Pension Fund’s Securities Fraud Action Against AMEX Is Dismissed

A putative securities fraud class action brought by a pension fund against the American Express Company and two of its officers alleging that the defendants misled investors about AMEX's underwriting guidelines and its exposure to delinquent cardholder payments has been dismissed by a federal district court in Manhattan. 

In examining the plaintiff's “hydra-like complaint,” which, it pointed out, “sprawls over 243 paragraphs, some silted with more than 500 words,” the court found, among other things, that the plaintiff failed to allege specific facts establishing that the defendants “knew their public statements were inaccurate or failed to check information they had a duty to monitor.” In the court’s view, the complaint's allegations revealed “a company attempting to increase its share of the credit card market during significant financial turmoil.” That AMEX's losses were higher than those of its competitors did “not alone support the inference” that the defendants had acted with intent or reckless disregard. Rather, the court declared, the more compelling inference was that the defendants' aggressive growth strategy “was sideswiped by the collapse of the credit markets.” It concluded by stating: “That a business plan turned out to be ill-timed and, in hindsight, ill-advised does not transmogrify it into a securities fraud.”
 
The case is Local No. 38 Int’l Brotherhood of Electrical Workers Pension Fund v. American Express Co., No. 09 Civ. 3016 (S.D.N.Y. July 19, 2010). Attorneys involved in the case include Beth A. Kaswan and Thomas L. Laughlin IV, Scott & Scott; Curtis V. Trinko; Alfred G. Yates, Jr., and Gerald L. Rutledge, Law Offices of Alfred G. Yates, Jr.; Robert E. Zimet, Skadden, Arps, Slate, Meagher & Flom.