Broker-Dealer Litigation - Greenberg Traurig LLP

subsequent equity offering before later press releases revealed no such partnership agreement
existed. Defendant filed a motion to dismiss for failure to state a claim under the heightened
pleading standards of the PSLRA. The court held that plaintiffs’ allegations were sufficient to
allow a strong inference of scienter given the strong financial red flags being experienced by the
company at the time and the company’s motive to raise cash cheaply. Accordingly, the court
denied the defendants’ motion to dismiss.
Dean v. China Agritech, Inc.,2011 WL 5148598 (C.D. Cal. Oct. 27, 2011).
Plaintiffs brought suit against defendants alleging violations of Section 10(b) and Rule
10b-5 of the Securities Exchange Act of 1934. Defendants filed a motion to dismiss for failure to
state a claim. Plaintiffs alleged that defendants materially misstated net revenue and income for
various time periods and concealed certain related-party transactions. Allegedly, these
misstatements and omissions were incorporated in defendants’ subsequent registration statement
and prospectus for public offering. Plaintiff alleged that these statements and omissions caused
plaintiffs to suffer damages in connection with purchases of the company’s stock. The court held
that plaintiffs adequately pled the contested elements of falsity, scienter and loss causation. The
court found that plaintiff (i) adequately pled particularized misrepresentations in the SEC filing
sufficient for falsity, (ii) that defendant’s underlying idle business and factories during the
alleged misrepresentations gave a strong inference of scienter and (iii) that the
misrepresentations were sufficiently pled as a substantial cause of plaintiffs loss. Accordingly,
plaintiff met the heightened pleading requirements under the PSLRA.
Rentea v. Janes, 2011 WL 5822255 (C.D. Cal. Nov. 16, 2011).
Plaintiff filed a complaint against defendant, an officer and director of a medical device
manufacturer, alleging violations of Section 10(b) and Rule 10b-5 of the Securities Exchange
Act of 1934. Plaintiff alleged defendant made false or misleading statements regarding FDA
approval of a product that influenced plaintiff’s decision in purchasing securities of the medical
device manufacturer. The court granted the defendant’s motion to dismiss on the grounds that
plaintiff failed to meet the heightened pleading requirements under PSLRA and therefore did not
plead with the requisite particularity of a Section 10(b) and Rule 10b-5 claim. Specifically, the
court found that plaintiff (i) failed to point to a single specific misleading or false statement, (ii)
offered no detailed facts to support the scienter allegation and (iii) generally failed to meet the
other required elements of a Section 10(b) and Rule 10b-5 claim.
Mannkind Securities Actions, 2011 WL 6327089 (C.D. Cal. Dec. 16, 2011).
Shareholders of a company that developed an inhalable insulin treatment for diabetes
brought suit against defendants alleging violations of federal securities laws. Specifically,
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