Broker-Dealer Litigation - Greenberg Traurig LLP

Pension Trust Fund for Operating Eng’rs v. Mortgage Asset Securitization Trans., Inc., 2011
WL 4550191 (D.N.J. Sept. 29, 2011).
The district court granted (without prejudice) defendants’ motion to dismiss an amended
class action complaint alleging violation of, inter alia, Section 11 of the Securities Act of 1933,
arising from alleged misstatements and omissions concerning mortgage-backed securities
(including alleged deviation from loan underwriting guidelines, loan-to-value ratios, debt-toincome
ratios, appraisal standards and procedures, and income, employment and credit history
verification processes). The court dismissed the amended class action complaint because
plaintiffs failed to comply with the particularized pleading requirements of Section 13 of the
Securities Act, which sets out the statutes of limitations and repose applicable to Securities Act
claims. Plaintiffs were directed to replead with particularized facts concerning the timeliness of
their claims, including but not limited to the time and circumstances of discovering the
defendants’ allegedly actionable statements, the reason why discovery was not made earlier, or
the diligent efforts undertaken in making such discovery. The court exercised its discretion to
grant leave to amend because doing so would not be “futile”.
In re Franklin Bank Corp. Sec. Litig., 782 F.Supp.2d 364 (S.D. Tex. 2011).
The district court granted defendants’ motions to dismiss and dismissed with prejudice a
consolidated class action lawsuit alleging violation of, inter alia, Section 11 of the Securities Act
of 1933, arising from Franklin Bank’s management and strategy practices that allegedly resulted
in its closure and liquidation. After applying the pleading standard of Federal Rule of Civil
Procedure 8 (and rejecting defendant’s argument that allegations of recklessness are tantamount
to fraud), the court dismissed with prejudice the Section 11 claim against the underwriter
defendant because it was based on an SEC filing and its attendant public announcement that
were not included in the registration statement at issue, and because the alleged misstatements
and omissions were not alleged to have been known at the time the registration statement was
issued and distributed. The Section 11 claim was also dismissed because an impact of .46% on
total interest income, 1.4% on net interest income, and 1.78% on interest income after credit
losses was insufficient to establish materiality as a matter of law. The court declined to consider
financial impacts that were material for timeframes not relevant to the Section 11 claims. The
court declined to find plaintiffs’ claims time-barred because the alleged “storm warnings”
identified by defendants did not address the time period relevant to the Section 11 claim.
Indiana State Dist. Council of Laborers v. Omnicare, Inc., 2011 WL 2786301 (E.D. Ky. July 14,
2011).
The district court disposed of a claim under Section 11 of the Securities Act of 1933 that
was remanded from the Sixth Circuit (because the district court had improperly dismissed the
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