Broker-Dealer Litigation - Greenberg Traurig LLP

defendant’s challenge of the Section 20(a) claim was premature. The motion to dismiss was
denied.
In re Credit Suisse-AOL, 2011 U.S. Dist. LEXIS 95889 (S.D. Mass. Aug. 26, 2011).
Shareholders filed a consolidated class action suit against a corporation and its officers
and directors based on allegations that defendants intentionally ignored material information
regarding the corporation’s financial future in formulating recommendations to the investing
public in violation of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934.
Plaintiffs also alleged control person liability under Section 20(a). Defendants moved for
summary judgment. The court found that plaintiffs’ claims of transactional causation and loss
causation for the Section 10(b) and Rule 10b-5 allegations necessarily relied on expert witnesses
and that summary judgment without a full hearing and analysis of Daubert factors would be
inappropriate, thus denying the motion for summary judgment. See Daubert v. Merrell Dow
Pharms., Inc., 509 U.S. 579 (1993). The court further denied the motion for summary judgment
on the control person liability claim reasoning that whether a defendant is a control person is an
intensely factual question.
In re Textron, Inc., 2011 U.S. Dist. LEXIS 103775 (D.R.I. Sept. 13, 2011).
Plaintiff filed a shareholder derivative action on behalf of a corporation against two of the
corporation’s officers and eleven of its thirteen directors. Plaintiff based his claims on a stock
purchase plan that the company’s board of directors approved in a series of allegedly misleading
statements that the corporation’s CEO and CFO made concerning the company’s backlog of
aircraft and helicopter orders, violating Section 10(b) and Section 20(a) of the Securities
Exchange Act of 1934. Defendants responded with a motion to dismiss based on the argument
that plaintiff filed the action without first demanding that the company bring the suit itself. The
court, evaluating whether a pre-suit demand would have been futile, assessed plaintiff’s demand
futility argument on the claim that the directors were not disinterested because they faced
substantial likelihood of liability. However, the court held that plaintiff failed to adequately
plead why defendants’ omissions regarding the backlog were actually misleading in anything
other than conclusory terms. As such, the court held that because plaintiff had not pleaded a
viable primary violation under Section 10(b), the Section 20(a) claim against the directors failed
as well.
Poptech, L.P. v. Stewardship Credit Arbitrage Fund, 792 F. Supp.2d 328 (D. Conn. 2011).
Plaintiff filed claims against a broker-dealer and registered investment advisors for
securities fraud under Section 10(b), Rule 10b-5, and Section 20(a) of the Securities Exchange
Act of 1934. One defendant, sued only for control person liability pursuant to Section 20(a),
brought a motion to dismiss. The court found that the plaintiff’s complaint plausibly alleged that
the defendant had the ability to control the alleged primary violators, including the ability to
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