Broker-Dealer Litigation - Greenberg Traurig LLP

were disclosed by the timely filing of Form 4s with the SEC. With respect to grants for which
Form 4s were not necessarily timely filed, the court credited the defendants’ arguments that the
plaintiffs used inconsistent standards to measure the gains that accrued after options were
granted, thus undercutting the force of their backdating allegations. The defendants also
convinced the court that the plaintiffs had improperly cherry-picked a small subset of option
grants to allege circumstantial backdating, ignoring the larger number of grants that bore no
indicia that they were backdated. With respect to the plaintiffs’ claims that Apollo overstated its
net income and understated its compensation expenses as a result of granting stock options below
their fair market value, the court similarly held that these allegations failed to meet the applicable
pleading standards.
Nguyen v. Radient Pharms. Corp., 2011 U.S. Dist. LEXIS 124631 (C.D. Cal. Oct. 26, 2011).
O.1
Plaintiffs filed a complaint alleging federal securities law violations against a small
pharmaceutical company and related individuals. The defendants moved to dismiss, arguing that
the complaint failed to comply with the applicable pleading requirements and, in particular,
failed to identify the allegedly material misrepresentations with the particularity required by Rule
9(b) and the Private Securities Litigation Reform Act of 1995. The court disagreed and denied
the motion, holding that the plaintiffs adequately specified which statements were misleading
and stated the reasons why those statements were misleading. Specifically, the plaintiffs
properly accused the defendants of misstating that that the company was conducting a drug study
with the Mayo Clinic and referring to that study as the “Mayo study” when, in fact, the company
had only entered into a collaboration agreement with a separate laboratory division of the Mayo
Clinic known as Mayo Validation Support Services.
O.1.
Anschutz Corp. v. Merrill Lynch & Co., Inc., 785 F. Supp. 2d 799 (N.D. Cal. 2011)
The plaintiff, an investor in auction rate securities (“ARS”) brought suit against sellers of
ARS and securities ratings agencies, accusing the sellers of market manipulation in violation of
the Securities Exchange Act of 1934 and California state securities laws, and accusing the ratings
agencies of negligent misrepresentation. The defendants moved to dismiss, and with one limited
exception, the court denied the motion. With respect to the market manipulation claims against
the sellers, the court found that the allegations were pleaded with sufficient particularity to
satisfy Rule 9(b), rejecting the defendants’ argument that their disclosure of the fact that they
“may” place support bids in auctions precluded claims of manipulation. The defendants’
disclosure was not sufficient to cover the allegation made by plaintiffs that in the auctions at
issue, the defendants had participated in every auction and bid for 100% of the issue at every
auction. With respect to the negligent misrepresentation claims against the ratings agencies, the
court noted that district courts within the Ninth Circuit held Rule 9(b) applicable to such claims
and therefore, although the Ninth Circuit had not decided the question, the court assumed that the
heightened pleading standard applied. The court found the plaintiff’s allegations against the
rating agencies sufficient to meet the heightened standard, particularly in light of the rating
agencies’ involvement in structuring the securities at issue, their knowledge that the securities
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