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Second Circuit Affirms Dismissal of Securities Fraud Class Action Against Centerline Holdings
Practices
On June 9, 2010, the Second Circuit Court of Appeals affirmed the decision of Judge Shira A. Scheindlin dismissing a securities fraud class action brought under Sections 10(b) and 20(a) of the Securities Exchange Act against our client, Centerline Holding Company. Plaintiffs claimed that Centerline had a duty to disclose its plans to transform Centerline's business model from one focused on the generation of distributable tax-exempt income to that of an asset manager focused on growth.
The Court of Appeals rejected plaintiffs' claim that defendants had a duty to disclose such plans, and noted that plaintiffs' effort "to characterize many of Defendants' class period statements as speaking to the company's future plans -- and thus misleading in light of Defendants' undisclosed plans for Centerline -- fails when the statements are reviewed in their entirety and in the context of the questions from analysts to which they were responsive .... These statements were not rendered misleading by the Defendants' omissions. Because Defendants therefore had no clear duty to disclose their plans, and for the other reasons identified by the district court, Plaintiffs' amended complaint did not adequately allege 'conscious misbehavior or recklessness,' and otherwise failed sufficiently to allege fraudulent scienter."
The Paul, Weiss team representing Centerline included litigation partners Richard Rosen (who argued the appeal) and Daniel Leffell and associates Satyam Bee, Kevin Frankel, Ethan Krasnoo and Erica Platt.