Connolly v. Deutsche Bank AG

Background

Matthew Connolly, a former Deutsche Bank employee, was arrested and prosecuted for illegal manipulation of the London Interbank Offered Rate, commonly called LIBOR. A jury convicted him of conspiracy to commit wire and bank fraud and substantive wire fraud. The Second Circuit reversed those convictions in January 2022 on the ground that the evidence was insufficient.

Connolly then sued Deutsche Bank for malicious prosecution. He alleged that the government effectively outsourced its investigation to Deutsche Bank and that the bank, seeking to avoid prosecution and protect senior executives, made intentionally false or misleading statements or omissions that caused him to be treated as a scapegoat. The opinion states that Connolly’s criminal trial judge agreed with the allegation that the government had outsourced its investigation to Deutsche Bank.

Deutsche Bank’s Motion

Deutsche Bank moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. It argued, among other things, that Connolly’s allegations were subject to Rule 9(b), which requires fraud to be pleaded with particularity.

Court’s Analysis

The court rejected Deutsche Bank’s argument that Rule 9(b) applied. It explained that Rule 9(b) applies when the central substance of a claim is fraud, but Connolly’s malicious-prosecution claim did not meet that description. The court noted that Connolly did not allege that Deutsche Bank’s statements were offered to deceive him or that he relied on them; the alleged statements were made to third parties.

The court instead applied the ordinary pleading standard under Rule 8, as explained in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. Under that standard, the court had to assume that Connolly’s allegations were true and draw reasonable inferences in his favor. The court concluded that his allegations stated a plausible malicious-prosecution claim and that Deutsche Bank’s arguments depended on factual disputes that could not be resolved on a motion to dismiss.

The court acknowledged that Connolly faced significant obstacles to ultimately prevailing, including the government’s role in bringing the charges, the grand-jury indictment, his jury conviction, and the trial judge’s denial of his request to vacate the conviction. But those issues did not require dismissal at the pleading stage.

Disposition

Judge Jesse M. Furman denied Deutsche Bank’s motion to dismiss. The court directed Deutsche Bank to file its answer within two weeks unless the court ordered otherwise, rescheduled the initial pretrial conference for December 5, 2023, and directed the clerk to terminate the docket entry associated with the motion.