Broker-Dealer Litigation - Greenberg Traurig LLP

First, the court noted that corporate officers are usually presumed to possess the requisite power
to control the actions of their employees and are often held accountable as controlling persons.
The court also found that the arbitration panel was plainly entitled to find that as founder, CEO,
sole shareholder, and registered principal of the securities firm, that the officer had at least “some
indirect means of discipline or influence” over the controlled person, and did not dispute the
liability of the controlled person. Thus, the award was upheld.
Local 731 I.B. of T. Excavators & Pavers Pension Trust Fund v. Swanson, 2011 WL 2444675
(D. Del. June 14, 2011).
Plaintiff brought a consolidated class action suit against officers and a director of a
corporation for securities fraud in violation of Section 10(b), Rule 10b-5, and for control person
liability under Section 20(a) of the Securities Exchange Act of 1934. The complaint alleged that
defendants deliberately misrepresented the financial performance of the corporation which
resulted in artificial inflation of the stock price. Defendants filed a motion to dismiss. The court
found that plaintiff adequately pleaded a claim for primary securities fraud under Section 10(b)
and Rule 10b-5. Because the complaint alleged that defendants had high level positions within
the corporation, participated in and were aware of the corporation’s operations and decision
making, sufficient facts were alleged to allow the Section 20(a) claim to survive the motion to
dismiss.
In re Heckmann Corp. Sec. Litig., 2011 WL 2413999 (D. Del. June 16, 2011).
Plaintiff brought a class action suit against a corporation and its officers for violation of
Section 10(b), Rule 10b-5 and Section 20(a) of the Securities Exchange Act of 1934 based on
materially false and misleading statements regarding a shareholder-approved merger.
Defendants moved to dismiss. The court found that plaintiff had pleaded with particularity
omitted facts that were material to the merger at issue and therefore satisfied the pleading
requirement for Section 10(b) and Rule 10b-5. Defendants’ only defense to the Section 20(a)
control person liability claim was that plaintiff failed to adequately plead a primary violation and
that the individual defendants had control over the corporation. The court found that in addition
to adequately pleading a primary violation, the complaint alleged control by the individual
defendants as well. As such, the motion to dismiss was denied.
In re Wash. Mut., Inc., 2011 Bankr. LEXIS 5008 (Bankr. D. Del. Dec. 20, 2011).
Plaintiff investment fund alleged that defendant investment corporations solicited,
offered, and sold trust certificates to plaintiff pursuant to offering documents containing material
misrepresentations and omissions. Plaintiff alleged that defendant investment corporations were
liable as control persons under Section 15 of the Securities Act of 1933 and the California
Corporations Code Section 25504 for the misstatements made by the issuing bank. The
investment corporations objected to plaintiff’s control person liability claims on two grounds:
H.2
H.2
H.2
250