In re National Century Financial Enterprises, Inc., Investment Litigation (846 F. Supp. 2d 828, 2012)

United States District Court for the Southern District of Ohio 2012-03-02

Citations

Full opinion text

OPINION AND ORDER ON CREDIT SUISSE’S MOTION FOR SUMMARY JUDGMENT IN THE NOTEHOLDER ACTIONS

JAMES L. GRAHAM, District Judge.

This matter is before the court on the motion of defendants Credit Suisse Securities (USA) LLC and Credit Suisse, New York Branch (together, “Credit Suisse”), for summary judgment on the claims brought by the Noteholder plaintiffs. The Noteholders are institutional investors who collectively purchased nearly $2 billion in notes issued by National Century Financial Enterprises, Inc., through its subsidiaries NPF VI, Inc. and NPF XII, Inc. In most cases, the Noteholders purchased their notes directly from Credit Suisse, which served in the role of initial purchaser and placement agent for National Century. It is undisputed that National Century committed a massive fraud. What is disputed here is the extent to which Credit Suisse can be held liable to the Noteholders for their losses.

According to the Noteholders, the evidence demonstrates that Credit Suisse knew or should have known of the material aspects of National Century’s fraud. They argue that Credit Suisse sold the notes despite knowing of various ways in which National Century ran it operations contrary to how those operations were described in the offering materials that Credit Suisse supplied to them, as well as in other communications Credit Suisse made to them. The Noteholders assert numerous claims, including for fraud, negligent misrepresentation, aiding and abetting fraud, violations of Section 10(b) of the Securities Exchange Act of 1934, and violations of the blue sky laws of various states.

Credit Suisse’s motion offers a host of reasons why it believes it is entitled to summary judgment. It contends that the evidence demonstrates as a matter of law that Credit Suisse did not know, nor should have known, of National Century’s fraud. According to Credit Suisse, National Century deliberately hid the fraud from Credit Suisse and other third parties involved in its operations. Credit Suisse further argues that it did not make any actionable misrepresentations to the Note-holders because it was not the maker of the statements in the offering materials and because its various direct communications with the Noteholders amounted to no more than sales talk and factually accurate descriptions of the note programs. It also contends that the Noteholders cannot establish that they relied upon any alleged Credit Suisse misrepresentation in making their decisions to purchase notes and that, in any event, their purported reliance was not reasonable.

For the reasons set forth below, the court finds that the Noteholders have submitted sufficient evidence in support of their fraud-based claims to create genuine issues of material fact. Thus, Credit Suisse’s motion for summary judgment is largely denied.

I. Background

The court provides this overview of undisputed facts regarding National Century’s fraud, Credit Suisse’s role with National Century, and the Noteholders’ purchases. More extensive discussions of the facts and the matters in dispute are reserved for the particular legal issue to which those facts relate.

A. National Century’s Fraud

National Century was a privately-held finance company founded in 1990 by Lance Poulsen, Donald Ayers, and Rebecca Parrett in Dublin, Ohio. It provided financing to healthcare providers by purchasing their accounts receivable at a discount under the terms of Sale and Subservicing Agreements. See CS Ex. 11 at NCFE1865-1642 (template Sale and Subservicing Agreement). Under the Agreements, National Century would purchase only “eligible” receivables — those that satisfied certain criteria designed to ensure the receivables were of high quality. Id. at NCFE-1865-1669 to -1671.

National Century generated cash by issuing notes through special-purpose and wholly-owned subsidiaries. The most prominent of these subsidiaries were NPF VI and NPF XII, in whose issuances all of the Noteholders invested. Each NPF note program operated as a trust under a Master Indenture. See CS Ex. 11 (NPF VI Master Indenture); CS Ex. 12 (NPF XII Master Indenture). The parties to the Indentures were the Trust (either NPF VI or NPF XII), the Servicer (National Premier Financial Services, Inc., also a wholly-owned subsidiary of National Century), and the Trustee (either JPMorgan or Bank One). Credit Suisse was not a party to the Indentures.

The NPF notes typically received the highest ratings by the credit rating agencies and were sold to institutional investors through private placement. The notes were secured by the healthcare receivables owned by NPF VI and NPF XII, see CS Exs. 11, 12 at § 3.01, and the Servicer had an obligation to ensure the note programs purchased only eligible receivables. Id. at § 5.04(b). The Indentures offered further layers of protection to investors. These layers included: maintaining the corporate separateness of the NPF entity from National Century and the Servicer and prohibiting the commingling of funds, see id. at § 4.04; subjecting the NPF entity to various monitoring, reporting, and auditing requirements, see id. at §§ 4.12, 5.04(b); observing concentration limits on the percentage amounts of receivables purchased from certain sources, see id. at § 4.13; establishing various reserve accounts, which were required to be maintained at specified percentage levels of the net value of purchased receivables, see id. at §§ 6.01, 6.02, 6.03; and directing the Trustees to declare an event of default if a party committed a material breach of the Indentures, see id. at §§ 7.01, 8.01.

In reality, National Century committed a multi-billion dollar fraud on investors. The mechanics of the fraud have been thoroughly detailed in orders of this court (in the multidistrict litigation, in the criminal proceedings against National Century’s executives, in civil enforcement actions brought by the Securities and Exchange Commission, and in numerous bankruptcy matters appealed to this court), as well as in orders of the Sixth Circuit in the appeals of the criminal convictions, and in orders of the bankruptcy court overseeing the Chapter 11 liquidation of National Century and its subsidiaries. See, e.g., U.S. v. Poulsen, 655 F.3d 492, 498-99 (6th Cir.2011); U.S. v. Faulkenberry, 614 F.3d 573, 577-79 (6th Cir.2010); In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig., 617 F.Supp.2d 700, 705-07 (S.D.Ohio 2009); U.S. v. Poulsen, 568 F.Supp.2d 885, 890-912 (S.D.Ohio 2008); In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig., No. 2:03-md-1565, 2006 WL 469468 at **1-6 (S.D.Ohio Feb. 27, 2006); In re Nat’l Century Fin. Enterprises, Inc., 341 B.R. 198, 209-10 (Bankr.S.D.Ohio 2006).

