A New York state judge ordered Morgan Stanley (MS) to face a part of a lawsuit in which MetLife (MET) accused the company of fraudulently selling $758 million of residential mortgage-backed securities that it knew were defective.

"While dismissing some claims as having been made too late, New York State Supreme Court Justice Eileen Bransten in Manhattan said MetLife may pursue claims that Morgan Stanley knew of underwriting defects and faulty appraisals, and pushed credit rating agencies to inflate ratings for the securities."