Overview
In an opinion yesterday, Judge Forrest denied a motion to dismiss by the investment bank Macquarie, which argued (see here and here) that, based on Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (June 13, 2011), the allegedly false prospectus at issue was “made” by the issuer (a company called Puda Coal), not the underwriter (Macquarie). There a few lower court decisions on this issue, but Judge Forrest found that Janus did not bar the plaintiffs' claims here:
Under Janus, "attribution within a statement or implicit from surrounding circumstances is strong evidence that a statement was made by -- and only by -- the party to whom it is attributed." 131 S. Ct. at 2302. With facts construed and inferences drawn in plaintiffs' favor, the complaint alleges that Macquarie had authority over the information contained in the prospectus sufficient to make its statements attributable to Macquarie. The complaint alleges that the underwriters "actively participated in creating the Prospectus, drafting it jointly with Puda management." Pursuant to its formal agreement with the underwriters, Puda agreed to "prepare the Prospectus in a form approved by" Macquarie. Indeed, on the morning of the December offering, Puda's counsel sent an email stating that, while the "Company has signed off," Puda's counsel still did not have "the underwriters' sign off." Thus, the complaint alleges that, "[a]bsent Macquarie's sign-off and approval, the Prospectus would not have been filed with the SEC and disseminated to investors." Furthermore, the complaint alleges that the underwriters communicated their involvement with the prospectus to the investing public in several ways. The front cover of the prospectus prominently displayed both underwriters' names, thus endorsing the statements within the prospectus to investors. Macquarie also solicited investors for the offering and distributed the prospectus to investors. Finally, the prospectus provided that the underwriters were authorized to make representations about Puda shares. Construed in plaintiffs' favor, these facts are sufficient to show "attribution within a statement or implicit from surrounding circumstances" such that the statements within the prospectus are attributable to the underwriters. Janus, 131 S. Ct. at 2302.Our sister blog, White Collar Securities Defense, has several posts on the lower courts' interpretation of the Janus decision here.