Briefly stated, a great deal of the accounts receivable that National Century “purchased” were worthless or non-existent receivables from healthcare companies in which National Century’s executives held undisclosed ownership interests. What appeared on paper to be legitimate transactions amounted to little more than transfers of corporate funds into the pockets of National Century’s executives. In testimony given in the criminal proceedings, a government witness provided a four-year snapshot of the fraud at National Century. He found that National Century had made $1.3 billion in unsecured advances in that time window to eight healthcare providers, seven of which the Founders held an ownership stake. See Poulsen, 568 F.Supp.2d at 900.

The Sixth Circuit summarized the fraud as follows:

The record before us makes unmistakably clear that NCFE’s representations were false. NCFE executives lied to investors in sales presentations; they lied to them in the governing documents for bond sales; and they lied to them in monthly investor reports that showed NCFE in full compliance with the obligations recited above. This practice of deception was continuous from approximately 1995 to October 2002, when NCFE ceased operations.

The deception centered on the practice of “advancing.” Contrary to what it told investors, NCFE routinely advanced funds to healthcare providers without obtaining any receivables, much less eligible ones, in return. NCFE apparently just fronted these monies — investor monies — with the hope that someday the provider would pay them back. Indeed, some providers were already so buried in debt that even the hope must have been absent. Moreover, the advances were large and focused on only a handful of providers, which meant that NCFE blew past its concentration limits as well.

Faulkenberry, 614 F.3d at 578.

By the time National Century went bankrupt in November 2002, investors suffered losses of well over $2 billion.

B. Credit Suisse and Its Role with National Century

Defendant Credit Suisse Securities (USA) LLC is an investment bank and broker-dealer that is a subsidiary of the Swiss bank Credit Suisse Group AG. Defendant Credit Suisse, New York Branch, is a branch of the Swiss bank. Both Credit Suisse defendants have their principal places of business in New York.

National Century used various financial institutions to bring its notes to market. See CS Ex. 10 (chart listing all of the NPF note issuances and identifying the underwriter for each issuance). Over time, and particularly from 1998 to 2002, Credit Suisse became the predominant placement agent for the NPF notes. See id,.; see also Az. Ex. 199 (August 30, 2000 agreement by which National Century granted Credit Suisse the right to serve as the sole lead in placing additional note offerings until Credit Suisse received at least $15 million in upfront fees). In this same time frame, the total dollar amount of each note issuance increased substantially from the pre-1998 issuances. See CS Ex. 10.

Credit Suisse’s involvement with National Century can be traced to late 1995, when the parties entered into a letter agreement whereby Credit Suisse agreed to be National Century’s “agent and financial advisor in connection with the marketing” of two $50 million note offerings by NPF VI. CS Ex. 19 at ¶ 1. The letter agreement called on Credit Suisse to “structure, market and place the [note] Offerings.” Id. Shortly thereafter, in early 1996, Credit Suisse entered into a Placement Agency Agreement with National Century, NPF VI, and the Servicer. See CS Ex. 36. The agreement required Credit Suisse to privately place the notes with qualified institutional buyers in return for a placement fee of 1% of the principal amount of notes sold. See id. at 2-4.

The arrangement changed slightly for the later note issuances in which the Note-holders invested. Credit Suisse entered into a series of Purchase and Agency Agreements with National Century, the note-issuing entity (either NPF VI or NPF XII), and the Servicer. See, e.g., CS Ex. 35. These agreements defined Credit Suisse as an “initial purchaser” who would purchase the notes from the issuer at a slight discount, such as 0.6 % less face value. See id. at § 3. Credit Suisse would then work with a placement agent (Banc One Capital Markets, for example) to place the notes with qualified institutional buyers. See id. at 2. Credit Suisse was not contractually required to sell the notes and in fact suffered losses of approximately $130 million from notes it had on hand when National Century collapsed. See CS Ex. 143.

Credit Suisse had additional points of involvement with National Century besides serving as the initial purchaser of NPF notes. It was a lender on the NPF WL, a fully-funded revolving warehouse line of credit to National Century. See CS Ex. 230. By the summer of 2000, Credit Suisse had a commitment of $50 million to the NPF WL. Id. In August 2000, Credit Suisse increased its commitment by $20 million by agreeing to purchase the loan of another bank who had declined to renew its commitment in the NPF WL. See Az. Ex. 181. The parties contemplated that National Century would find another lender for the NPF WL and that National Century would pay the $20 million back by September 30, 2000. See id. In late September 2000, National Century requested a two-week extension in paying off the $20 million, which Credit Suisse granted in exchange for a $100,000 fee. See Az. Exs. 59, 189.

Later in 2000, Credit Suisse helped National Century obtain short-term financing under a separate revolving liquidity facility. National Century issued the NPF XII 2000-4 variable funding note (“VFN”), which was backed by healthcare receivables held by NPF XII. See CS Ex. 10. In December 2000, Credit Suisse, New York Branch, entered into a Liquidity Asset Purchase Agreement with NPF' XII and a conduit purchaser whereby Credit Suisse committed to purchase an undivided interest in the VFN upon the occurrence of certain events. See CS Ex. 145 at LL_000108. In turn, Credit Suisse prepared materials and marketed participation interests in the VFN to other banks. See NJ Leivick Exs. 112, 113, 114, 117. On October 31, 2002, the triggering events occurred that required Credit Suisse to purchase its $127 million interest in the VFN. See CS Ex. 192 at LL_002039; CS Ex. 340, Lengel Dep. at 48.

Credit Suisse also extended credit to National Century in the form of a short-term loan in September 2002. National Century requested a $100 million increase in the VFN from Credit Suisse. See CS Ex. 137 at CSFB-EMAIL-0384677; Az. Ex. 146. Credit Suisse declined that request, but later approved a $75 million loan on September 4, 2002. See Az. Ex. 145. The loan was extended to the NPF XII program through the VFN. Id.; CS Reply Ex. 330. Credit Suisse earned $1 million above its usual fees in connection with this loan. See Az Ex. 146 at 2; Az. Ex. 147.

C. The Noteholders and Their NPF Note Purchases

The Noteholders are institutional investors who purchased NPF VI and NPF XII notes. Plaintiff Lloyds TSB Bank pic is a British public limited company with its principal place of business in London, England and an office in New York. Lloyds purchased $60 million in NPF XII 2001-1 notes from Credit Suisse in March 2001. See NJ Vespasiano Decl. at ¶ 3. In the same month, Lloyds and Credit Suisse entered into a Participation Agreement, under which Lloyds assumed a $68 million undivided interest in the VFN. See CS Ex. 219. In exchange, Lloyds received payment of certain fees. See id. at § 4. On November 5, 2002, Lloyds purchased its participation interest from Credit Suisse in the VFN. See CS Ex. 217.

