Broker-Dealer Litigation - Greenberg Traurig LLP

Camofi Master LDC v. Riptide Worldwide Inc., 2011 U.S. Dist. LEXIS 31237 (S.D.N.Y.
Mar. 23, 2011).
Plaintiffs brought a wide range of securities claims, including Section 20(a) violations of
the Securities Exchange Act of 1934, against defendants alleging a multimillion-dollar fraud,
stemming from a failed acquisition and related loan repayment. Defendants moved to dismiss
each and every claim against them. The court held that to establish a prima facie case of liability
under Section 20(a) a plaintiff must show: (1) a primary violation by a controlled person;
(2) control of the primary violator by the defendant; and (3) that the controlling person was in
some meaningful sense a culpable participant in the primary violation. Moreover, the court
noted that Section 20(a) also contains the requirement that “plaintiff allege culpable participation
in some meaningful sense by the controlling person in the fraud.” In this case, the individual
defendants were President and Senior Vice President of the corporation. The court found that the
most plausible inference to be drawn from their positions was that the individual defendants were
familiar with the company’s day to day financial outlook and, as such, should have known that
the company was misrepresenting its ability to repay the loan in the transaction documents and
Securities and Exchange Commission filings. The court found that the plaintiffs sufficiently pled
particularity of facts that raised a strong inference of scienter. Thus, the motion to dismiss was
denied.
Bd. of Trs. of Fort Lauderdale Gen. Emps. Ret. Sys. v. Oao, 2011 U.S. Dist. LEXIS 88143
(S.D.N.Y. Aug. 9, 2011).
Plaintiffs brought a putative class action suit against a corporation and its officers for
violations of Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934 based on
failure to disclose that a portion of the company’s income and revenue during the class period
derived from unlawful conduct which, upon discovery, would subject the corporation to
significant fines and penalties. Plaintiffs also brought claims for control person liability under
Section 20(a). Defendants moved to dismiss. The court found that plaintiffs did not plead a
sufficiently strong inference of scienter and dismissed the Section 10(b) and Rule 10b-5 claims.
The court further found that because plaintiffs failed to sufficiently plead Section 10(b) and
Rule 10b-5 claims, the Section 20(a) claims must also be dismissed.
In re Deutsche Bank AG, 2011 WL 3664407 (S.D.N.Y. Aug. 19, 2011).
Shareholders in a consolidated class action against a corporation and related individuals
alleged violations of Sections 11 and 12(a)(2) of the Securities Act of 1933 based on
misstatements and omissions related to the corporation’s prospectus and registration statement.
Shareholders also alleged control person liability under Section 15. Defendants moved to
dismiss. The court found that although some of the Section 11 claims merely pleaded legal
conclusions and should be dismissed, other Section 11 claims and the Section 12(a)(2) claims
survived the motion to dismiss. The court further held that the control person liability claims
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