January 18, 2006
Kelley Drye succeeded in obtaining dismissal of two lawsuits, affirmed by the Second Circuit Court of Appeals, alleging RICO, securities fraud and common law fraud claims against client Shinhan Bank. The plaintiffs in the two related actions were former shareholders of Lernout & Hauspie Speech Products N.V. (“L&H”) who claimed losses of more than $600 million when L&H declared bankruptcy. Plaintiffs claimed that L&H disseminated false financial statements, based largely on a fraud committed by L&H’s Korean subsidiary and various Korean Banks including Shinhan.
Kelley Drye successfully moved to dismiss the claims on behalf of Shinhan Bank for failure to state a claim under U.S. securities laws and to plead fraud with particularity. The Second Circuit affirmed the “bright line” test adopted in Wright v. Ernst & Young, and also confirmed that Federal Rule 9(b) applies to state law claims sounding in fraud.