Broker-Dealer Litigation - Greenberg Traurig LLP

allege a material misrepresentation or omission because the offering documents put plaintiffs on
notice that the originators would deviate from underwriting standards. The court held that the
allegations were sufficient because the offering documents did not put investors on notice as to
the actual level of risk faced by investors and whether originators applied underwriting standards
to account for borrowers’ ability to pay.
N.J. Carpenters Health Fund v. NovaStar Mortg., Inc., 2011 WL 1338195 (S.D.N.Y. Mar. 31,
2011).
The court granted defendants’ motion to dismiss a class-action plaintiff’s claims under
Section 12(a) of the Securities Exchange Act of 1933. The plaintiff lacked standing to sue on
five of the six offerings pled in its complaint because, as the only named plaintiff in the suit,
plaintiff failed to allege that it purchased securities traceable to any of those offerings. As to the
sole offering in which plaintiff did purchase securities, the court nevertheless found dismissal
was warranted since plaintiff’s allegations were wholly conclusory in nature. Instead of pointing
to specific factual statements to support its allegations, the plaintiff instead pointed to
voluminous news articles and broad investigations concerning the subprime mortgage crisis,
which standing on its own, was not enough.
Employees’ Retirement Sys. of the Government of the Virgin Islands v. J.P. Morgan Chase &
Co., No. 09 Civ. 3701(JGK), 2011 WL 1796426 (S.D.N.Y. May 10, 2011).
The court granted the defendants’ motion to dismiss plaintiff’s claims under Section
12(a) of the Securities Exchange Act of 1933, finding that the plaintiff lacked standing as to
certain claims and failed to sufficiently plead others. With respect to ten sets of Certificates the
plaintiff did not purchase, the court dismissed for lack of standing, stating that a Section 12
plaintiff cannot sue over a broad course of conduct, rather their suit is limited to only “the
specific registration statement and prospectus that cover the specific security that it purchased.”
With respect to the one set of Certificates the plaintiff did have standing to sue upon, the court
found that plaintiff nevertheless had failed to state a plausible claim, as plaintiff did not purchase
the Certificates in the initial public offering, in fact making the purchase nearly a full year after
the first offering. The court concluded that even if a party could base its Section 12 claim on “an
aftermarket sale,” plaintiff had failed to include any factual allegations to support its legal
contention that the defendants “promoted and sold” the Certificates and “solicited sales” for
financial gain.
Huelbig v. Aurora Loan Servs., LLC, 2011 WL 4348281 (S.D.N.Y. May 18, 2011).
The magistrate judge recommended that the court grant defendants’ motions to dismiss
plaintiff’s claims under Section 12(a) of the Securities Exchange Act of 1933, finding that
plaintiff had failed to plausibly allege that he purchased a security from any defendant in the
case. The plaintiff failed to “explain what securities were allegedly purchased, in what amount,
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