Broker-Dealer Litigation - Greenberg Traurig LLP

held that, in taking plaintiffs’ allegations as true, the defendant was the “incorporator, registered
agent, active owner, director, president, and employee” and, therefore, the court found such
allegations sufficient to state a plausible claim for control person liability. Thus, the motion to
dismiss was denied.
Shammami v. Allos, 2011 WL 4805931 (E.D. Mich. Oct. 11, 2011).
Plaintiff filed suit against a securities firm and related individual defendants to recover
damages for allegedly wrongful trading of securities in plaintiff’s investment accounts. Plaintiff
brought numerous claims, including violations of Section 20(a) of the Securities Exchange Act
of 1934. The court found that because the plaintiff had failed to make any allegations of control
as to one of the individual defendants, the motion to dismiss with respect to that defendant was
granted.
Cumberland & Ohio Co. of Tex. v. Goff, 2011 U.S. Dist. LEXIS 52897 (M.D. Tenn. May 17,
2011).
Investors filed suit against a corporation and its affiliates alleging that it fraudulently sold
unregistered securities based on certain memoranda issued by defendants that contained material
misstatements and omissions in violation of federal and Tennessee securities laws, and based on
control person liability under the Tennessee Securities Act. Defendant moved for summary
judgment. The court found that plaintiffs provided evidence that individual defendant was in
charge of sales, directed the “cold calling” operations, supervised the sales staff, and set
commission levels. The court found sufficient evidence to overcome defendant’s summary
judgment motion on the claim of control person liability under the Tennessee Securities Act.
Silverman v. Motorola, Inc., 772 F. Supp. 2d 923 (N.D. Ill. 2011).
Plaintiffs brought a securities fraud class action against a large corporation and certain of
its officers alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 against all defendants, as well as Section 20(a) of the Exchange Act against the
individual defendants. Defendants moved for summary judgment. The court found that two
corporate executives who had authority only as to their particular divisions were entitled to
summary judgment on the control person claims brought against them under Section 20(a)
because the alleged wrongdoing was in another division and the evidence did not show general
control of operations. The court noted that had the plaintiffs provided evidence supporting their
contentions that the other executives collaborated with each other to solve general problems of
the company, and that earnings releases were reviewed together as a group, this may have raised
an issue of material fact as to the general control of those executives. The chief strategy officer,
however, whose responsibilities were not limited to a particular business segment, was not
entitled to summary judgment on the Section 20(a) claim.
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