Broker-Dealer Litigation - Greenberg Traurig LLP

extensive disclosures regarding the risks contained in the notes’ offering documents. The court
held that defendants could not avail themselves of the bespeaks caution doctrine because
plaintiffs denied receiving the offering documents which contained the risk disclosures cited by
defendants. The only documents plaintiffs indisputably received in connection with their
investment did not contain disclosures related to the conversion of the notes to securities.
Accordingly, the court found that the bespeaks caution doctrine did not apply and denied
defendants’ motion to dismiss.
Local 731 I.B. of T. Excavators and Pavers Pension Trust Fund v. Swanson, 2011 WL 2444675
(D. Del. June 14, 2011).
In a consolidated securities fraud class action against former officers and directors of a
leading publisher of yellow pages directories, the district court denied defendants’ motion to
dismiss claims related to an alleged scheme to artificially inflate the publishing company’s stock.
Defendants argued that alleged misstatements regarding future demand for yellow pages and the
publisher’s ability to grow its online business were forward-looking statements shielded from
liability by the Private Securities Litigation Reform Act of 1995’s safe harbor provisions. The
court found that the statements were mixed statements that referenced present and historical facts
and, thus, did not qualify for safe harbor protection. Moreover, defendants failed to warn
investors of an overall industry decline and, thus, cautionary language relied upon by defendants
was not adequate to warn investors of the risk plaintiffs alleged defendants had knowingly failed
to disclose. The court also found that plaintiffs adequately alleged that defendants had actual
knowledge that their stated growth projections were inaccurate given defendants’ attendance at
certain meetings and review of internal company reports. Accordingly, the court denied
defendants’ motion to dismiss.
In re Lincoln Educ. Srvs. Corp. Sec. Litig., 2011 WL 3912832 (D.N.J. Sept. 6, 2011).
In a consolidated securities fraud class action, the court granted defendants’ motion to
dismiss claims related to the defendant school’s admissions process, in part, because the alleged
misstatements were shielded from liability by the Private Securities Litigation Reform Act of
1995’s safe harbor. Plaintiffs alleged that in the wake of new regulations denying funding to
schools that failed to provide “gainful employment” for students, defendants announced plans to
limit enrollment of students without a high school diploma and misled investors regarding the
impact of this new policy on enrollment numbers. Plaintiffs conceded that the statements at
issue were forward-looking but argued that they were not accompanied by meaningful cautionary
language. The court found that cautionary language accompanying the alleged misstatements
discussing the new Department of Education regulations as likely to have short-term impact on
growth was sufficiently “tailored” to warn investors about risks that might affect the projection at
issue. The court further found that plaintiffs’ complaint improperly isolated certain words or
comments from the defendants’ overall remarks in press releases and conference calls in an
attempt to create the impression of fraud. Accordingly, the court found that the alleged
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