loan
documents and promissory note did not assign cause of action for
malpractice against drafter of loan documents]).
          The declarations of Williams and Shlissel are
insufficient, as a matter of law, to demonstrate that the parties
expressed an intent to and did, in fact, undertake an assignment
of fraud claims in connection with the conveyance of the notes at
the time of the sale.   Williams and Shlissel averred only that
DAF and Dresdner assumed that DAF's rights and causes of action
would transfer automatically with the note; neither declarant
claimed that the assignment of tort claims was actually discussed
or negotiated by the parties prior to or at the time of the
transfer, or that the sale of the notes in any way referenced the
simultaneous assignment of such claims.   This deficiency is fatal
to Commerzbank's argument that it has standing (see generally


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Wells v Shearson Lehman/American Express, 72 NY2d 11, 24 [1988]
["uncommunicated subjective intent alone cannot create an issue
of fact where otherwise there is none"]; Property Asset Mgt.,
Inc. v Chicago Tit. Ins. Co., Inc., 173 F3d 84, 87 [2d Cir
1999]).
          As Commerzbank points out, in Banque Arabe (57 F3d 146)
and International Design (486 F Supp 2d 229) the Second Circuit
and District Court, respectively, took note of the circumstances
surrounding the transfers in question when considering whether
the parties assigned tort causes of action.   However, these cases
do not stand for the proposition that Commerzbank espouses --
namely, that the surrounding circumstances can be sufficient, in
the absence of any supporting language, to raise a question of
fact regarding whether an assignment of tort claims was effected.
In both Banque Arabe and International Design, the Courts first
concluded that the language of the assignment encompassed tort
claims before reinforcing their conclusions by reference to the
circumstances of the transaction (see Banque Arabe, 57 F3d at 152
[concluding that the "language in the Assignment alone is
sufficient to demonstrate (the assignor's) intent to transfer all
of [its] rescission and fraud claims"]; International Design, 486
F Supp 2d at 236-237 [noting that "(t)he words of the assignment
are of paramount importance" and that the assignment there
expressly provided that it was "without limitation"]).   By
contrast, the only language used to convey the notes here is


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contained in the confirmation letter sent by Dresdner, which
merely referred to the purchase of "each of the Cheyne Holdings,"
and the declarations of Williams and Shlissel, which similarly
fail to contain any assertion that the parties to the sale
referenced or assigned tort causes of action.
          In any event, the circumstances here would be
insufficient to raise a question of fact as to whether DAF
intended to assign to Dresdner potential fraud causes of action
based on the ratings.   Although Dresdner bought the Cheyne SIV
notes after they were devalued, Commerzbank presented no evidence
that the sale was in contemplation of DAF's dissolution, as it
was in Banque Arabe (compare 57 F3d at 152), and DAF was not
terminated until a year after the sale (compare International
Design, 486 F Supp 2d at 237 [assignor was a defunct entity at
the time of the sale]).   Nor would Dresdner's purchase of the
notes after they were devalued compel the conclusion that
Dresdner must have intended to assume any potential fraud claims,
particularly in light of Williams' assertion that Dresdner
purchased the notes "in order to ensure DAF's compliance" with
federal rules.   Indeed, there is no indication that Dresdner and
DAF were even aware, at the time of the sale, that any potential
fraud claims existed (see Fox, 157 AD at 369).   Likewise, on this
record, Dresdner's purchase of the notes "at par" lends no
support to Commerzbank's position since the sale price was
mandated by federal rules (see 17 CFR 270.17a-9 [a]).     Thus, the


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circumstances surrounding this transaction are plainly
distinguishable from those in Banque Arabe and International
Design, and Commerzbank's reliance on those cases is unavailing.
            Because DAF's sale of the notes, in the conceded
absence of any expression of a contemporaneous intent to transfer
related tort claims to Dresdner, did not, under New York law,
effectuate an assignment of the fraud claim Commerzbank now seeks
to pursue, Commerzbank has failed to raise a question of fact
concerning standing.     Accordingly, the first certified question
should be answered in the negative and the second certified
question not answered as academic.
*   *   *    *   *   *    *   *     *      *   *   *   *   *   *    *   *
Following certification of questions by the United States Court
of Appeals for the Second Circuit and acceptance of the questions
by this Court pursuant to section 500.27 of this Court's Rules of
Practice, and after hearing argument by counsel for the parties
and consideration of the briefs and the record submitted, first
certified question answered in the negative and second certified
question not answered as academic. Opinion by Judge Stein.
Chief Judge Lippman and Judges Read, Pigott, Rivera, Abdus-Salaam
and Fahey concur.

Decided June 30, 2015




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