Broker-Dealer Litigation - Greenberg Traurig LLP

pursuant to Rule 10b5-1, they would not be held liable for insider trading. The court held that
the defendants traded stock solely based on their 10b5-1 plans, which were in effect prior to any
known errors on the company’s financial statements. Accordingly, the court granted defendants’
motion to dismiss.
Applestein v. Medivation, Inc., 2011 WL 3651149 (N.D. Cal. Aug. 18, 2011).
C.1.f
Plaintiffs filed a securities class action against defendants based on violations of Section
10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 by making misleading
representations related to the results of a clinical trial for a drug. In support of their claim,
plaintiffs argued that insider trading allegedly perpetrated by corporate officers was indicative of
scienter for the claims under the Securities Exchange Act of 1934. Defendants, in their motion
to dismiss, argued the affirmative defense that any trading done on their behalf was pursuant to
Rule 10b5-1 plans. Such plans are a predetermined plan or contract to trade in stock created prior
to becoming aware of material non-public information. However, the court concluded that
defendants could not claim the defense under Rule 10b5-1 because plaintiffs alleged that the
plans were adopted by the individual defendants after they knew of the inside information.
Nonetheless, the court determined that plaintiffs failed to adequately plead facts giving rise to an
inference of scienter, and dismissed the complaint without prejudice.
Curry v. Hansen Medical, Inc., 2011 WL 3741238 (N.D. Cal. Aug. 25, 2011).
C.1.f.
Plaintiffs, who purchased or acquired common stock in defendant corporation, brought a
class action against defendants alleging violations of Rule 10b-5 and Section 10(b) of the
Securities Exchange Act of 1934. Plaintiffs alleged that defendants induced plaintiffs to
purchase common stock at artificially inflated prices by making intentional misstatements
regarding defendant corporation’s revenue recognition and sales performance. In particular,
plaintiffs asserted that defendants specifically indicated that the company had seen four
successive quarters of increasing sales. Defendants moved to dismiss the complaint on the basis
that the complaint failed to allege securities fraud with sufficient particularity. The court, in
evaluating whether the statements were forward-looking statements protected by the safe harbor
provision of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), found that
statements of present or historical fact are not protected. Accordingly, references to concrete
rates of sales and user activity were not protected by the safe harbor provision as statements of
present or historical fact. However, the court held that the plaintiffs failed to adequately allege
that the defendants made the statements with knowledge of the alleged falsity. Accordingly, and
for other reasons, the Court granted defendants’ motion to dismiss and found that plaintiffs failed
to adequately plead the misstatements were made with the requisite knowledge.
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