Broker-Dealer Litigation - Greenberg Traurig LLP

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U.S. v. Reyes, 660 F.3d 454 (9th Cir. 2011).
Appellant, chief executive officer of a corporation, appealed from a conviction for
securities fraud, making false filings to the Securities and Exchange Commission, falsifying
corporate books and records, and making false statements to auditors with regard to backdated
and improperly recorded stock options. Appellant asserted prosecutorial misconduct, which
included a claim that the prosecution’s focus on corporate responsibility and rejection of
proposed jury instructions gave no significance to the legal concept of respondeat superior. The
appellate court found that the lower court did not abuse its discretion because the instructions
provided to the jury made clear that the appellant could not be found guilty simply due to his
position of CEO.
Ledford v. Peeples, 657 F.3d 1222 (11th Cir. 2011).
Appellants related to limited liability company (“LLC 1”) sued appellee-financier for
federal and state securities violations, including alleged violations of Section 10(b) and
Rule 10b-5 of the Securities Exchange Act of 1934. LLC 1 specifically alleged it would not
have sold its interest in another company (“LLC 2”) had it known the financier was supplying
financing to the buyers. Financier was sued under the doctrine of respondeat superior for the
board of directors’ fraudulent conduct and breach of fiduciary duty for failure to inform LLC 1
of financier’s intent to provide the buy-out funds. The district court granted summary judgment
to financier, despite financier’s denial of its involvement in the purchase transaction. The
appellate court found that the district court did not abuse its discretion because it found no
evidence that the financier’s denial of involvement in the purchase transaction affected LLC 1’s
decision to sell its interest in the corporation. Thus, the financier could not be held liable under
the doctrine of respondeat superior.
STMicroelectronics v. Credit Suisse Group, 775 F. Supp. 2d 525 (E.D.N.Y. 2011).
Plaintiff alleged control person liability under Section 20(a) of the Securities Exchange
Act of 1934 against defendant, the bank of a non-party subsidiary. Among plaintiff’s claims was
a Section 10(b) allegation, for which the district court determined the plaintiff could not
prosecute under a respondeat superior theory imputing liability directly from the subsidiary’s
registered representatives to the parent company. The district court reasoned that the agents’
misrepresentations were made simultaneously on behalf of the subsidiary and parent company,
and thus both were considered principals. Because plaintiff previously secured an arbitration
award against the subsidiary for misrepresentations made by the registered representatives, the
plaintiff could not now assert the same respondeat superior theory of liability as against the
parent corporation as well.
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