Broker-Dealer Litigation - Greenberg Traurig LLP

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Fishman v. Morgan Keegan & Co., Inc., 2011 WL 3705187 (E.D. La. Aug. 24, 2011).
Plaintiff brought suit against Morgan Keegan based on, inter alia, violations of Section
10(b) of the Securities Exchange Act of 1934 relating to the purchase of Auction Rate Securities
(“ARS”) in 2005. Morgan Keegan claimed that plaintiff’s claim was time barred. Morgan
Keegan asserted that it had made disclosures in 2006 as a result of an SEC investigation, and
plaintiff should have discovered the alleged fraud as a result of the disclosures. On Morgan
Keegan’s motion to dismiss, the court held that plaintiff, as a non-institutional investor, was not
required to have known the information contained in Morgan Keegan’s disclosures because
plaintiff had bought the ARS prior to the additional disclosures required as a result of the SEC
investigation. Accordingly, the court denied Morgan Keegan’s motion to dismiss.
In re Burton W. Wiand, as Receiver, 2011 U.S. Dist. LEXIS 113212 (M.D. Fla. Sept. 29, 2011).
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An investigation by the SEC led to a guilty plea by a hedge fund manager that perpetrated
a Ponzi scheme. As a result of the investigation, a receiver was appointed that initiated over 150
“clawback” cases in an attempt to recover false profits received by certain investors. Several of
these investors moved the court to compel arbitration of the clawback cases alleging, inter alia,
the violation of Rule 10b-5 of the Securities Exchange Act of 1934. The court agreed with the
investors, finding that the arbitration agreements in their contracts mandated arbitration.
Accordingly, the court granted the investors’ motion to compel arbitration.
2. Section 14
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Besinger v. Denbury Resources Inc., 2011 U.S. Dist. LEXIS 91905 (E.D.N.Y., Aug. 11, 2011)
The U.S. District Court of the Eastern District of New York denied defendant’s motion to
dismiss claims asserted by plaintiff Besinger for violations of Section 11 of the Securities
Exchange Act of 1933 and Section 14 of the Securities Exchange Act of 1934. The defendant,
Denbury Resources Inc. (“Denbury”) contends that the plaintiff has not stated a claim upon
which relief can be granted.
Besinger claimed that the defendant’s violations stem from the use of materially
misleading information in Denbury’s registration and proxy statement regarding the formula
used to calculate the amount of compensation due to Encore Acquisition Company (“Encore”)
shareholders upon completion of Encore’s merger with Denbury. As a result of the
misinformation, Encore shareholders received significantly less compensation once the merger
was completed.
In determining whether the defendant’s motion should be denied, the court examined
plaintiff’s claims against the two actionable elements required for a Section 11 and Section 14
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