By Susan Beck, The Litigation Daily

German bank IKB Deutsche Industriebank AG was a little too late to the party.

In a ruling Tuesday, Manhattan U.S. District Judge Jed Rakoff held that a fraud lawsuit brought by IKB against Standard & Poor’s Rating Services was time-barred. IKB had waited until May 12 of this year to sue S&P over the top ratings it gave to notes issued by a structured investment vehicle called Rhinebridge back in 2007. Three months later, those notes were downgraded to junk status.

Rakoff, as he often does, issued only a brief order Tuesday, and will release a full opinion later.

IKB alleged in its complaint that it lost an unspecified hundreds of millions of dollars over its Rhinebridge investment. But even if it didn’t have statute of limitations problems, the suit faced hurdles because of IKB’s role helping to manage and promote Rhinebridge. The German bank was a sponsor of the deal, and it also managed Rhinebridge’s investments.

S&P, represented by Floyd Abrams of Cahill Gordon & Reindel, argued that IKB’s suit was barred by a three-year statute of limitations imposed by German law. While IKB’s suit would still be allowed under New York’s six-year statute of limitations (because of a tolling agreement), Rakoff was required by New York law to apply the shorter of the two cutoff dates. IKB was put on notice of the alleged fraud, and the clock started running, when other institutional investors sued S&P in October 2009, Cahill Gordon maintained in its motion to dismiss. The firm also asserted that IKB’s claims were barred because it was the “consummate insider” to the deal.

IKB, represented by Wollmuth Maher & Deutsch, countered in a court filing that the other investors’ complaint in 2009 contained merely unsubstantiated allegations, and under German law the clock didn’t start running until it had actual knowledge of S&P’s wrongdoing.

“We are pleased that the court granted our motion and dismissed the claims against us,” said an S&P spokesperson. IKB counsel David Wollmuth declined to comment.

For its role in Rhinebridge, IKB settled two years ago with two institutional investors for a confidential amount. The settlement came after Manhattan U.S. District Judge Shira Scheindlin refused to dismiss the investors’ lawsuit against IKB and the ratings agencies. In April 2013, S&P and Moody’s Investors Service and Morgan Stanley & Co. settled with investors for a reported $225 million.

IMAGE: Floyd Abrams. Photo: Diego M. Radzinschi/NLJ.

For more on this story go to: http://www.litigationdaily.com/id=1202668842906/Cahill-Fends-Off-German-Banks-Suit-Against-SP#ixzz3CMLKJ8Di