Broker-Dealer Litigation - Greenberg Traurig LLP

In re Oppenheimer Rochester Funds Group Sec. Litig., 2011 WL 5042066 (D. Colo. Oct. 24,
2011).
Shareholders in seven different municipal bond funds brought a total of 32 putative
securities fraud class actions in federal courts throughout the country naming the individual
funds, fund managers, and trustees as defendants. The principal claims were asserted under
Sections 11, 12, and 15 of the Securities Act of 1933 and were based on allegations that the
funds were falsely marketed as stable investments when in fact they employed extremely risky
investment strategies. Plaintiffs contended that their factual allegations were sufficient to
demonstrate that each of the moving defendants possessed the requisite power to direct or cause
the direction of management necessary to survive dismissal. As “senior officers” of the funds,
the officer defendants controlled the funds’ operations and disclosures made by the funds in
registration statements. In addition, plaintiffs alleged that documents filed with the Securities
and Exchange Commission by the defendants stated the company “has the power to direct or
cause the direction of the management or policies of the manager, whether through ownership of
securities, by contract or otherwise.” The court held these allegations to be sufficient to support
an inference that the officer defendants had the direct or indirect means of influencing the
content of the registration statements at issue in the litigation. With regard to the trustee
defendants, under Section 15 of the Securities Act the trustee defendants’ authority to sign or not
sign the registration statements at issue were sufficient indicia of “control” over the
representations and disclosures that went out to potential investors to support “control person”
liability at the pleading stage of the litigation. Thus, defendants’ joint motion to dismiss
plaintiffs’ “control person” claims against the officer and trustee defendants was denied.
In re Thornburg Mort., Inc. Sec. Litig., 2011 WL 2429189 (D.N.M. June 2, 2011).
Plaintiff shareholders filed suit against a corporation, its officers and directors, and its
underwriters for alleged violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933
and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on
misrepresentations and omissions regarding the financial condition of the corporation. Plaintiffs
filed an Omnibus Motion requesting, among other things, that the court reconsider ruling on the
dismissal of the issue of control person liability under Section 20(a) against certain directors and
officers. The court ruled that it would reconsider the ruling on dismissal of certain directors and
officers because the second amended complaint cured deficiencies in the plaintiffs’ allegations
against those individual defendants. However, the court refused to reconsider ruling on the
dismissal of the control person claims against other individual defendants because even in the
second amended complaint, plaintiffs failed to plead that those defendants had control over any
primary violations.
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