Morgan Stanley obtained the dismissal of a complaint filed by Dexia SA in court. The suit alleged the bank of misrepresenting information about loans which were backed up by over USD600 million in mortgage backed securites.

Dexia had filed the case in the New York Supreme Court in Manhattan last January 2012. The suit alleged 29 residential mortgage backed securities purchased by FSA Asset Management LLC from Morgan Stanley worth USD626 million for 2006 and 2007 assigned to Dexia and two other entities two year later were misrepresented. The same assets had been downgraded to junk status by the time the suit was filed in court.

Morgan Stanley, for its part, sought dismissal of the case before presiding Justice Eileen Bransten. It said Dexia did not have the right to sue because the said transaction covered only ownership and contractual rights and not claims. It further argued that FSA is estopped from bringing fraud claims as it had received face value for the said securities and did not sustain any damages for the asset's downgraded status.

In her ruling dated August 16, Bransten said FSA Asset Management did not assign fraud claims upon Dexia and no damages were sustained. She added, "FSAM suffered no losses on the RMBS it purchased; it received exactly the purchase price upon the sale to the Dexia plaintiffs. There is also no allegation that pass-through payments due to FSAM as holders of the participation certificates were missed. To the extent FSAM did receive pass-through payments, the RMBS was profitable to them and there can be no claim for damages."