By Nate Raymond
NEW YORK Oct 29 A U.S. judge on Tuesday refused
to allow shareholders to proceed as a group in a lawsuit
accusing Deutsche Bank AG of misrepresenting the
risks of mortgage-related investments that were central to the
The ruling by U.S. District Judge Katherine Forrest in New
York effectively ends the class action against the German bank,
although shareholders could proceed individually.
Forrest ruled that an expert hired by the shareholders to
give an opinion on whether the market for Deutsche Bank shares
was efficient was unqualified and used a flawed methodology.
"For this court to rely on testimony from someone who lacks
real expertise asks this Court to dispense with the need for
real qualifications," Forrest wrote.
Renee Calabro, a spokeswoman for Deutsche Bank, said it was
"pleased with the court's decision." John Grant, a lawyer for
the plaintiffs at Robbins Geller Rudman & Dowd, did not
responded immediately to requests for comment.
Filed in 2011, the lawsuit accused Deutsche Bank of issuing
false and misleading statements about its health in the run up
to and during the global financial crisis.
The lawsuit said Deutsche Bank packaged and sold
mortgage-backed securities and collateralized debt obligations
that it knew were riskier than it told the market.
The lawsuit also accused Deutsche Bank of misrepresenting
its risk management practices and said it was too slow to write
down impaired mortgage securities.
The misrepresentations enabled Deutsche Bank to inflate its
stock price and maximize its profits, but as the bank began
announcing losses in 2008 its stock price fell 87 percent to
$21.27 in January 2009 from $159.59 in May 2007, the lawsuit
In March, Forrest denied a motion by the bank to dismiss the
lawsuit, and the plaintiffs moved to certify plaintiffs who
bought shares in the United States from Jan. 3, 2007, through
Jan. 16, 2009.
The lawsuit is led by shareholders Building Trades United
Pension Trust Fund, Steward Global Equity Income Fund, and
Steward International Enhanced Index Fund.
Forrest, in denying class certification on Tuesday, focused
extensively on the qualifications of the expert hired by the
plaintiffs, Michael Marek.
Forrest said Marek's expertise came from acting as an expert
in securities class actions, which she said was "not
sufficient." She added that he had "not been specially trained
by academics in the field; he has not written articles, taught
any courses, or conducted any relevant research."
The judge said Marek's training instead "appears to have
been one year he spent working for a firm after college and then
his work for an economist who was later indicted for submitting
The economist, John Torkelsen, pleaded guilty in 2008 to
lying to judges about secret payments he took from plaintiffs'
law firms. Among the firms he worked for was Milberg, which at
the time was at the center of a massive kickback scandal.
Robbins Geller, which represents the Deutsche Bank
plaintiffs, spun out of Milberg in 2004.
Even if Marek was qualified, Forrest said his analysis
suffered from "certain significant flaws."
Forrest said Marek failed to consider that more than 90
percent of Deutsche bank securities were traded outside the
United States, in Germany, which he conceded drove U.S. pricing.
Forrest said Marek also failed to consider that, during the
time in question, both the United States and Germany instituted
short-sale bans, even though he acknowledged arbitrage was an
important driver of an efficient market.
Marek did not immediately respond to a call or an email
The case is IBEW Local 90 Pension Fund v. Deutsche Bank AG,
et al, U.S. District Court, Southern District of New York, No.