Pomerantz Clears Major Hurdle in Obtaining Justice for Credit Suisse AT1 Bondholders
On November 13, 2025, Judge Colleen McMahon of the United States District Court for the Southern District of New York granted Pomerantz’s motion on behalf of Lead Plaintiff Core Capital Partners, Ltd. to certify a class of all individuals and entities that purchased or acquired additional tier-one bonds (“AT1 Bonds”) issued by failed bank Credit Suisse Group AG (“Credit Suisse”) within the U.S. between October 27, 2022 and March 20, 2023. in a securities fraud class action captioned Core Capital v. Credit Suisse, et al., No. 23-cv-9287 (CM) (S.D.N.Y.). Judge McMahon’s thoughtful and detailed opinion largely adopted Pomerantz’s arguments and could provide a roadmap to obtaining class certification for plaintiffs bringing class actions against foreign companies that issue securities overseas that do not trade on a domestic exchange.
Background
In the wake of the 2008 global financial crisis, new regulations required banks to hold more capital to provide a layer of protection when they run into trouble and prevent taxpayers from bailing them out. AT1 bonds, a type of contingent convertible bonds, were introduced at that time. In a World Economic Forum article in March 2023, Emma Charlton, reporting on Credit Suisse Group’s AT1 bonds, wrote:
When a bank goes bust, who pays? The decision to write down [Credit Suisse’s] AT1 bonds but pay some money to shareholders angered some investors, who said debt should always rank higher than equity when it comes to taking losses.
Core Capital alleges that investors were duped into purchasing Credit Suisse’s AT1 bonds by false or misleading assurances from the the bank and certain of its executives, the defendants in this case, including that customer and asset outflows had slowed or stopped and that the bank was in stable financial condition, when in reality the outflows had continued, and the bank had uncovered a material weakness in its internal financial reporting controls. These statements allegedly concealed the risk that Credit Suisse would cease operations, which materialized when the Swiss Financial Market Supervisory Authority (“FINMA”) abruptly forced Credit Suisse to merge with fellow Swiss global financial services company UBS Group AG, and, in the process, ordered Credit Suisse to write down its AT1 bonds from approximately $372 million to zero.
On July 7, 2025, Judge McMahon denied the defendants’ motion to dismiss Core Capital’s claims and held that the action could proceed in parallel with Diabat v. Credit Suisse AG et al., a second securities fraud class action arising out of the same facts that was brought on behalf of Credit Suisse equity and corporate bond holders. Diabat had abandoned claims by AT1 bondholders. Rather than leave those disenfranchised investors to fend for themselves, Pomerantz recognized the viability of their claims and fought to have the opportunity to vindicate them. In that same July 2025 ruling, Judge McMahon granted the Diabat lead plaintiff’s motion for class certification largely on the ground that the market for the bank’s equity and corporate debt securities was efficient, and thus the class could rely on the “fraud on the market” presumption of reliance.
In the wake of the grant of class certification in Diabat, Pomerantz moved to certify a class of AT1 bondholders who purchased AT1 bonds in domestic transactions largely on the grounds that the market for the bonds was efficient and thus AT1 bondholders, like the Diabat class members, could rely on the fraud on the market presumption of reliance.
Unlike their opposition to class certification in Diabat, which contested the Diabat plaintiff’s evidence of market efficiency, the defendants’ opposition to Core Capital’s class certification motion focused on whether the need to show that a transaction occurred domestically and the availability of the affirmative defense of estoppel as to certain class members would mean that individualized issues “predominated” over class-wide issues. In the U.S., a party to multiple lawsuits arising out of the same facts is precluded, or “estopped,” from asserting inconsistent theories in the actions. For example, in their opposition to class certification, the defendants hypothesized that a class member who had brought claims in Switzerland could argue that their losses were caused by the Swiss government’s unlawful conduct, while at the same time could assert in the Core Capital case that those losses were caused by an undisclosed material weakness in Credit Suisse’s internal controls over financial reporting. According to the defendants, this hypothetical class member should be “estopped” from asserting the latter position in Core Capital, because the positions were inconsistent, and identifying and resolving potentially inconsistent positions would predominate over class-wide issues. The defendants further argued that Core Capital had failed to show that there were a sufficient number of purchasers of AT1 bonds in domestic transactions for the case to proceed as a class action. Finally, the defendants argued that the existence of thousands of individual actions in Switzerland concerning the write-down of AT1 bonds demonstrated that class members were capable of pursuing their own claims and thus that a class action was not a “superior” means of prosecuting AT1 bondholders’ claims. Judge McMahon considered and rejected each of these arguments and granted Core Capital’s motion.
