Broker-Dealer Litigation - Greenberg Traurig LLP

initially inflated the company’s stock price and ultimately caused the stock to drastically decline
in value. Defendants moved to dismiss the complaint. The court dismissed the Section 12
claims because plaintiffs based their claims on statements concerning the relationship between
the issuer and another products manufacturer as well as statements concerning sales strategy and
relationships that could not constitute untrue statements of material fact. The court granted
plaintiffs leave to amend.
In re STEC Inc. Sec. Litig., Nos. SACV 09–1304 JVS (MLGx), SACV 09–01306–JVS(MLGx),
SACV 09–1320–JVS(MLGx), SACV 09–1460–JVS(MLGx), CV09–08536–JVS(MLGx), 2011
WL 2669217 (C.D. Cal. June 17, 2011).
The court granted in part defendants’ motion to dismiss plaintiffs’ claims arising under
Section 12(a)(2) of the Securities Act of 1933. Plaintiffs brought a putative class action alleging
that defendants violated federal securities laws, including Section 12(a)(2) of the Securities Act,
when they issued or caused to be issued materially untrue statements and made omissions that
created an inflated impression of issuing defendant’s revenue growth and dramatically inflated
the company’s stock price. The issuer defendants moved to dismiss pursuant to Federal Rules of
Civil Procedure 12(b)(1), (b)(6), 8(a), and 9(b) and the Private Securities Litigation Reform Act
of 1995 arguing that plaintiffs did not adequately allege material misrepresentation. The court
denied defendant’s motion and cited several instances where plaintiffs alleged factual
misrepresentations. The court noted that plaintiffs did not oppose dismissal of the Section
12(a)(2) claims against the underwriter defendants and thereby granted dismissal without
discussion.
Healthy Habits, Inc. v. Fusion Excel Corp., No. CV11–675–CAS (PLAx), 2011 WL 2448256
(C.D. Cal. June 17, 2011).
The court denied defendants’ motion to dismiss plaintiffs’ claims arising under Section
12(a)(2) of the Securities Act of 1933 because plaintiffs validly asserted a prima facie Section 12
claim. Investors brought suit alleging violation of Section 12(a)(2) based on the sale of
unregistered securities and fraudulent misrepresentations associated with those sales.
Defendants moved to dismiss the Section 12 claims pursuant to Federal Rules of Civil Procedure
12(b)(1) and (b)(6) arguing that the court lacked subject matter jurisdiction because plaintiffs
failed to show the sale of a “security.” The court denied the motions because plaintiffs had plead
a sufficient factual basis to establish a Section 12 claim. The court held that defendants’
submissions regarding the true nature of the disputed security inappropriately required the court
to make findings of fact. The court deemed such factual determinations more suitable for a
summary judgment motion.
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