Broker-Dealer Litigation - Greenberg Traurig LLP

solvency. The district court held that the prior rulings of the courts in the two class action suits
controlled this case. As such, the court allowed the Section 10(b) claims to move forward
against one of the class action defendants and defendants conceded that those claims should not
be dismissed. Plaintiffs also alleged control person liability against the corporate officers under
Section 20(a). The court found that because plaintiffs stated primary violations of Section 10(b)
which were allowed to proceed and because plaintiffs adequately pled scienter for control person
defendants, the claims for control person liability under Section 20(a) were allowed to proceed as
well.
Roseville Emps. Ret. Sys. v. EnergySolutions, Inc., 2011 U.S. Dist. LEXIS 113630 (S.D.N.Y.
Sept. 30, 2011).
Shareholders brought a class action suit against a corporation, its officers, and its sole
stockholder prior to public offerings under Sections 11, 12(a)(2), and 15 of the Securities Act of
1933, and Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated
thereunder, and Section 20(a). Defendants moved to dismiss. The court found that the
allegations of material misrepresentations and omissions which must be assumed to be true for
the purposes of the motion to dismiss were well pleaded and could go forward. Further, because
defendants’ only defense to the control person claims was that plaintiffs failed to show a primary
violation, the motion to dismiss the Section 20(a) and Section 15 claims for control person
liability was denied.
Wilamowsky v. Take-Two Interactive Software Inc., 2011 WL 4542754 (S.D.N.Y. Sept. 30,
2011).
Plaintiff opted out of a class action that settled for an amount in excess of $20 million.
He then brought his own suit against the corporation and its executives. Plaintiff’s complaint
alleged breach of fiduciary duty, violations of Section 10(b) and Rule 10b-5 of the Securities
Exchange Act of 1934, and control person liability under Section 20(a) based on defendant’s
routine manipulation of the dates of stock option grants making them fall on days with the lowest
stock prices. The court found plaintiff failed to sufficiently plead loss causation and dismissed
the securities claims. The court held that because the complaint did not adequately allege a
primary violation under Section 10(b) or Rule 10b-5, the claim for control person liability under
Section 20(a) must also be dismissed.
Mandell v. Reeve, 2011 U.S. Dist. LEXIS 114804 (S.D.N.Y. Oct. 4, 2011).
Plaintiffs sought to vacate, and defendant sought to confirm, an arbitration award
rendered by a FINRA arbitration panel in favor of investor plaintiffs against defendant securities
firm. In the FINRA hearing, the investors brought securities claims against the securities firm,
including claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
arbitration panel ruled in favor of the investors and found control person liability violations.
H.2
H.2
H.2
249