Broker-Dealer Litigation - Greenberg Traurig LLP

The court further found that in the absence of primary liability, the claim for control person
liability under Section 20(a) must fail and granted defendants’ motion to dismiss.
In re Anadigics, Inc., 2011 WL 4594845 (D.N.J. Sept. 30, 2011).
Plaintiff investors brought a putative class action against defendant corporation and its
officers for violations of Section 10(b) and Rule 10-5 of the Securities Exchange Act of 1934 and
for Section 20(a) control liability based on defendants allegedly misleading investors by making
statements regarding Anadigics’ capability to meet demand for its products. Defendants filed a
motion to dismiss. The court held that such statements were forward looking, accompanied by
meaningful language and/or immaterial. As such, the court found that plaintiffs had not
established a material misrepresentation or omission as required for the securities fraud claims.
Further, the court held that because plaintiffs did not plead a primary securities violation under
Section 10(b) and Rule 10b-5 with adequate particularity, there could be no control person
liability under Section 20(a). The motion to dismiss was granted.
Steamfitters Local 449 Pension Fund v. Alter, 2011 WL 4528385 (E.D. Pa. Sept. 30, 2011).
Plaintiff brought a class action suit on behalf of shareholders against a bankrupt
corporation and its officers and directors under Section 10(b) and Section 20(a) of the Securities
Exchange Act of 1934 for making misrepresentations that artificially inflated the corporation’s
financial results and stock prices. Defendants moved to dismiss. The court found that the
Section 10(b) claims against the management defendants were adequately pleaded, and control
was also adequately pleaded, so the Section 20(a) claims were allowed to proceed against the
management defendants. However, the court found that the plaintiff failed to plead adequate
scienter against outside directors, and thus the Section 10(b) allegations against outside directors
were dismissed, and the derivative Section 20(a) claims were dismissed for lack of an underlying
violation. The court found that the Section 20(a) claims against the chief credit officer failed
because the inference that defendant did not intend to be involved in fraudulent activity was
more compelling than the inference that he acted with scienter. Moreover, the Section 20(a)
claim against the former president of a subsidiary of defendant corporation failed because
plaintiff did not plead adequate control and because the role as a subsidiary’s president is
insufficient alone to indicate control for Section 20(a).
Aubrey v. Barlin, 2011 U.S. Dist. LEXIS 15332 (W.D. Tex. Feb. 16, 2011).
Plaintiffs brought suit after suffering financial losses stemming from real estate-backed
investments that were created, packaged, marketed, and sold to plaintiffs by defendants.
Plaintiffs brought numerous federal and state securities claims. One individual defendant moved
to dismiss. She argued that plaintiffs had failed to state a claim that she was liable as a “control
person” under Section 20 of the Securities Exchange Act of 1934. Specifically, the defendant
argued that plaintiffs’ claims were merely conclusory allegations of control. However, the court
H.2
H.2
H.2
252