Broker-Dealer Litigation - Greenberg Traurig LLP

General Retirement System of City of Detroit v. Onyx Capital Advisors, LLC, 2011 WL 4528304
(E.D. Mich. Sept. 29, 2011).
On defendants’ motion to dismiss, the court dismissed plaintiffs’ RICO claims, finding
them to be predicated on securities law violations and, therefore, barred by 18 U.S.C. § 1964(c).
Plaintiffs claimed that their RICO claims did not relate to the purchase or sale of securities, but
to misappropriation and poor post-investment management. However, the court found that the
securities laws (and specifically Section 10(b) of the Securities Exchange Act of 1934) covered
fraudulent conduct beyond an initial purchase or sale, and that “[a] surgical presentation of the
cause of action cannot avoid the determination that the conduct giving rise to the predicate
offenses amount to securities fraud.” Here, the court found that since plaintiffs purchased
securities over a period of several years and alleged that defendants’ misappropriation and bad
management occurred during the same time, the actions alleged as predicates for the RICO
claims could not be separated from the purchases and sales of securities.
Moorehead v. Deutsche Bank AG, 2011 WL 4496221 (N.D. Ill. Sept. 26, 2011).
On defendants’ motion to dismiss, the court dismissed plaintiffs’ RICO claims, finding
that while the claims were not barred by the statute of limitations, they were prohibited under the
Private Securities Litigation Reform Act (“PSLRA”). Plaintiffs alleged that defendants induced
them into pursuing faulty tax-reducing investment strategies. As to the statute of limitations, the
court found that while the four-year limitation period for plaintiffs’ RICO claims had passed, it
had been adequately tolled by a class-action lawsuit, in which plaintiffs participated, that
included a RICO claim. As for the PSLRA, which bars RICO claims predicated on securities
law violations (18 U.S.C. § 1864(c)), the court found the bar to be applicable even though
plaintiffs contended that their claims were predicated on purportedly faulty tax-planning
strategies, not securities transactions. The court concluded that the tax strategies at issue
involved “significant securities transactions” in which defendants repeatedly made
misrepresentations about their tax effects and profitability. Accordingly, the RICO claims could
not be brought.
Bobrowski v. Red Door Group, 2011 WL 3555712 (D. Ariz. Aug. 11, 2011).
Plaintiff investor sued defendant entities alleging, among others, securities fraud and
RICO claims. The court dismissed plaintiff’s securities fraud claims on defendants’ motion for
summary judgment, finding that the Purchase Agreement coupled with the Asset Management
Agreement, though an investment contract, was not a security under SEC v. W.J. Howey Co., 328
U.S. 293 (1946). The court found that there was no horizontal commonality here because
plaintiff purchased fee simple title to eight units and was entitled to a fixed monthly rent and a
set repurchase price for his units alone. The court also found that there was no vertical
commonality because payment under the lease was not conditioned upon the successful rental of
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