Plaintiffs Metropolitan Life Insurance Company and Metropolitan Insurance and Annuity Company (together, “MetLife”), both with their principal places of business, in New York, purchased a total of $121 million in NPF XII notes from June 2001 to July 2002. All but one purchase was made from Credit Suisse. MetLife purchased $104.5 million of NPF XII Series 2001-1, 2001-2, 2001-4, and 2002-1 notes from Credit Suisse. See NJ Tau Deck at ¶¶ 3-8; NJ Leivick Ex. 50. Credit Suisse served as the initial purchaser for all of these notes. See CS Ex. 10. MetLife made one purchase from Bear, Stearns & Company. This purchase occurred in the secondary market and consisted of $16.6 million of NPF XII 2001-2 notes for which Credit Suisse had been the initial purchaser. See NJ Leivick Ex. 50 at ML_00491516.

The Arizona Noteholder plaintiffs include numerous governmental entities from Arizona and other states, as well as investment funds, banks, insurance companies, trusts and other entities from various states and foreign countries. The Arizona Noteholders collectively purchased over $1.5 billion of NPF VI and NPF XII notes between 1998 and 2002. See CS Ex. 191 (chart listing all of the Arizona Noteholders’ purchases). The great majority of the Arizona Noteholders’ purchases were made directly from Credit Suisse, either at the time of initial issuance or in the secondary market. Id. Approximately $200 million of their purchases were made from an agent or broker other than Credit Suisse. Id. Certain of the Arizona Note-holders (the Asset Allocation & Management plaintiffs, the Clifton Group plaintiffs, Louisiana Corporate Credit Union, and Oregon Insurance Guaranty Association) purchased all of their notes from a source other than Credit Suisse.

D. Procedural Background

The Noteholders have asserted numerous claims against Credit Suisse for its alleged knowing involvement in National Century’s wrongdoing. Their claims have been the subject of several orders of this court. See In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig., 755 F.Supp.2d 857 (S.D.Ohio 2010) (granting summary judgment to Credit Suisse as to the Note-holders’ claims under the Ohio Securities Act); In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig., 541 F.Supp.2d 986 (S.D.Ohio 2007) (largely denying Credit Suisse’s motion to dismiss the Noteholders’ complaints).

Still remaining are the following claims: Lloyds’s claim under § 10(b) of the Securities Exchange Act of 1934 and its claims for fraud, negligent misrepresentation, and breach of contract; MetLife’s claims under § 10(b) and under New Jersey’s securities statute and its claims for fraud and negligent misrepresentation; and the Arizona Noteholders’ claims under the blue sky laws of various states and their claims for fraud, negligent misrepresentation, aiding and abetting fraud, aiding and abetting breach of fiduciary duty, conspiracy, and unjust enrichment. Two of the Arizona Noteholders — Grantham, Mayo, Van Otterloo & Company (GMO) and Pacific Investment Management Company, LLC (PIMCO) — have also asserted fraud-based statutory claims under the laws of Massachusetts .and California, respectively.

Credit Suisse has filed a motion for summary judgment against the claims of all of the Noteholders. The parties have presented oral argument, and the matter is ripe for decision.

II. Standard of Review

Under Federal Rule of Civil Procedure 56, summary judgment is proper if the evidentiary materials in the record show that there is “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.Civ.P. 56(a); see Longaberger Co. v. Kolt, 586 F.3d 459, 465 (6th Cir.2009). The moving party bears the burden of proving the absence of genuine issues of material fact and its entitlement to judgment as a matter of law, which may be accomplished by demonstrating that the nonmoving party lacks evidence to support an essential element of its case on which it would bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Walton v. Ford Motor Co., 424 F.3d 481, 485 (6th Cir.2005).

The “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original); see also Longaberger, 586 F.3d at 465. “Only disputed material facts, those ‘that might affect the outcome of the suit under the governing law,’ will preclude summary judgment.” Daugherty v. Sajar Plastics, Inc., 544 F.3d 696, 702 (6th Cir.2008) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). Accordingly, the nonmoving party must present “significant probative evidence” to demonstrate that “there is [more than] some metaphysical doubt as to the material facts.” Moore v. Philip Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir.1993).

A district court considering a motion for summary judgment may not weigh evidence or make credibility determinations. Daugherty, 544 F.3d at 702; Adams v. Metiva, 31 F.3d 375, 379 (6th Cir.1994). Rather, in reviewing a motion for summary judgment, a court must determine whether “the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505. The evidence, all facts, and any inferences that may permissibly be drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). However, “[t]he mere existence of a scintilla of evidence in support of the plaintiffs position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252, 106 S.Ct. 2505; see Dominguez v. Corr. Med. Servs., 555 F.3d 543, 549 (6th Cir.2009).

III. Choice of Law

The court has thus far refrained from making a choice-of-law determination for the Noteholders’ common law claims against Credit Suisse. For issues of federal law, a transferee court receiving a case from the Judicial Panel on Multidistrict Litigation applies the law of the circuit in which it is located. In re Cardizem CD Antitrust Litig., 332 F.3d 896, 912 n. 17 (6th Cir.2003); In re Temporomandibular Joint (TMJ) Implants Prods. Liab. Litig., 97 F.3d 1050, 1055 (8th Cir.1996). For issues of state law, however, the transferee court must apply the state law that would have applied had the cases not been transferred for consolidation. Id.

The court has thus far used Ohio law as its default reference point in evaluating the Noteholders’ common law claims against Credit Suisse and numerous other defendants. At the summary judgment stage, Credit Suisse urges the court to make a choice-of-law determination because it believes the facts demonstrate that New York law should apply.

The parties differ greatly in their approach to this issue. Credit Suisse argues that New York law should apply because Credit Suisse, MetLife, Lloyds, and certain of the Arizona Noteholders have their principal places of business in New York. Credit Suisse also emphasizes that it sold the notes and made its alleged representations from New York. In contrast, Met-Life and Lloyds argue that Ohio law should apply because it was the “center of gravity’ of the fraud in which Credit Suisse participated. The Arizona Note-holders offer yet a different view. They argue that it is not necessary to make a choice of law because a conflict does not exist. If a conflict is found to exist, they contend that the court should examine the matter on an issue-by-issue basis and conclude that the interests of the plaintiffs residing in various states outweigh the interest in applying the law of Credit Suisse’s place of business.

