Davis Polk Wins Decisive Victory for Ingram Micro in Lawsuit Arising Out of the Refco Bankruptcy

Davis Polk won a significant victory on behalf of Ingram Micro, Inc. and its subsidiary CIM Ventures, Inc. (Ingram Micro) on Tuesday, July 31, 2012, when Judge Rakoff in the District Court for the Southern District of New York granted Ingram Micro’s motion to dismiss a suit brought by the Joint Official Liquidators of the SPhinX Funds, a group of Cayman Island-based hedge funds allegedly defrauded by Refco, Inc.

Plaintiffs alleged that Ingram Micro aided and abetted the fraud that ultimately led to the Refco bankruptcy in 2005 by entering into so-called “round trip loans” with Refco in 2000 and 2001. Plaintiffs sought $263 million in damages.

In November 2008, Ingram Micro filed a motion to dismiss. On February 9, 2012, Special Master Daniel J. Capra issued a Report and Recommendation recommending dismissal of all claims against Ingram Micro, finding that Ingram Micro could not be said to have known or consciously avoided knowing that the round-trip loan transactions were being used for fraudulent purposes and additionally finding that Ingram Micro could not have known that Refco was breaching a fiduciary duty to the SPhinX Funds, entities that did not come into existence until after the time that Ingram Micro engaged in its two lone round-trip loan transactions with Refco.

On July 31, 2012, Judge Rakoff issued an opinion agreeing with the Special Master’s ultimate recommendation, approving the Report and Recommendation with only slight modifications in reasoning, and dismissing the case against Ingram Micro with prejudice.

The Davis Polk litigation team includes partners Robert F. Wise Jr. and Paul Spagnoletti, associate Jami Johnson, and former associate Ian R. Rooney. All members of the Davis Polk team are based in the New York office.

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