As I have previously noted on this blog (most recently here), one of the more distinctive litigation phenomena in recent years has been the rash of securities class action lawsuits involved allegations that the defendant firms’ use of stock promotion firms had resulted in misrepresentations to investors. The difficulty for the plaintiffs in these cases is that under the U.S. Supreme Court’s 2011 Janus Capital Group’s decision (about which refer here), only the “maker” of an allegedly misleading statement can be held liable under Rule 10b-5, and in many of these cases it was the stock promotion firm, not the company itself, that “made” the allegedly misleading statement.
However, in a recent motion to dismiss ruling in one of these stock promotion firm securities class action lawsuit, the plaintiffs’ complaint survived the dismissal motion in part, even though the Court agreed that the company defendants could not be liable for statements “made” by the stock promotion firm. The ruling is interesting in and of itself and also for what it says about theories of liability that apparently survived the U.S. Supreme Court’s Janus ruling.
As discussed below, in a July 13, 2015 ruling, Central District of California Chief Judge George H. King, granted in part and denied in part the defendants’ motions to dismiss the securities class action lawsuit that plaintiff shareholders had filed against CytRx Corporation, certain of its officers, and its offering underwriters. A copy of Judge King’s ruling can be found here.
Continue Reading Securities Suit Against Company That Used Stock Promotion Firm Survives Dismissal Motion