Co-authored by Allison Wuertz.
The US District Court for the District of Colorado considered several motions to dismiss a class-action suit filed by plaintiff Touchtone Group, LLC to recover damages resulting from a Ponzi scheme devised by Mantria Corporation. Defendants filed motions to dismiss for, among other things, failure to state a claim for violations of the Securities Exchange Act of 1934 (the Exchange Act). The court granted defendants’ motion, in part, finding that Touchstone had failed to adequately plead violations of Sections 10(b) and 20(a) of the Exchange Act against defendant Granoff, who served as controller of Mantria. In dismissing these securities claims against Granoff, the court considered whether false statements actually had been “made” by him. In the recent Supreme Court case of Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (2011), the Court held that an individual “makes” a false statement when he or she possesses “ultimate authority over the statement, including its content and whether and how to communicate it.” Janus, 131 S. Ct. at 2302. The court, however, found that Janus did not address statements that are published collectively by a group of equally authoritative individuals within an organization. As a result, the court held that Touchstone sufficiently had alleged that two other defendants—the interim Chief Financial Officer and Chief Legal Officer of Mantria—had “made” false statements, but that Granoff, who reported to the CFO and did not have “ultimate authority,” could not be the maker of such statements.
Touchtone Group, LLC v. Rink et al., Civil Action No. 11-cv-02971WYD-KMT (Dec. 21, 2012).