IN RE iANTHUS CAPITAL HOLDINGS, INC. SECURITIES LITIGATION
- Lewis Kaplan
- 1:20-cv-03135
- U.S. District Court · Southern District of New York
- 1
In iAnthus Securities Litigation, Judge Kaplan granted clarification dismissing Maslow, Galvin, and Stavola’s primary 10b-5 and common-law fraud claims but denied it as to their Section 20(a) claims.
Hi-Med LLC and defendants Maslow, Galvin, and Stavola. The primary 10b-5 and common-law fraud claims against the three defendants were dismissed, while the Section 20(a) claims were not dismissed by this order.
What happened
In In re iAnthus Capital Holdings, Inc. Securities Litigation, defendants Maslow, Galvin, and Stavola asked the court to clarify what claims against them had been dismissed in an earlier decision. Hi-Med LLC took a different view of that decision and argued that its primary securities claims and control-person claims should continue.
The court explained that its earlier decision had mistakenly accepted the parties’ assumption that a Section 20(a) claim required allegations that a control person knowingly participated in the underlying securities violation. The court held that a plaintiff does not need to plead that kind of participation to state a Section 20(a) claim.
Judge Lewis A. Kaplan granted the clarification request to the extent that the primary 10b-5 claims and common-law fraud claims against the three defendants were dismissed. He denied the request as to the Section 20(a) claims, modifying the earlier decision.
The detailed version
- IN RE iANTHUS CAPITAL HOLDINGS, INC. SECURITIES LITIGATION · No. 1:20-cv-03135
- Lewis Kaplan
- Dec. 7, 2022
Background
Defendants Maslow, Galvin, and Stavola moved for clarification of the court’s September 28, 2022 memorandum opinion. The dispute concerned what claims brought by plaintiff Hi-Med LLC had been dismissed against those defendants.
The defendants argued that the earlier opinion dismissed Hi-Med’s securities claims except for claims concerning an escrow provision, and also dismissed the defendants from the Section 20(a) control-person claims relating to that escrow issue. Hi-Med argued that the earlier opinion had not dismissed any primary Section 10(b) claims against these defendants and that the Section 20(a) claims should continue.
Court’s Analysis
The court said the earlier opinion had adopted, without analysis, the parties’ assumption that a plaintiff must allege “culpable participation”—participation in the underlying securities violation by the alleged control person—to state a legally sufficient Section 20(a) claim. The court noted that district courts in the Second Circuit disagree about whether culpable participation is required and that the Second Circuit has not resolved the issue.
The court adopted the view that a plaintiff does not need to plead culpable participation by a control person to state a Section 20(a) claim. Section 20(a) concerns control-person liability for securities violations; Section 10(b) claims are the underlying securities-fraud claims. The court also addressed the common-law fraud claims in its clarification ruling.
Disposition
The court granted the motion for clarification to the extent that the primary 10b-5 claims and common-law fraud claims against Maslow, Galvin, and Stavola were dismissed. It denied the motion with respect to the Section 20(a) claims. The order modified the September 28, 2022 memorandum opinion. Judge Lewis A. Kaplan entered the order on December 7, 2022.
Read the full 1-page opinion on CourtListener, the free public archive maintained by the Free Law Project.