The court finds that it is an appropriate time to make a choice of law. The relevant evidence is undisputed and the parties have fully briefed their positions. Further, there are enough conflicts among the laws of the various states implicated here to make a difference. One such difference is New York’s requirement that the Noteholders prove their fraud claims by clear' and convincing evidence, rather than by a preponderance of the evidence. Compare’ In re Vivendi Universal, S.A. Sec. Litig., 765 F.Supp.2d 512, 534 (S.D.N.Y.2011), with Cornwell v. N. Ohio Surgical Ctr., 185 Ohio App.3d 337, 345, 923 N.E.2d 1233, 1239-40 (Ohio Ct.App. 2009). Another difference relates to the claims for negligent misrepresentation, for which New York law requires a showing of “a special or privity-like relationship” between the parties. Compare Bonded Waterproofing Servs., Inc. v. Anderson-Bernard Agency, Inc., 86 A.D.3d 527, 927 N.Y.S.2d 133, 135 (2011), with Kaufman v. i-Stat Corp., 165 N.J. 94, 754 A.2d 1188, 1195-96 (2000). Further, several of the Noteholders have asserted “holder” claims, arguing that assurances made by Credit Suisse caused them to refrain from selling their NPF notes. New York law recognizes such a claim in limited circumstances, but many states do not. See In re WorldCom Sec. Litig., 336 F.Supp.2d 310, 318-322 (S.D.N.Y.2004) (surveying the law of various states).

A. Restatement of Conflict of Laws

As a transferee court, this court must apply the choice of law rules of the transferor courts, New Jersey and Arizona. See Rosen v. Chrysler Corp., 205 F.3d 918, 921 n. 2 (6th Cir.2000). Both states have adopted the Restatement (Second) of Conflicts of Laws (1971). See P.V. v. Camp Jaycee, 197 N.J. 132, 962 A.2d 453, 460 (2008); Bates v. Superior Ct., 156 Ariz. 46, 749 P.2d 1367, 1369-70 (1988).

Section 6 of the Restatement identifies general factors that are relevant to any choice of law determination:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability, and uniformity of result, and

(g) ease in determination and application of the law to be applied.

Restatement (Second) of Conflicts of Laws § 6(2).

With respect to torts, the inquiry is which state “has the most significant relationship to the occurrence and the parties under the principles stated in § 6.” Id., § 145(1); see also Camp Jaycee, 962 A.2d at 460; Bates, 749 P.2d at 1370. Contacts to be considered include:

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

(d) the place where the relationship, if any, between the parties is centered.

Restatement § 145(2).

For claims of fraud and misrepresentation in particular, the Restatement provides that in cases where the plaintiffs reliance and the defendant’s representations took place in the same state, then the law of that state should be applied unless the principles of § 6 dictate otherwise. Id., § 148(1). But when “plaintiffs action in reliance took place in whole or in part in a state other than that where the false representations were made,” the court should consider the following contacts in determining the state that has the most significant relationship to the occurrence and the parties:

(a) the place, or places, where the plaintiff acted in reliance upon the defendant’s representations,

(b) the place where the plaintiff received the representations,

(e) the place where the defendant made the representations,

(d) the domicil, residence, nationality, place of incorporation and place of business of the parties,

(e) the place where a tangible thing which is the subject of the transaction between the parties was situated at the time, and

(f) the place where the plaintiff is to render performance under a contract which he has been induced to enter by the false representations of the defendant.

Restatement § 148(2).

In evaluating the applicable Restatement provisions, courts typically start with the most particularized section — here, § 148 on fraud and misrepresentation— and then turn to the more general guidance in § 145 and the cornerstone principles of § 6. See e.g., Camp Jaycee, 962 A.2d at 461 (describing the tort-specific section as the “point of departure”). The focus throughout is which state has the most significant relationship to the occurrence and the parties. Id.

B. Lloyds

Lloyds contends, without any challenge from Credit Suisse, that it acted in reliance upon Credit Suisse’s alleged misrepresentations and omissions in several locations. Before Lloyds entered into an asset-backed transaction like the ones with Credit Suisse, it conducted a risk assessment by its “Structured Finance New York” unit and a risk analysis by its credit services department in Miami, Florida. See CS Ex. 178, Vespasiano Dep. at 53-56; NJ Vespasiano Decl. at ¶ 15. Once both groups recommended a transaction, the recommendation went to certain individuals in London for final approval. See CS Ex. 178, Vespasiano Dep. at 55-58; NJ Seggins Decl. at ¶¶ 3-4.

Lloyds received materials from Credit Suisse regarding the notes and the Variable Funding Note (“VFN”) at its New York office. See, e.g., NJ Vespasiano Exs. A-J; NJ Mayor Decl. at ¶20. Lloyds argues that it also received materials at its Miami office, but the materials received in Miami did not come directly from Credit Suisse. They were forwarded from Lloyds Structured Finance New York. See NJ Swaby-Hinds Decl. at ¶¶ 3, 6; NJ Leivick Ex. 119. Moreover, Lloyds attended a presentation by National Century at Credit Suisse’s New York offices. See NJ Leivick Ex. 100, Mayor Dep. at 161.

Credit Suisse dealt with Lloyds from its New York office. Nonetheless, Lloyds argues that the representations came in part from Ohio because the offering materials were “issued out of Ohio.” Lloyds is correct that, to the extent that the offering materials can be attributed to any one particular state, Ohio has ties as strong as the ties of any other state. The materials were authored at least in part by National Century and its legal counsel in Ohio, with the input of other parties involved in the securitization programs. Even so, Credit Suisse’s input on the materials originated from its Asset Finance Group in New York. See CS Ex. 83, O’Connell Dep. at 18-20; CS Exs. 103, 104. And in any event, where the offering materials were authored is not of greater importance than where Credit Suisse provided them to Lloyds. It is undisputed that New York is the state from which Credit Suisse provided materials to Lloyds and otherwise made representations to Lloyds.

The parties’ places of business also point to a strong connection with New York. Lloyds, a British bank with it principal place of business in London, established its American offices in New York and Miami, but it accounted the NPF transactions to the Structured Finance New York unit. See CS Ex. 178, Vespasiano Dep. at 38; CS Ex. 218. Credit Suisse, a Delaware corporation and subsidiary of the Swiss bank Credit Suisse Group AG, has its principal place of business in New York. See Restatement § 148, cmt. i (stating that the place of business is typically more important than the place of incorporation).

