Broker-Dealer Litigation - Greenberg Traurig LLP

C.1.d
Alki Partners, L.P. v. Vatas Holding GmbH, 769 F. Supp. 2d 478 (S.D.N.Y. 2011).
Hedge fund filed suit against international corporations, their executives, and their
subsidiaries, alleging market manipulation scheme to artificially inflate price of stock in
violation of federal and Washington state security laws, and state law claims of common law
fraud, breach of contract, veil piercing, and conspiracy. Defendants moved to dismiss on the
grounds of jurisdictional and substantive objections. In granting defendants’ motions, the court
held: (1) it did not have general jurisdiction over Swiss broker; but 2) Swiss broker had sufficient
minimum contacts with United States for exercise of personal jurisdiction; 3) court did not have
personal jurisdiction over German broker; 4) court did not have personal jurisdiction over
nonresident corporation’s principal shareholder; 5) court had personal jurisdiction over
nonresident corporation’s managing director; 6) hedge fund failed to state claim for market
manipulation since its damages were not caused by reliance on an assumption of an efficient
market; 7) complaint failed to allege facts sufficient to give rise to strong inference of scienter on
part of Swiss corporation or its United States agent; 8) allegations that corporation and its
managing director knew that trading would have impact upon market price were insufficient to
allege scienter; 9) allegations of undercapitalization were insufficient to meet scienter
requirement; 10) complaint sufficiently alleged corporation’s managing director’s manipulative
acts with particularity; 11) sua sponte dismissal of claims against non-appearing defendant was
appropriate; and 12) amendment of complaint would be futile, so dismissal without leave to
amend was appropriate.
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In re Bear Stearns Companies, Inc., Securities, Derivative and ERISA Litigation, 763 F. Supp.
2d 423 (S.D.N.Y. 2011).
Investors in bank stocks and former employees who held stock in an ESOP brought class
action against bank, its officers and directors and accounting firm that performed audits to
recover for violations of federal securities laws and ERISA violations. Defendants moved to
dismiss for failure to state a claim. Under the Private Securities Litigation Reform Act, a
securities fraud plaintiff asserting a claim for money damages must 1) specify the statements that
he believes are fraudulent, 2) identify the speaker, 3) state where and when statements were
made, and 4) explain why statements were fraudulent. Securities Exchange Act §10(b) The
district court held that plaintiffs had sufficiently pled allegations of securities fraud with respect
to the bank’s continued use of outdated models to value mortgage backed securities. Plaintiffs
also sufficiently alleged insider trading and control liability against officers and directors of the
bank as well as violations of securities laws against the accounting firm for using improper
auditing standards. The court found that the allegations of securities fraud were material and
were made with the requisite scienter to establish the violations. Plaintiff’s derivative claims and
the ERISA claims were dismissed.
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