A federal judge dismissed a shareholder lawsuit against Canadian Imperial Bank of Commerce and four executives for allegedly misleading investors about the bank's exposure to securities backed by subprime mortgages.
In an order Wednesday, U.S. District Judge William H. Pauley 3rd in Manhattan threw out the case, saying a number of major financial institutions failed to anticipate a meltdown in the mortgage market and the plaintiffs failed to demonstrate that the Canadian bank and its executives received information that was contrary to their public statements.
"Looking back, a full turn of the wheel would have been appropriate. That CIBC chose an incremental measured response, while erroneous in hindsight, is as plausible an explanation for the losses as an inference of fraud," the judge said. "CIBC, like so many other institutions, could not have been expected to anticipate the crisis with the accuracy plaintiff enjoys in hindsight."
The judge said the bank took six writedowns related to its mortgage-backed securities holdings in the alleged class period.
The bank was sued in 2008 for at least 14 alleged misrepresentations in press releases or public statements about its exposure to securities backed by residential subprime mortgages.
The lawsuit, filed by the Plumbers and Steamfitters Local 773 Pension Fund, was seeking class-action status on behalf of investors who purchased CIBC shares in the U.S. between May 31, 2007, and May 29, 2008.
A lawyer for the lead plaintiff did not immediately return a phone call seeking comment.
"CIBC is pleased with the decision to dismiss this lawsuit and the court's recognition that the allegations had no legal merit," a CIBC spokesman said in a statement.