According to Lloyds, factor (e) — the place where the subject of the transaction is situated — weighs in favor of Ohio because the assets that collateralized the notes were held in National Century accounts with Trustee Bank One in Ohio. This is a strained application of factor (e). Lloyds did not purchase the accounts receivable held in Ohio; it acquired a security interest in them. The Restatement makes clear that factor (e) has importance when the subject of the transaction is a “tangible thing,” particularly when “the subject of the transaction is land.” Restatement § 148, cmt. i.

The final factor of § 148 is the place where the plaintiff is to render performance under a contract which he has been induced to enter by the false representations of the defendant. This factor has no real application to Lloyds purchase of NPF XII 2001-1 notes, but Lloyds does concede that the parties agreed that the Participation Agreement relating to the VFN investment would be governed by New York law. See CS Ex. 219 at § 15.

The court concludes that under § 148, New York has the most significant relationship to the occurrence and the parties. The first three factors of § 145 support the same conclusion. However, Lloyds argues that factor (d) of § 145 — the place where the parties’ relationship is centered — and the principles of § 6 support application of Ohio law. Lloyds contends that this litigation is about an Ohio-based fraud and describes Ohio as the center of gravity of National Century’s fraud. Lloyds points out some of the many ways in which the litigation has Ohio connections: the notes sold by Credit Suisse were originally issued from Ohio; the Master Indentures governing the note programs had an Ohio choice-of-law provision; the NPF bank accounts were held in Ohio; and Credit Suisse’s due diligence of National Century was conducted in Ohio. Lloyds argues that Ohio has a strong interest in securing an honest marketplace and that it is the state with the greatest interest in having its law applied to the participants in the fraud.

The court is not persuaded by Lloyds’s argument for focusing on the center of gravity of the overall National Century fraud. The Restatement instructs courts to give separate consideration to each issue in a case. See Restatement § 145, cmt. d. The approach of Lloyds is to Jump everything together and arrive at the conclusion that Ohio was home to the fraud. Lloyds even cites the decision of the Judicial Panel on Multidistrict Litigation to consolidate and transfer the various actions to this court. The Restatement requires greater precision, and the Judicial Panel’s rationale for choosing an Ohio court to oversee the National Century multidistrict litigation does not dictate the choice of law for a particular issue within the litigation.

Lloyds’s tort claims present the issue of whether Credit Suisse made misrepresentations to Lloyds in relation to the note purchase and the Participation Agreement. The case is about Credit Suisse’s alleged fraud. The fraud at National Century matters to the extent Credit Suisse knew or should have known of it. That National Century was located in Ohio is of no overriding significance, and there is no evidence that National Century’s location was relevant to any of Lloyds’s investment decisions. Thus, the focus for choice-of-law purposes should be on the securities transactions between Credit Suisse and Lloyds, and not on the overall National Century fraud. Credit Suisse and Lloyds dealt with each other in New York — that is where their relationship was centered. See Restatement § 145(2)(d). The parties should have expected New York law to apply (indeed, they contracted for as much in the Participation Agreement), and New York has the greatest interest in regulating the alleged fraudulent transactions that took place almost fully within its boundaries (saving for the steps requiring Lloyds personnel in Miami and London to approve the note purchase). See Restatement § 6(2). Accordingly, the court will apply New York law in evaluating the fraud and negligent misrepresentation claims of Lloyds.

C. MetLife

MetLife argues that if the court rejects applying Ohio law, then New Jersey is the state with the most significant relationship to its claims. Two MetLife entities purchased notes from Credit Suisse: Metropolitan Life Insurance Company, a New York corporation with its principal place of business in New York, and Metropolitan Insurance and Annuity Company, a Delaware corporation with its principal 'place of business in New York. Despite the apparent connections to New York, MetLife states that it acted out of a New Jersey office in dealing with Credit Suisse. MetLife’s Asset-Backed Securities Unit in New Jersey received sales materials and other communications from Credit Suisse and also hosted a May 2001 “roadshow” presentation put on by National Century and attended by a Credit Suisse representative. See NJ Tau Decl. at ¶ 2; NJ Fretwell Decl. at ¶ 2; NJ Leivick Exs. 62-64. Moreover, the unit in New Jersey made the decision to purchase the notes. See NJ Tau Decl. at ¶ 2; NJ Fretwell Decl. at ¶ 2.

Both parties can therefore claim two § 148 factors in their favor. MetLife received representations and acted in reliance upon those representations in New Jersey. Credit Suisse made the representations from New York, which is also where Credit Suisse and MetLife have their principal places of business. The comments to § 148 offer inconclusive guidance. When the loss is strictly pecuniary, the place of loss has less importance and the place where the defendant made the representations has greater importance than when the injury is to persons or tangible things. See Restatement § 148, cmt. c. This supports Credit Suisse’s argument for applying New York law. But in support of MetLife’s position, the comments suggest that the place of reliance has somewhat more importance than the place where the defendant made the representation. Id., cmt. f. New Jersey case law also could support either side. Compare Fink v. Ricoh Corp., 365 N.J.Super. 520, 839 A.2d 942, 988 (N.J.Super. Law Div.2003) (putting greatest weight in the place where plaintiffs received and acted in reliance upon representations) with In re Mercedes-Benz Tele Aid Contract Litig., 257 F.R.D. 46, 68 (D.N.J.2009) (holding that the place where the defendant made the representations outweighed other § 148 factors).

Looking to § 6 and § 145 of the Restatement, the court finds that New York law should apply to MetLife’s claims. New York has the greatest interest in regulating the securities transactions that occurred here between two of its own companies. See Restatement § 6(2)(c) and cmt. f (“In general, it is fitting that the state whose interests are most deeply affected should have its local law applied.”); Restatement § 145 cmt. b (court may consider competing state interests in regulating the conduct). It is true that New Jersey was the location of the MetLife employees most involved with the purchases, but at the end of the day these were securities transactions between two New York businesses. Credit Suisse and MetLife undoubtedly are accustomed to operating under New York law and under the Martin Act in particular, as both parties engage frequently in securities transactions. See Restatement § 6(2)(f) and (g) (court may consider the interests of predictability and ease in the application of the law to be applied); Restatement § 145 cmt. b (same). Thus, there is nothing unfair about holding MetLife’s common law claims to the standards of New York, even if those standards are more stringent than those of New Jersey law.

