Broker-Dealer Litigation - Greenberg Traurig LLP

to dismiss, defendants claimed, inter alia, the “bespeaks caution” doctrine protected any
statements made in connection with the ARS market. The court found that the bespeaks caution
doctrine protected forward-looking statements so long as adequate cautionary language disclosed
the risks associated with ARS. The cautionary language must so clearly disclaim the risks that
the alleged misstatements could not be said to be material. The court, in dismissing defendants’
motion and taking the allegations in the complaint as a whole, held that there was a question as
to whether the alleged disclosures accurately informed the investors of the risks of ARS.
Valentini v. Citigroup, Inc., 2011 WL 6780915 (S.D.N.Y. Dec. 27, 2011).
C.1.f
Plaintiffs brought a complaint against defendants alleging violations of Section 10(b) and
Rule 10b-5 of the Securities Exchange Act of 1934 related to the purchase of equity linked
securities (“ELKs”). In particular, plaintiffs alleged that defendants made misrepresentations or
omissions related to the risks associated with ELKs. On defendants’ motion to dismiss,
defendants claimed that any statements they made in association with ELKs were tempered by
the plethora of warnings and disclaimers provided to plaintiffs prior to their purchase of the
ELKs. The court found this argument to essentially be the “bespeaks caution” doctrine defense,
which holds that certain forward-looking statements that directly contradict cautionary language
in the offering documents will generally be considered immaterial as a matter of law. However,
the court held that such disclaimers did not defeat plaintiffs’ allegations of misrepresentations.
Rather, the disclaimers did not directly relate to the risk that was allegedly misrepresented, a
requirement of the bespeaks caution doctrine. Accordingly, the court denied defendants’ motion
to dismiss on the Section 10(b) claim.
In re Anadigics, Inc., Securities Litigation, 2011 WL 4594845 (D. N.J. Sept. 30, 2011).
C.1.f
Plaintiffs brought a class action suit against defendant alleging violations of Section 10(b)
and Rule 10b-5 of the Securities Exchange Act of 1934 related to multiple statements made in
various press releases and earnings calls. Allegedly, defendant was losing its market share to
various competitors and failed to disclose this fact to plaintiffs. Moreover, defendant allegedly
made affirmative statements indicating it currently had a substantial market share of the relevant
market. On its motion to dismiss, defendant made two main arguments. First, defendant argued
that, absent an affirmative duty to disclose, it was not required to disclose the fact that it was
losing marking share. The court agreed, reasoning that defendant had no duty to disclose the
information in question. The court reasoned that the applicable information did not require
disclosure, unlike a situation in which there is insider trading, a statute requiring disclosure, or an
inaccurate, incomplete or misleading prior disclosure. Second, defendant argued that it was
protected from any statements it allegedly made by the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 (“PSLRA”). Again, the court agreed, holding that a
party is not liable under Section 10(b) or Rule 10b-5 for forward looking statements provided
they are (1) identified as such, and accompanied by meaningful cautionary statements; (2)
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