Broker-Dealer Litigation - Greenberg Traurig LLP

In re Oppenheimer Rochester Funds Grp. Sec. Litig., 2011 WL 5042066 (D.Colo. Oct. 24,
2011).
The district court denied one defendant’s motion to dismiss and granted in part and
denied in part defendants’ joint motion to dismiss consolidated class action complaints alleging
violation of, inter alia, Section 11 of the Securities Act of 1933 in connection with funds that
were allegedly marketed as stable, income-seeking, capital-preserving investments when, in fact,
they allegedly used risky investment strategies fundamentally incompatible with stated
objectives. The court held that defendants’ disclosure duties were not satisfied given their failure
to disclose sufficient information to render not misleading statements on investment objectives,
highly-leveraged derivative instruments, and the volatility, liquidity, risk, and valuation of the
securities at issue. As such, those statements were sufficient to state a claim under Section 11.
The court held that plaintiffs’ losses were adequately linked to the allegedly misleading
statements and omissions, thus rejecting defendants’ loss causation arguments. The court also
rejected defendants’ argument that plaintiffs’ claims were time-barred, holding that news articles
and other press reports were insufficient to trigger inquiry notice.
In re Thornburg Mortg., Inc. Sec. Litig., 2011 WL 2429189 (D.N.M. June 2, 2011).
The district court granted in part and denied in part plaintiff’s omnibus motion for leave
to amend the consolidated class action complaint and for reconsideration of the court’s
memorandum opinion and orders granting in part and denying in part defendant’s motion to
dismiss the consolidated amended complaint, which had alleged violation of, inter alia, Section
11 of the Securities Act of 1933 in connection with alleged failure to disclose certain business
and financial conditions. The court agreed to reconsider whether Regulation S-K and Item 303
imposed on defendants a duty to disclose adverse liquidity trends during the offering period. The
court affirmed its prior decision to dismiss the underwriter defendants, holding that (i) the
abstain-or-disclose rule applicable in the insider trading context does not apply to Section 11
claims (because it would require disclosure of more information than required by the Securities
Act, and would “render nugatory” laws that specify information issuers must disclose); and (ii)
plaintiffs had not established violation of disclosure duties under Item 303 (because certain facts
in support of the duty were not pleaded in the complaint; events occurring in a three-week period
were insufficient as a matter of law to establish a trend; and allegations in support of a trend did
not differentiate between defendants and were therefore implausible). The court also
reconsidered, and rejected, (i) whether Item 303 requires disclosure of contractual provisions in
offering materials (held not to be a material omission absent allegations that the provision was
unique); (ii) the requirement of Regulation S-X that significant concentrations of credit risk be
disclosed (rejected because the issuer made such disclosures); (iii) arguments that the issuer’s
2007 10-K was actionable and that certain statements constituted inactionable puffery (because
there was no basis given for reconsideration); and (iv) arguments that the issuer’s 2008 offering
was actionable (because no named plaintiff purchased shares during that offering, thus depriving
them of statutory standing to sue).
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