Broker-Dealer Litigation - Greenberg Traurig LLP

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Elipas v. Jedynak, 2011 WL 1706059 (N.D. Ill. May 5, 2011).
Plaintiffs moved for summary judgment against defendant Howard under Rule 10b-5 and
Illinois securities law. Plaintiffs had invested in UWT, and the court had previously found that
Howard had taken part in a scheme to divert funds from UWT that had been a significant factor
in UWT’s demise. The court noted that if UWT had been as profitable as Howard represented it
to be, it was reasonable to infer that plaintiffs would have received some return on their
investments. Howard was not participating in the litigation in any meaningful way. The court
held that, although it is ordinarily the plaintiff’s burden to isolate the effects of fraud from other
effects that may have contributed to his loss, under these circumstances the burden shifted to
Howard to show that other factors besides her fraud contributed to UWT’s demise. Because
there was no such evidence in the record, the court concluded that Howard’s fraud was the sole
cause of the loss. Accordingly, the appropriate measure of damages against Howard was the
amount of plaintiffs’ investments in UWT less any distributions they may have received.
Benincasa v. Lafayette Life Ins. Co., 2011 WL 5967300 (D. Minn. Nov. 29, 2011).
Plaintiffs brought claims alleging (among other things) breach of fiduciary duty based on
the unsuitability of an insurance investment. The court found that the appropriate measure of
damages for breach of fiduciary duty based on an unsuitable investment is the difference
between the value of the plaintiff’s current investment and the value of the plaintiff’s investment
had it been suitably invested. Plaintiffs presented a damages calculation that related only to
rescission damages and not to unsuitability damages. Because plaintiffs failed to present
evidence as to a required element of a breach of fiduciary duty claim, the court granted
defendants’ motion for summary judgment.
Genesee County Employees’ Retirement System v. Thornburg Mortgage Securities Trust 2006-3,
2011 WL 5840482 (D.N.M. Nov. 12, 2011).
Plaintiffs brought a class action asserting federal and state securities claims relating to
mortgage-backed securities. Defendants argued under Section 11 of the Securities Act of 1933
(which requires plaintiffs to plead a decline in market value) that plaintiffs’ claims could not
succeed because the offering documents for the securities warned that there may be no secondary
market for the securities. The court disagreed, finding that Section 11 prescribes a particular
measure of damages and that statements in a prospectus cannot limit the purchaser’s remedies
under federal law.
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