Broker-Dealer Litigation - Greenberg Traurig LLP

corporation’s earnings forecasts was meaningful, precluding summary judgment for corporation
on issue of whether its forecasts were protected by safe harbor provision for forward-looking
statements in investors’ action alleging violations of § 10(b) and Rule 10b-5. Securities
Exchange Act of 1934 § 10(b), 15 U.S.C.A § 78j(b); Private Securities Litigation Reform Act of
1995, § 102(b), 15 U.S.C.A. § 78u-5(i)(1)(A); 17 C.F.R. § 240.10b-5.
In Re Franklin Bank Corp. Securities Litigation, 782 F. Supp. 2d 364 (S.D. Tex.
2011).
C.1.d
Purchasers of common and preferred stock in the failed Franklin Bank Corp. filed
securities fraud class action against bank’s officers and directors, its outside auditor, and
underwriter for preferred stock offer. Defendants moved to dismiss for failure to satisfy the
Private Securities Litigation Reform Act (PSLRA) heightened pleading requirements for
securities fraud cases under Rule 9(B). The court granted defendants’ motion, holding that the
Bank’s acts, and its officers,’ directors,’ and auditors’ acts did not give rise to cognizable claims
because for failure to allege an omission to be sufficiently “material” and failure to allege
scienter sufficient to support a securities fraud claim.
Puskala v. Koss Corp., 799 F. Supp.2d 941 (E.D. Wis. 2011).
C.1.d
Investors brought putative class action against corporation and certain of its officers for
securities fraud and control-person liability involving a $50 million embezzlement scheme by the
vice president of finance. The investors also sued the company’s outside auditors. Plaintiffs
alleged that the defendants had recklessly certified the accuracy of the company’s financial
statements and recklessly represented that the financial statements fairly represented the
company’s financial position. The court rejected the company’s motion to dismiss in part
holding that the company could be liable under the doctrine of apparent authority for the V-P
finance’s “statements to the market while acting with apparent authority, and therefore the
company is liable for her fraud even though she was not trying to further the company’s goals.”
The claim against the auditor was dismissed because its conduct was merely negligent and not
reckless.
e. Standing
C.1.e
Amorosa v. AOL Time Warner Inc., 2011 WL 310316 (2nd Cir. 2011).
Plaintiff brought suit against defendants alleging a violation of Section 10(b) of the
Securities Exchange Act of 1934 based on misleading statements contained in an audit of AOL’s
financial statements. The district court granted defendants’ motion to dismiss. On affirming the
district court, the Second Circuit addressed, inter alia, defendant’s “holder” Rule 10b-5 claim.
Essentially, plaintiff attempted to argue that it had standing to sue based on the Exchange Act as
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