Broker-Dealer Litigation - Greenberg Traurig LLP

improper attempt to file the Third Amended Complaint---as the basis for its motion for sanctions.
The court found that the sanctions award violated Rule 11’s clear requirement that the motion
describe the specific conduct that allegedly violates Rule 11(b), and thus the plaintiffs lacked the
requisite notice that the initial filing of the lawsuit could form the basis for sanctions.
SEC v. Smith, 798 F. Supp. 2d 412 (N.D.N.Y. 2011).
Sanctions were warranted against wife of the target of an SEC investigation and the
attorney for a trust in which she and her husband had an interest based upon their subjective bad
faith. When the SEC moved for a preliminary injunction freezing assets of the trust based upon
its contention that the target held an interest in the trust assets, the wife deliberately concealed
the existence of an annuity agreement pursuant to which she and her husband were to receive
$500,000 annually from the trust, warranting sanctions. Likewise, the attorney for the trust acted
with subjective bad faith by submitting a declaration denying that she informed the SEC of the
existence of the annuity agreement because she had no knowledge of it at the time, where she
had received an email referring to the annuity agreement one day before her conversation with
the SEC.
Stevens v. Sembcorp Utilities PTE Ltd., 2011 WL 3296063 (S.D.N.Y. Aug. 1, 2011).
In a suit brought by a shareholder against a defendant claiming that the defendant omitted
material information from its tender offer to purchase the shares of the firm in which the plaintiff
was a shareholder, the defendant moved to recover its attorney’s fees under Rule 11. The district
court rejected the defendant’s argument that the plaintiff’s amended complaint was moot before
it was filed, holding that while the release of certain documents mooted the primary concerns of
the original complaint, those disclosures did not address the claims asserted in the amended
complaint. The court found that the plaintiff’s claims were not so patently meritless as to render
the amended complaint sanctionable, and thus refused to award attorney’s fees to the defendant.
Maine State Ret. Sys. v. Countrywide Fin. Corp., 2011 WL 4389689 (C.D. Cal. May 5, 2011).
District court granted defendant’s motion to strike allegations from plaintiffs’ complaint
referring to untested allegations from pleadings in other cases as if they were facts. Unlike other
cases in which this practice was deemed appropriate, the plaintiffs’ counsel did not investigate
the grounds for the allegations in the other complaints and did not contact the attorneys in the
other cases to discuss the basis for the claims. The court concluded that lifting allegations from
other complaints without performing any dud diligence did not constitute a reasonable
investigation as required by Rule 11(b), and thus granted the motion to strike.
O.2.
O.2
O.2
361