Broker-Dealer Litigation - Greenberg Traurig LLP

over common questions, given the number of separate offerings and the need to determine
whether the actionable misstatements were material and the extent to which each putative class
member relied on those statements. The court concluded that common questions predominated
because of the similarity between the offerings and alleged misrepresentations present in each.
Finally, the court rejected the defendants’ arguments that there were individual questions arising
from the statute of limitations, which had allegedly tolled for many plaintiffs based on their
possible suspicion of misrepresentations at an earlier time. The court held mere suspicion of
legal violations did not constitute actual knowledge for tolling purposes and defendants had not
alleged that any putative class members participated in the illegal acts at issue.
In re Morgan Stanley Mortg. Pass-Through Certificates Litig., 2011 WL 4089580 (S.D.N.Y.
Sept. 15, 2011).
The court granted in part defendants’ motion to dismiss plaintiffs’ claims arising under
Section 12(a) of the Securities Exchange Act of 1933. The court held that plaintiffs’ complaint
alleging that “[defendants] promoted and sold the Certificates to plaintiffs and other class
members” was sufficient to satisfy statutory standing requirements under Section 12(a)(2).
Further, the court also found that diminution of a security is a cognizable loss under Section
12(a)(2). The court determined that plaintiffs’ 12(a)(2) claims that mortgage loans were made
without any regard to borrower qualifications, that borrowers were coached by defendants, and
that defendants employed atypical real estate valuation practices could not be dismissed because
of disclosures made in defendants’ offering documents that “borrower information was not
always obtained or verified, and that appraisals might not be independent.” The court then
dismissed plaintiffs’ claims that defendants, by stating that underlying securities held a certain
investment claim, made an actionable misrepresentation without disclosing underlying flaws in
the ratings process. The court held these “ratings-related” claims failed to state a factual
misstatement but granted plaintiffs leave to amend.
City of Roseville Employees’ Retirement Sys. v. Energysolutions, Inc., No. 09 Civ. 8633 (JGK),
2011 WL 4527328 (S.D.N.Y. Sept. 30, 2011).
The court granted defendants’ motion to dismiss in part and denied it in part. Plaintiffs
were a proposed class of investors in common stock of engineering, spent fuel management, and
decontamination and decommissioning company that serviced nuclear reactors. About a year
after its IPO, defendants announced that that they would not be able to move forward with an
announced major project due to significant decline in the trust fund for that decommissioning
project. Further, new regulatory policies the company had expected to pass had been denied.
For these reasons, defendants’ revenue and earnings estimates would need to be significantly
reduced, causing the company’s stock to drop more than 60% over the next month. Plaintiffs
alleged that Registration Statements filed by defendants prior to this announcement contained
false and misleading statements under Section 12(a)(2) of the Securities Act of 1933. These
alleged misstatements and omissions included 1) representations regarding impact of certain
contracts defendant entered prior to its IPO on waste disposal opportunities, 2) available
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