Viewing this matter as an alleged fraud between a New York seller and New York buyer (who happened to negotiate through its agents in New Jersey), the court concludes that the relevant considerations of the Restatement weigh in favor of applying New York law.

D. The Arizona Noteholders

There are approximately 118 remaining Arizona Noteholder plaintiffs. When counting the plaintiffs’ places of incorporation or organization, principal places of business, and places where certain plaintiffs are governmental entities, the plaintiffs come from 26 states, the District of Columbia, 9 foreign countries, 2 British Overseas Territories, and 1 British Crown Dependency.

Of these plaintiffs, 13 have principal places of business in New York and one more is incorporated in New York. This means that New York has more plaintiffs organized under its laws or with a principal place of business in its borders than does any other state or foreign jurisdiction. Illinois is home 10 plaintiffs, and the Cayman Islands are home to 8 plaintiffs.

The Arizona Noteholders’ argument against applying New York law depends heavily on a comment to Restatement § 145: “When certain contacts involving a tort are located in two or more states with identical local law rules on the issue in question, the case will be treated for choice-of-law purposes as if these contacts were grouped in a single state.” Restatement § 145, cmt. i. They contend that the contacts of the non-New York plaintiffs should be aggregated because the laws of all of the implicated states are identical with respect to fraud and negligent misrepresentation. They argue that the contacts of the non-New York plaintiffs, once aggregated, easily outnumber and outweigh the contacts of the New York plaintiffs.

Comment i to Restatement § 145 has limited value here. The illustration to the comment shows that it relates to aggregating the multi-state contacts of a single party, not aggregating the various contacts of numerous plaintiffs. See Restatement § 145, Illustration 4. Even more importantly, New York’s contacts go far beyond the 14 plaintiffs who are organized or have their principal places of business there, and this makes the Arizona Noteholders’ attempt to cast those 14 plaintiffs as a small minority inappropriate. Many plaintiffs purchased notes through investment advisors, including some non-New York plaintiffs who purchased notes through New York agents. Twenty-five entities purchased the notes owned by the Arizona Noteholders. See Az. App’x at ii. Some of these entities, like PIMCO and Alliance Capital Management (ACM), are investment advisors who acted on behalf of numerous plaintiffs. Others, like United of Omaha Life Insurance Company, are singular plaintiffs who purchased notes on their own behalf. Of these 25 purchasing entities, 4 are located in New York: ACM, Ambac, Dreyfus, and Mutual of New York (MONY). New York is home to twice as many purchasing entities as the next closest jurisdictions — Illinois and the Cayman Islands, both of which have 2 purchasing entities. And New York purchasing entities invested more in NPF notes, $467 million, than the purchasing entities of any other jurisdiction. The next highest was California, home to PIMCO, which invested $440 million in notes.

There are 7 purchasing entities located in foreign jurisdictions, including France, Italy, Luxembourg, the United Kingdom, Bermuda, and the Cayman Islands. For these foreign plaintiffs, New York law is the most natural choice. Six of the foreign purchasing entities directed their contacts to New York. See Az. App’x at 18-20 (RenaissanceRe in Bermuda and the European Bank for Reconstruction and Development in London dealt with representatives of Credit Suisse’s New York office); id. at 24 (Highland plaintiffs of the Cayman Islands traveled to New York City to meet with representatives of National Century and Credit Suisse); Az. Ex. 329, Dieudonne Dep. at 95-101 (Ofivalmo of France dealt with representatives of Credit Suisse’s New York office); Az. Ex. 386, DiMario Dep. at 45-46 (SanPaolo IMI of Italy visited Credit Suisse’s offices in New York); Az. Ex. 392, Kizner Dep. at 271 (Drake of Cayman Islands dealt with representatives of Credit Suisse’s New York office).

Thus, the contacts with New York are many and strong. New York is home to the seller Credit Suisse, which made representations and sold the notes from New York. More plaintiffs are organized under the laws of or have their principal places of business in New York than in any other state. New York has the most purchasing entities, and New York purchasing entities bought more NPF notes, in terms of dollar value, than did the purchasing entities of any other state. New York was also the primary point of contact within the United States for the foreign plaintiffs. Finally, for the American-based plaintiffs with places of organization or principal places of business in states other than New York, it is clear from the materials submitted— particularly in the plaintiff-specific appendix (attached to doc. 1581) regarding how plaintiffs received and relied on Credit Suisse’s alleged misrepresentations — that those plaintiffs knew they were dealing with a New York seller. The court accordingly will apply New York law to the Arizona Noteholders’ tort claims.

IV. New York’s Martin Act

Credit Suisse has argued that the Note-holders’ claims for negligent misrepresentation and aiding and abetting breach of fiduciary duty are precluded by New York’s Martin Act. Many courts have held that the Martin Act, N.Y. Gen. Bus. Law § 352 et seq., preempts common law claims relating to securities transactions if the claim does not require proof of intent. See e.g., In re Wachovia Equity Sec. Litig., 753 F.Supp.2d 326, 380-81 (S.D.N.Y.2011) (citing cases). These courts reasoned that the Martin Act gives the New York Attorney General exclusive authority to prosecute such claims and that no private right of action is allowed. See In re Beacon Assocs. Litig., 745 F.Supp.2d 386, 431-32 (S.D.N.Y.2010).

New York’s highest court, however, has now held that the Martin Act does not preempt common law causes of action arising out of a securities transaction. In Assured Guar. (UK) Ltd. v. J.P. Morgan Inv. Mgmt. Inc., 18 N.Y.3d 341, 939 N.Y.S.2d 274, 962 N.E.2d 765 (2011), the plaintiff asserted claims for breach of fiduciary duty and gross negligence relating to securities transactions. The court found that the Martin Act’s language contains no preemptive language and that the statute’s purpose would be best served by allowing nonfraud common law claims to proceed. It concluded that “an injured investor may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Mere overlap between the common law and the Martin Act is not enough to extinguish common-law remedies.” 939 N.Y.S.2d 274, 962 N.E.2d at 770-71.

Accordingly, Credit Suisse’s argument that the Martin Act preempts the Note-holders’ claims for negligent misrepresentation aiding and abetting breach of fiduciary duty must be rejected.

