Broker-Dealer Litigation - Greenberg Traurig LLP

dismissed the latter two defendants for lack of personal jurisdiction, the remaining defendants
moved to dismiss under Rule 12(b)(6). The court granted the motion in part and denied it in part.
With respect to the securities law claims, the court found that one of the plaintiffs failed to plead
transaction causation adequately, while the other largely failed to plead loss causation adequately
and, to the extent its causation allegations were adequate, the alleged misrepresentations were
nevertheless protected as forward-looking statements. Turning to the plaintiffs’ claims that the
defendants breached certain warranties in the transaction documents, the court held that Rule
9(b) applied to these breach of contract claims because the warranty claims were closely related
to the securities fraud claims, and thus the question of breach turned on whether the fraudulent
conduct adequately had been pleaded. According to the court, Rule 9(b)’s relaxed standard for
averments of intent should not be mistaken as a license to base claims of fraud on speculation
and conclusory allegations, and still required the plaintiff to allege facts giving rise to a strong
inference of fraudulent intent. Because the complaint failed to contain allegations giving rise to
a strong inference that the issuer or any of its agents had a concrete personal motive to
manipulate the price of the company’s stock and warrants, the breach of warranty claims failed.
SEC v. Aragon Capital Advisors, LLC, 2011 WL 3278907 (S.D.N.Y. July 26, 2011).
In an action brought by the SEC accusing a father and his sons of insider trading where
the father allegedly disclosed material non-public information regarding his employer to his
sons, the defendants moved to dismiss, claiming that the SEC’s allegations failed to comply with
the pleading requirements of Rule 9(b) because they did not allege whether the father directly or
indirectly provided the sons with the information. The court rejected this argument, holding that
the allegations were sufficient to put the defendants on notice of the claims, and to require the
SEC to allege the specific details of the tips, including the manner in which they were disclosed,
would place too heavy a burden on the SEC at the pleading stage. The court also rejected the
defendants’ contention that the fact that the SEC had conducted discovery and deposed several
defendants obligated it to plead with greater particularity, finding no basis for raising the
pleading standard based upon the procedural posture of the case.
PT Bank Negara Indonesia (Persero) Tbk v. Barclays Bank PLC, 2011 WL 4717360 (S.D.N.Y.
Sept. 28, 2011).
Plaintiff sued the defendants alleging that they defrauded the plaintiff into buying a
credit-linked note that lost more than half of its value due to the bankruptcy of one of the
corporate entities to which it was linked. The plaintiff asserted claims for violations of the
Securities Exchange Act of 1934, along with numerous other state law claims. The defendants
moved to dismiss on the grounds that the federal securities claim failed to plead an active
misrepresentation or willful omission of material information about the credit-linked note with
the particularity required by Rule 9(b). The court agreed, finding a general statement by the
defendants that the note would be linked to “Verizon,” a large company known to have good
credit, and the fact that the note carried a low rate of interest, were insufficient to show that the
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