Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
Plaintiffs' Memorandum of Law in Opposition to Motions to Dismiss ...
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Notwithstand<strong>in</strong>g the provisions <strong>of</strong> subsection (a) no person, other than the issuer,<br />
shall be liable as provided there<strong>in</strong> who shall susta<strong>in</strong> the burden <strong>of</strong> pro<strong>of</strong> ....<br />
Walker has not susta<strong>in</strong>ed that burden <strong>of</strong> pro<strong>of</strong> at this stage and therefore the claim aga<strong>in</strong>st him should<br />
not be dismissed. 43<br />
F. <strong>Pla<strong>in</strong>tiffs'</strong> Control Person Claims Should Be Susta<strong>in</strong>ed<br />
Under §15 <strong>of</strong> the Securities Act and §20(a) <strong>of</strong> the Exchange Act , liability attaches <strong>to</strong> one<br />
who "controls" a person who violates any provision <strong>of</strong> the securities laws. To state a valid claim<br />
under §§15 or 20(a), a pla<strong>in</strong>tiff need only allege (i) a violation <strong>of</strong> the securities laws and (ii) the<br />
defendant was a controll<strong>in</strong>g person with respect <strong>to</strong> the violation with<strong>in</strong> the mean<strong>in</strong>g <strong>of</strong> §§15 and 20. 44<br />
See Landry's, slip op. at 11 n.14 (cit<strong>in</strong>g Ellison v. Am. Image Mo<strong>to</strong>r Co., 36 F. Supp. 2d 628, 637-38<br />
(S.D.N.Y. 1999)); Christ<strong>of</strong>fel v. E.F. Hut<strong>to</strong>n & Co., 588 F.2d 665, 667 (9th Cir. 1978); Stern v. Am.<br />
Bankshares Corp., 429 F. Supp. 818, 823 (E.D. Wis. 1977). As the Fifth Circuit held <strong>in</strong> G.A.<br />
Thompson & Co. v. Partridge, 636 F.2d 945, 957 (5th Cir 1981), "'[t]he term "control" ... means the<br />
43<br />
Pla<strong>in</strong>tiffs are no longer pursu<strong>in</strong>g §11 claims on the 7% Exchangeable Notes. Thus, Meyer<br />
and W<strong>in</strong>okur's arguments as <strong>to</strong> the 8/99 <strong>of</strong>fer<strong>in</strong>g are moot. Pla<strong>in</strong>tiffs have also withdrawn their §11<br />
claims aga<strong>in</strong>st Foy and Meyer as <strong>to</strong> the 7/01 <strong>of</strong>fer<strong>in</strong>g.<br />
44<br />
Although worded differently, the control person liability provisions <strong>of</strong> §15 <strong>of</strong> the Securities<br />
Act and §20(a) <strong>of</strong> the Exchange Act are <strong>in</strong>terpreted <strong>in</strong> the same way. See First Interstate Bank, N.A.<br />
v. Pr<strong>in</strong>g, 969 F.2d 891, 897 (10th Cir. 1992), rev'd on other grounds sub nom. Central Bank, N.A.<br />
v. First Interstate Bank, N.A., 511 U.S. 164 (1994). Section 15 <strong>of</strong> the Securities Act, 15 U.S.C.<br />
§77(o), provides:<br />
Every person who, by or through s<strong>to</strong>ck ownership, agency, or otherwise, or<br />
who, pursuant <strong>to</strong> or <strong>in</strong> connection with an agreement or understand<strong>in</strong>g with one or<br />
more other persons by or through s<strong>to</strong>ck ownership, agency, or otherwise, controls any<br />
person liable under sections 11 or 12 ... shall also be liable jo<strong>in</strong>tly and severally with<br />
and <strong>to</strong> the same extent as such controlled person <strong>to</strong> any person <strong>to</strong> whom such<br />
controlled person is liable, unless the controll<strong>in</strong>g person had no knowledge <strong>of</strong> or<br />
reasonable ground <strong>to</strong> believe <strong>in</strong> the existence <strong>of</strong> the facts by reason <strong>of</strong> which the<br />
liability <strong>of</strong> the controlled person is alleged <strong>to</strong> exist.<br />
Section 20(a) <strong>of</strong> the Exchange Act, 15 U.S.C. §78t(a), conta<strong>in</strong>s an analogous control person<br />
provision:<br />
Every person who, directly or <strong>in</strong>directly, controls any person liable under any<br />
provision <strong>of</strong> this title or <strong>of</strong> any rule or regulation thereunder shall also be liable<br />
jo<strong>in</strong>tly and severally with and <strong>to</strong> the same extent as such controlled person <strong>to</strong> any<br />
person <strong>to</strong> whom such controlled person is liable, unless the controll<strong>in</strong>g person acted<br />
<strong>in</strong> good faith and did not directly or <strong>in</strong>directly <strong>in</strong>duce the act or acts constitut<strong>in</strong>g the<br />
violation or cause <strong>of</strong> action.<br />
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