Broker-Dealer Litigation - Greenberg Traurig LLP

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Resnik v. Woertz, 744 F. Supp. 2d 614 (D. Del. 2011).
Shareholder alleged that misrepresentations in a company’s proxy statement deprived
him of his right to a fully informed stockholder vote. The court rejected his claim for injunctive
relief under Section 14(a) of the Securities Exchange Act. The court held that corrective
disclosure and holding another stockholder vote was an injury “insufficient to meet the loss
causation requirement.” Shareholder was successful, however, in avoiding dismissal of his
claims for unjust enrichment and corporate waste based on the high executive salaries received
from the company as a result of the proxy vote.
Vandevelde v. China Natural Gas, Inc., 277 F.R.D. 126 (D. Del. 2011).
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Investor filed class action lawsuit alleging securities fraud by Chinese natural gas
corporation and corporate officers in violation of §§10(b) and 20(a) of Securities Exchange Act
and Rule 10b-5. More specifically, plaintiffs alleged that defendant failed to disclose material
facts regarding its financial well-being which, in turn led plaintiffs to purchase its common stock
to their detriment. A notice of the class action was published and two investors filed competing
motions seeking appointment as lead plaintiff and seeking approval of each of their selections for
lead counsel. The court in denying one motion and granting another, held: 1) investor who
suffered largest financial loss was presumptive lead plaintiff; 2) investor satisfied typicality
requirement; 3) investor satisfied adequacy requirement; 4) investor’s communications with
corporation did not create unique defense to his lead plaintiff status; and 5) investor’s electronic
message board postings did not render him inadequate to represent the class.
SEC v. Monterosso, 768 F. Supp.2d 1244 (S.D. Fla. 2011).
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Security and Exchange Commission (“SEC”) instituted fraud proceedings against
executives of wholesale telecommunications companies for generating fictitious revenue. Both
parties moved for summary judgment. Plaintiff alleged that: 1) Defendants were liable for
violations of the anti-fraud provisions based on their conduct of making false statements and
participation in a fraudulent scheme; 2) defendants acted with knowledge or at least recklessly in
manufacturing and submitting invoices for business that never occurred; 3) overstatements of
revenue were material; 4) defendants aided GlobeTel’s reporting and book violations; and 5)
defendants falsified records and misled GlobeTel’s auditors in violation of Rules 13b2-1 and
13b2-2. Defendants moved for summary judgment on the SEC’s claims on the basis that any
misstatements of revenue were immaterial. The court, in denying defendants’ motion and
granting plaintiff’s motion, held that: 1) company’s misstatements were made in connection
with purchase or sale of securities within meaning of antifraud provisions of federal securities
laws; 2) overstatements of $108 million of revenue in annual reports, registration statements, and
press releases were material; 3) overstatements of revenue were made with scienter; 4) court was
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