Broker-Dealer Litigation - Greenberg Traurig LLP

market sector downturn rendered the complaint’s stated facts insufficient under Rule 9(b)’s
particularity requirement.
Hill v. State Street Corp., 2011 WL 3420439 (D. Mass. Aug. 3, 2011).
In consolidated class actions alleging violations of both the federal securities laws and the
Employee Retirement Income Security Act (“ERISA”) brought against State Street Corporation
and several other defendants, the defendants moved to dismiss claiming that, among other
reasons, the plaintiffs failed to state claims with sufficient particularity. After finding that the
federal securities law claims complied with the heightened pleading standards of both the Private
Securities Litigation Reform Act of 1995 and Rule 9(b), the court turned to whether Rule 9(b)
also applied to the ERISA claims. Recognizing uncertainty in the law on the issue, the court
rejected the defendants’ arguments and held that Rule 9(b) did not apply. The court explained
that while the complaint alleged that State Street’s foreign exchange practices were fraudulent,
the fraud allegations were simply further proof that State Street stock was an imprudent
investment. Thus, the court held, the plaintiffs might ultimately be unable to prove the alleged
fraud, but nonetheless succeed on their claim that the defendants breached their fiduciary duty
under ERISA by imprudently offering State Street stock as a plan investment.
Poptech, L.P. v. Stewardship Credit Arbitrage Fund, LLC, 792 F. Supp. 2d 328 (D. Conn. 2011).
The plaintiff brought securities fraud claims against a fund and related entities in which it
invested, along with the executive who allegedly controlled the defendant-entities. The
executive moved to dismiss the Section 20(a) claim against him alleging control person liability,
but the court denied the motion, finding that the complaint sufficiently alleged that the executive
possessed control over the alleged primary violators and that he was a culpable participant in the
alleged primary violations. Addressing the defendant’s argument that the pleading standards of
Rule 9(b) and the Private Securities Litigation Reform Act of 1995 applied to all the elements of
the Section 20(a) claim, the court disagreed. The court found that the heightened pleading
standards applied to the culpable participation element of the claim, but that the control element
was subject only to the lower standard of Rule 8. Because the complaint contained sufficient
allegations to satisfy the pleading standard applicable to each element, the court denied the
motion to dismiss.
Prime Mover Capital Partners, L.P. v. Elixir Gaming Techs., Inc., 793 F. Supp. 2d 651
(S.D.N.Y. 2011).
Hedge funds brought a securities fraud action against an issuer of securities, its individual
directors and officers, a Hong Kong corporation that later gained control of the issuer, and the
Hong Kong corporation’s chairman, a citizen of Canada residing in Hong Kong. After the court
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