V. Whether Certain Tort Claims are Precluded by Breach of Contract Claims

Credit Suisse argues that certain tort claims asserted by Lloyds and the Arizona Noteholders are precluded because they duplicate their respective breach of contract claims. Credit Suisse raised this same argument in its motion to dismiss and the court agreed that “ ‘the existence of a contract action generally excludes a cause of action based upon the same conduct sounding in tort,’ ” but denied the motion because the rules of civil procedure allow a party to assert inconsistent claims at the pleading stage. In re Nat’l Century Fin. Enterprises, Inc., Inv. Litig., 541 F.Supp.2d 986, 1016 (S.D.Ohio 2007) (quoting Hanlin v. Ohio Builders and Remodelers, Inc., 196 F.Supp.2d 572, 579 (S.D.Ohio 2001)).

Credit Suisse argues that it is now appropriate at the summary judgment stage to preclude any tort claims that arise from the same operative facts as the breach of contract claims. Under New York law, a party’s breach of contract cannot form the basis for a tort claim “unless a legal duty independent of the contract itself has been violated.” Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190, 193-94 (1987) (citations omitted). This legal duty must not arise from circumstances constituting the elements of the contract claim, but from circumstances “extraneous” or “collateral” to the contract claim. Id.; Gruet v. Care Free Housing Div. of Kenn-Schl Enterprises, Inc., 305 A.D.2d 1060, 759 N.Y.S.2d 276, 278 (2003); Calcutti v. SBU., Inc., 223 F.Supp.2d 517, 521 (S.D.N.Y.2002); Ladenburg Thalmann & Co., Inc. v. Imaging Diagnostic Sys., Inc., 176 F.Supp.2d 199, 206 (S.D.N.Y. 2001).

When a fraud-based claim is simultaneously asserted with a breach of contract claim, a court should look to the existence of the following in determining whether the fraud-based claim is precluded: (1) a legal duty separate from the duty to perform under the contract; (2) a fraudulent misrepresentation collateral or extraneous to the contract; and (3) damages caused by the misrepresentation and unrecoverable as contract damages. MacQuesten Gen. Contracting, Inc. v. HCE, Inc., 191 F.Supp.2d 407, 410 (S.D.N.Y.2002); Ladenburg Thalmann, 176 F.Supp.2d at 206 (holding that a fraud claim was precluded because it was based on the “same operative facts” and “same damages” as the breach of contract claim).

A. Lloyds

The breach of contract claim brought by Lloyds relates to the Participation Agreement it entered into with Credit Suisse on March 1, 2001. Lloyds alleges that three provisions of the Agreement were breached. First, Lloyds contends that Credit Suisse breached a provision in which it promised not to consent to the modification of certain NPF XII transaction documents without Lloyds’s approval. See CS Ex. 219 at § 7. According to Lloyds, Credit Suisse breached this provision because it knew of material violations of the transaction documents, particularly the Master Indenture, yet purchased its interest in the VFN without informing Lloyds of the violations. This allegedly amounted to a waiver or modification by Credit Suisse of the requirements set forth in the Master Indenture.

Second, Lloyds alleges that the Agreement imposed a duty.of care on Credit Suisse to not act with “gross negligence or willful misconduct.” CS Ex. 219 at § 10(a). Lloyds argues that Credit Suisse breached its duty by failing to advise Lloyds of National Century’s violations of the Master Indenture. Lloyds further alleges that Credit Suisse acted wilfully and with gross negligence when it made the decision to purchase its interest in the VFN and trigger Lloyds’s’ obligations under the Agreement, despite knowing of the violations of the Master Indenture.

Third, Lloyds alleges that Credit Suisse assumed a “responsibility for information prepared by it and furnished to [Lloyds]” in connection with the Agreement. CS Ex. 219 at § 12(a). Credit Suisse allegedly breached this duty by furnishing Lloyds with a January 2011 sales document (the “term sheet”), which contained misrepresentations about National Century’s operations. See CS Ex. 253. The term sheet allegedly misrepresented that NPF XII would, among other things, purchase eligible receivables, maintain reserve accounts at certain levels, over-eollateralize the receivables, and be bankruptcy remote.

Lloyds also brings tort claims for fraud and negligent misrepresentation relating to its investment in the VFN. Its tort claims are based on alleged misrepresentations and material omissions about National Century’s operations in the materials that Credit Suisse gave to Lloyds, including private placement memoranda, the term sheet, and the VFN (which incorporated the Master Indenture by reference). Lloyds alleges that Credit Suisse is liable for the misrepresentations and omissions in those materials because, having undertaken to speak in the transaction, Credit Suisse had a duty to speak truthfully and completely. See Rubin v. Schottenstein, Zox & Dunn, 143 F.3d 263, 268 (6th Cir. 1998) (en banc).

The court concludes that the tort claims of Lloyds are duplicative of its breach of contract claim. Lloyds strains to argue that Credit Suisse owed a duty independent from the duty to perform the contract because Credit Suisse chose to supply offering materials relating to the proposed participation of Lloyds in the VFN. However, the parties’ dealings culminated in a written contract, the Participation Agreement, which Lloyds itself contends contained provisions imposing a duty of care on Credit Suisse. Lloyds is unable to explain how an independent duty could exist when sections 10 and 12 of the Agreement defined the scope of Credit Suisse’s alleged duty of care with respect to the information it supplied to Lloyds. See International Cabletel Inc. v. Le Groupe Videotron Ltee, 978 F.Supp. 483, 486 (S.D.N.Y.1997) (“It is well settled under New York law that a contract action cannot be converted to one for fraud merely by alleging that the contracting party did not intend to meet its contractual obligations.”) (quotation marks and citations omitted).

Moreover, the same alleged misrepresentations form the basis of both types of claims. In its contract claim, Lloyds alleges that Credit Suisse breached the Agreement by failing to advise Lloyds of National Century’s violations of the Master Indenture and by misrepresenting in the term sheet how National Century ran its operations. Lloyds’s tort claims are based on the exact same misrepresentations and omissions. Lloyds argues that its tort claims are “broader” in the sense that the contract claim relates just to the term sheet’s misrepresentations, while the tort claims additionally relate to alleged misrepresentations in other documents; however, the alleged misrepresentations and omissions in the other documents concerned the same subject matter as the term sheet’s misrepresentations — National Century’s violations of the Master Indenture. In other words, Lloyds has not identified a “collateral” or “extraneous” misrepresentation separate from the alleged promises made in the Participation Agreement. See Astroworks, Inc. v. Astroexhibit, Inc., 257 F.Supp.2d 609, 616-17 (S.D.N.Y.2003) (allowing fraud claims to survive a motion dismiss but cautioning the plaintiff that “[i]f discovery reveals that the agreement between [the parties] included all of the promises that [plaintiff] alleges in his fraud claim, then the fraud claim will be dismissed at summary judgment”).

