NEW YORK: A federal judge on Tuesday allowed a lawsuit to move forward that seeks to hold former MF Global Holdings Ltd Chief Executive Officer Jon Corzine and other executives responsible for the brokerage's collapse.
U.S. District Judge Victor Marrero said that it was reasonable to infer someone "did something wrong to set in motion such an extraordinary chain of events causing such extensive harm to so many people and interests."
But the judge also called the litigation "wasteful and rancorous" and chastised the parties for failing to come together to resolve the matter "in a just and efficient way."
The judge also chided lawyers for the customers for filing claims that "fly in the face of clear precedent." He dismissed parts of the lawsuit, including claims pending against accounting firm PricewaterhouseCoopers.
In a statement, a Corzine spokesman said the former CEO is pleased the court dismissed some of the claims.
"We believe that discovery in the case will reveal that the remaining claims also are without merit, and that ultimately we will prevail on all counts," the spokesman said in the statement.
The ruling was the latest by the judge that refused to dismiss a lawsuit over the 2011 collapse of MF Global, which left about $1.6 billion of customer funds missing and was one of the 10 largest bankruptcies in U.S. history.
Last month, Marrero refused to dismiss a lawsuit by the U.S. Commodity Futures Trading Commission accusing Corzine and former Assistant Treasurer Edith O'Brien of illegally transferring money out of customer accounts to stem losses from big bets on European sovereign debt.
The judge similarly in November allowed investors in MF Global to move forward with a lawsuit against Corzine, other executives and several banks related to their alleged role in the futures brokerage's collapse.
The latest ruling came in a lawsuit filed in 2011 by former customers of broker-dealer MF Global Inc accusing officials at the brokerage of violating the Commodity Exchange Act and New York state law.
The lawsuit also accused PwC of failing to adequately audit MF Global's internal controls over customer funds.
In his ruling, Marerro dismissed claims that Corzine and O'Brien engaged in direct violation of the Commodity Exchange Act but allowed the plaintiffs to pursue claims against the executives for aiding and abetting violations of the law.
He also dismissed some state law claims asserted in the lawsuit against the defendants. But Marrero declined to dismiss other claims against the executives including claims of breach of fiduciary duty, negligence, and tortuous interference with contract and business advantage.
The judge also dismissed the claims against PwC, saying the plaintiffs had failed to allege any direct "linking conduct" between the customers and the accounting firm.
Despite the narrowing of the lawsuit, Andrew Entwistle, a lawyer at the law firm Entwistle & Cappucci who is representing the customers, welcomed the decision.
"We are pleased that the customer-specific claims against the core bad actors here, including Mr. Corzine, have been upheld and we are reviewing the other aspects of the court's decision as Judge Marerro invited us to do," Entwistle said.
An attorney for O'Brien did not immediately respond to a request for comment. A spokesman for PwC had no immediate comment.
The ruling comes after prior settlements in the litigation. Last year, JPMorgan Chase & Co agreed to a $546 million settlement to resolve claims by MF Global's trustee and customers in the class action.
Exchange operator CME Group Inc has meanwhile agreed to pay $14.5 million to resolve customer claims in the class action. A hearing for final approval of the settlement is scheduled for March 14.
The case is Deangelis v. Corzine, U.S. District Court, Southern District of New York, No. 11-07866- Reuters
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