Broker-Dealer Litigation - Greenberg Traurig LLP

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SEC v. Tecumseh Holdings Corp., 765 F. Supp. 2d 340 (S.D.N.Y. 2011).
The SEC filed suit alleging violations of Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934 based on misrepresentations contained in offering materials that falsely
stated defendant’s anticipated profits, dividends and acquisition of a separate corporation. The
SEC moved for summary judgment as to one of the corporate executives of defendant
corporation. Defendant executive argued, inter alia, that even if the offering materials contained
false statements, he was not responsible for compliance and oversight of sales personnel. The
court, in granting the SEC’s summary judgment motion, held that the requisite standard of mind
under the Exchange Act is an intent to deceive, manipulate or defraud. However, the court found
that the Second Circuit has held that the scienter element can be satisfied by a strong showing of
reckless disregard for the truth. The court held that defendant executive, as the principal of
defendant corporation, knew or should have known of the materially false and misleading
information provided to the investors and granted summary judgment in favor of the SEC.
In re Vivendi Universal, S.A. Sec. Litig., 765 F. Supp. 2d 512 (S.D.N.Y. 2011).
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Plaintiffs brought derivative claims against foreign global media corporation and its
former executives for securities fraud in violation of Section 10(b) and Rule 10b-5 of the
Securities Exchange Act of 1934 relating to allegations of artificially inflated prices as a result of
various misrepresentations made by defendants. After a jury trial on the merits, the jury
concluded that certain defendants violated the Exchange Act. Defendants filed a motion for
judgment as a matter of law, and while the motion was pending, the U.S. Supreme Court issued
its opinion in Morrison v. National Australia Bank, 130 S.Ct. 2869, (2010), holding that Section
10(b) does not apply extraterritorially. Accordingly, the court asked defendants to submit
supplemental briefs on the matter. The court found that the transactions in securities at issue in
the case were either purchased by foreign shareholders with a foreign bank or were purchased on
a foreign exchange by Americans. Such shares were not listed on a domestic exchange or
purchased in the United States, a requisite of bringing securities fraud claims under Morrison.
Accordingly, claims by such purchasers were dismissed.
In re MRU Holdings Securities Litigation, 769 F. Supp. 2d 500 (S.D.N.Y. 2011)
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Investors in corporation that was purchaser, holder and seller of federal and private
student loans brought class action against defendant alleging violations of Rule 10b-5 and
Section 10(b) of the Securities Exchange Act of 1934. In particular, plaintiffs alleged that
defendants issued false and incomplete financial statements and press releases relating to
defendants’ issuance of auction rate securities (“ARS”), which resulted in the inflation of MRU’s
stock price. Merrill Lynch (“Merrill”) managed the auction process for defendants. In addition
to allegations against defendants, plaintiffs claimed that Merrill was equally liable for violations
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