Finally, Lloyds has not shown any damages caused by the misrepresentations that are not recoverable as contract damages. Its alleged tort damages are the lost $68 million investment in the VFN. This is the same amount of damages as the breach of contract claim. And the alleged breach of contract was that Credit Suisse failed to perform the Participation Agreement by disclosing the true nature of National Century’s operations, which is the same alleged cause of Lloyds’s alleged tort damages.

In sum, the court finds that the tort claims of Lloyds relating to the YFN are precluded because they are based on the same operative facts and “same damages” as the breach of contract claim.

B. The Arizona Noteholders

In response to the motion for summary judgment, the Arizona Noteholders state that they are voluntarily dismissing their breach of contract claim. Even so, Credit Suisse argues that the existence of the contract claim in the complaint is sufficient grounds for excluding the tort claims.

Credit Suisse is correct in theory that, if the parties entered into a contract which by operation of New York law precluded plaintiffs’ tort claims, then plaintiffs could not salvage their tort claims by tactically dismissing the contract claim. But that is not the case here. Unlike Lloyds, the Arizona Noteholders did not enter into any written agreements with Credit Suisse. Discovery has shown that Credit Suisse’s contractual obligations to the Arizona Noteholders at most amounted to delivering a certain quantity of NPF notes at a certain price. See, e.g., CS Reply Ex. 600 (trade confirmation). Thus, there is no contract here that would act to preclude the Arizona Noteholders’ tort claims, and the court finds that the Arizona Noteholders’ tort claims are not precluded.

VI. Section 10(b), Fraud, and Negligent Misrepresentation Claims

Lloyds and MetLife bring claims against Credit Suisse for violations of Section 10(b) of the Securities Exchange Act of 1934. Section 10(b) makes it unlawful to “use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe.... ” 15 U.S.C. § 78j(b). Rule 10b-5 prohibits “mak[ing] any untrue statement of a material fact or ... omit[ting] to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b).

In order to prevail on a § 10(b) claim, a plaintiff must prove that, in connection with the purchase or sale of securities: (1) the defendant made a misrepresentation or omission (2) of a material fact (3) with scienter (4) justifiably relied on by plaintiffs (5) and proximately causing injury. Frank v. Dana Corp., 646 F.3d 954, 958 (6th Cir.2011); Helwig v. Vencor, Inc., 251 F.3d 540, 554 (6th Cir.2001) (en banc).

Lloyds and MetLife also brings claims for fraud, as do the Arizona Note-holders. The elements of this claim under New York law are: “a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury.” Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V., 17 N.Y.3d 269, 929 N.Y.S.2d 3, 952 N.E.2d 995, 1000 (2011); see also Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 883 N.Y.S.2d 147, 910 N.E.2d 976, 979 (2009). Fraud claims must be proved by clear and convincing evidence. See e.g., In re Vivendi Universal, S.A. Sec. Litig., 765 F.Supp.2d 512, 534 (S.D.N.Y.2011). “Clear and convincing evidence is evidence that makes the fact to be proved highly probable.” Century Pacific, Inc. v. Hilton Hotels Corp., 528 F.Supp.2d 206, 219 (S.D.N.Y.2007) (internal quotation marks omitted).

Finally, all of the Noteholders bring claims for negligent misrepresentation, the elements of which are: “(1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment.” Hydro Inv., Inc. v. Trafalgar Power, Inc., 227 F.3d 8, 20 (2d Cir.2000); MatlinPatterson ATA Holdings LLC v. Federal Express Corp., 87 A.D.3d 836, 929 N.Y.S.2d 571, 575-76 (2011).

The court notes from the outset that the element of materiality is not seriously in dispute. The misrepresentations that the Noteholders seek to attribute to Credit Suisse go to the core of how the NPF programs supposedly functioned. These included, among other things, that NPF VI and NPF XII would use note proceeds to purchase only eligible receivables, would limit the use of funds in reserve accounts to certain purposes, and would maintain reserve accounts at certain percentage levels. The Noteholders also seek to hold Credit Suisse responsible for omitting any statements that would have disclosed National Century’s extensive practice of engaging in related party transactions. These misrepresentations and omissions naturally were material to an investor interested in purchasing NPF notes, particularly because the notes were secured by the receivables. These misrepresentations conveyed to investors “why the bonds [were] worth buying.” CS Ex. 216, Hutchings Dep. at 179. Certainly, reasonable investors would have considered it important to know that National Century intended to misuse their money.

A. Misrepresentation or Omission of Material Fact

The Noteholders received various forms of communication about the NPF notes. These included private placement memoranda and supplements (collectively the “PPMs”), “Sales Points” brochures, road show presentations, and various emails and telephone calls. Credit Suisse argues that it did not make any misrepresentations to the Noteholders. This argument has two components. The first relates to those statements for which Credit Suisse says it is not responsible because it was not the author or speaker. The second relates to those statements that Credit Suisse admits to having made but says were factually accurate and thus not actionable as misrepresentations.

1. Private Placement Memoranda

The PPMs served as the primary source of information about the NPF notes for many of the Noteholders. It is undisputed that these materials were replete with material misrepresentations about how the note programs would operate. Credit Suisse, however, argues that it did not draft the PPMs and thus cannot be held responsible for their content. Credit Suisse contends that the issuers (NPF VI or XII) and their legal counsel authored the PPMs. See CS Ex. 26, Purcell Dep. at 81-82, 84-86; CS Ex. 32 (showing that counsel for National Century helped draft PPMs for issuances prior to Credit Suisse’s involvement).

The Noteholders dispute this point and submit evidence showing that Credit Suisse did indeed have input in the PPMs. For the note transactions at issue in this case, counsel for Credit Suisse, Kaye Scholer, took the PPMs from prior transactions and used them as a template or starting place for preparing the PPMs that were distributed to the Noteholders. See Az. Ex. 18, O’Connell Dep. at 13-20. The PPMs were tailored as needed for each note issuan