Numerosity
Using data from Bloomberg, Core Capital identified at least 229 financial institutions holding AT1 bonds during the class period and thus asserted that the proposed class of AT1 bondholders was sufficiently numerous to warrant treatment as a class action. The defendants countered, however, that the data only identified holders of AT1 bonds, not purchasers of AT1 bonds during the class period. Although Judge McMahon noted that the defendants’ argument was “not without merit,” she rejected it on the grounds that “over 270 U.S. individuals or entities” had brought actions in Switzerland arising out of FINMA’s write-down of AT1 bonds and the evidence Core Capital had submitted of approximately $15.65 billion in AT1 bonds outstanding and actively traded during the Class Period.
Predominance
The defendants asserted that individual issues predominated over class-wide issues, and thus class certification was not appropriate because (1) Core Capital could not demonstrate that transaction domesticity was capable of class-wide proof, and (2) positions taken by certain AT1 bondholders in parallel litigation could create additional individualized issues, particularly regarding whether class members may be judicially estopped from advancing specific arguments in future proceedings.
Judge McMahon first held that “even if determining domesticity requires individualized inquiry, these inquiries do not predominate over class-wide issues” because Core Capital had identified multiple reliable methods of proving domesticity, including that U.S.-based purchasers placing orders in the U.S. and purchasing securities from U.S.-based brokers were clearly making domestic transactions, and for other purchasers domesticity could be established using ordinary trading documents, such as purchase orders, brokerage statements, or trade confirmations, supplemented by expert declarations. Judge McMahon then held that the defendants’ assertions regarding potential estoppel defenses “rest[s] on a chain of speculation concerning overlapping parties, hypothetical defenses, and uncertain rulings in foreign jurisdictions, rather than any concrete conflict or individualized issue that is presently before the Court,” and thus was insufficient to show that individual issues would predominate.
Superiority
The defendants then asserted that Core Capital could not show that a class action was the superior method for vindicating AT1 bond holders’ claims because thousands of parallel lawsuits had been brought against the defendants in the U.S. and Switzerland. In rejecting this argument, Judge McMahon first held that putative class members could always opt out of Core Capital’s action, and thus the ability to pursue an independent action could not defeat superiority on its own. Judge McMahon then observed that the parallel actions cited by the defendants were distinct from Core Capital’s action because they were brought against the Swiss government and challenged the legality of FINMA’s write-down under Swiss law, did not assert U.S. securities fraud claims against Credit Suisse or its officers or directors, and thus presented no risk of conflicting judgments. Judge McMahon concluded by observing that only two cases had been brought in the U.S. that overlapped with Core Capital’s case, which were too few to demonstrate that a class action was not the superior means of litigating AT1 bondholder claims.
Conclusion
Core Capital’s motion for class certification presented the rare case of a securities class action certification motion that did not focus on market efficiency or price impact. Instead, the defendants seized on circumstances attendant to Core Capital’s case that arose out of the fact that Credit Suisse was a foreign issuer of securities and that the securities in question did not trade on a U.S. exchange. The defendants’ arguments concerning numerosity, predominance and superiority could be raised in every securities class action involving foreign issuers. By adopting Pomerantz’s arguments and resolving these issues in Core Capital’s favor, Judge McMahon’s ruling may substantially limit the effectiveness of these arguments in similar class actions going forward.