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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 1 of 12

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE BARCLAYS BANK PLC SECURITIES
LITIGATION

This Document Relates to: All Actions

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Master File No. 1:09-cv-01989-PAC

ECF Case

Electronically Filed

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF THE
UNDERWRITER DEFENDANTS' MOTION TO DISMISS COUNTS I

AND II OF THE CONSOLIDATED AMENDED COMPLAINT

SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP

Jay B. Kasner ([email protected])
Scott D. Musoff ([email protected])
Four Times Square
New York, New York 10036
(212) 735-3000

Attorneys for the Underwriter Defendants

Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 2 of 12

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...........................................................................................................ii

PRELIMINARY STATEMENT...................................................................................................... 1

ARGUMENT ................................................................................................................................... 2

I.

II.

III.

PLAINTIFFS FAIL TO ALLEGE ANY ACTIONABLE MISSTATEMENTS OR
OMISSIONS IN THE OFFERING DOCUMENTS ........................................................... 2

PLAINTIFFS LACK STANDING TO SUE UNDER SECTION 12(a)(2)........................ 2

PLAINTIFFS CANNOT RECOVER UNDER SECTIONS 11 OR 12(a)(2) IN
CONNECTION WITH THE APRIL 2008 OFFERING OF SERIES 5
SECURITIES ....................................................................................................................... 6

CONCLUSION ................................................................................................................................ 8

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 3 of 12

TABLE OF AUTHORITIES

CASES

In re American International Group, Inc. Securities Litigation,

No. 04 Civ. 8141 (DAB), 2010 WL 646720 (S.D.N.Y. Feb. 22, 2010).................................... 7

Caifa v. Sea Containers Ltd.,

331 F. App'x 14 (2d Cir. 2009) .............................................................................................. 4, 5

In re Century Aluminum Co. Securities Litigation,

Nos. C 09-1001 SI, C 09-1205 SI, C 09-1103 SI, C 09-1162, SI, 2010 WL 1729426
(N.D. Cal. Apr. 27, 2010)....................................................................................................... 4, 5

In re Citigroup Inc. Bond Litigation,

No. 08 Civ. 9522 (SHS), 2010 WL 2772439 (S.D.N.Y. July 12, 2010).......................3, 4, 5, 6

DeMaria v. Andersen,

153 F. Supp. 2d 300 (S.D.N.Y. 2001), aff'd, 318 F.3d 170 (2d Cir. 2003)............................... 5

In re Deutsche Telekom AG Securities Litigation,

No. 00 CIV 9475 SHS, 2002 WL 244597 (S.D.N.Y. Feb. 20, 2002) ....................................... 5

Gustafson v. Alloyd Co.,

513 U.S. 561 (1995) ................................................................................................................... 3

In re Livent, Inc. Noteholders Securities Litigation,

151 F. Supp. 2d 371 (S.D.N.Y. 2001)................................................................................ 1, 6, 7

New Jersey Carpenters Health Fund v. DLJ Mortgage Capital, Inc.,

No. 08 Civ. 5653 (PAC), 2010 WL 1473288 (S.D.N.Y. Mar. 29, 2010).......................... 1, 3, 5

Pinter v. Dahl,

486 U.S. 622 (1988) ................................................................................................................... 5

Plumbers' Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp.,

658 F. Supp. 2d 299 (D. Mass. 2009) ........................................................................................ 5

Public Employees' Retirement System v. Merrill Lynch & Co.,

No. 08 Civ. 10841(JSR), 2010 WL 2175875 (S.D.N.Y. June 1, 2010) ................................ 3, 5

In re Sterling Foster & Co. Securities Litigation,

222 F. Supp. 2d 216 (E.D.N.Y. 2002) ................................................................................... 4, 5

ii

Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 4 of 12

STATUTES

15 U.S.C. § 77k(a)............................................................................................................................ 6

15 U.S.C. § 77l(a)(2).................................................................................................................... 1, 6

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 5 of 12

The Underwriter Defendants respectfully submit this reply memorandum of law in

further support of their motion to dismiss Counts I and II of the Amended Complaint with

prejudice.1

PRELIMINARY STATEMENT

Plaintiffs' Opposition Brief ("Opp. Br.") serves to confirm that dismissal of the Amended

Complaint is appropriate. First, as set forth in the Barclays Defendants' moving and reply briefs,

Plaintiffs have failed to allege any actionable misstatements or omissions in the Offering

Documents. (See Point I infra.)

Second, Plaintiffs lack standing to assert claims under Section 12(a)(2) of the Securities

Act of 1933, 15 U.S.C. § 77l(a)(2), because they concede that they did not allege that they

purchased the Barclays Securities in the subject Offerings or from a particular Underwriter

Defendant. While Plaintiffs argue that it is sufficient to merely allege that they purchased the

Barclays Securities "pursuant and/or traceable" to the Offering Documents (Opp. Br. at 34), such

a position has explicitly been rejected by this Court. N.J. Carpenters Health Fund v. DLJ

Mortgage Capital, Inc., No. 08 Civ. 5653 (PAC), 2010 WL 1473288, at *4 (S.D.N.Y. Mar. 29,

2010) (Crotty, J.) (dismissing Section 12(a)(2) claims for lack of standing where complaint only

alleged that plaintiff purchased securities "'pursuant and traceable to' the Offering Documents").

(See Point II infra.)

Third, Plaintiffs do not dispute that recovery under Sections 11 and 12(a)(2) is barred

where a plaintiff knew of the alleged "untruth or omission" at the time he purchased the subject

securities. In re Livent, Inc. Noteholders Sec. Litig., 151 F. Supp. 2d 371, 441 (S.D.N.Y. 2001)

Capitalized terms not otherwise defined have the meanings ascribed to them in the

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Underwriter Defendants' moving brief. To the extent applicable to this motion, the Underwriter
Defendants adopt the arguments contained in the Reply Memorandum of the Barclays
Defendants.

Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 6 of 12

(citations omitted). Here, Plaintiff Martin Ettin, the only named Plaintiff alleged to have

purchased the Series 5 Securities, purportedly purchased those securities after the date on which

Plaintiffs allege Barclays "[began] to make adequate disclosures of its capital credit market

exposures." (Am. Compl. ¶ 184.) Although Plaintiffs contend that "certain vital disclosures

were not made until the annual report as of December 31, 2008" (id.; Opp. Br. at 33), Plaintiffs

do not and cannot identify any such "vital disclosures." Thus, because Ettin purchased the Series

5 Securities after the point at which he admits he had knowledge of the alleged "untruths or

omissions" identified in the Amended Complaint, Plaintiffs' Securities Act claims regarding the

April 2008 Offering of Series 5 Securities should be dismissed. (See Point III infra.)

For these, and additional reasons outlined below and in the Reply Memorandum of the

Barclays Defendants, Counts I and II of the Amended Complaint should be dismissed with

prejudice against the Underwriter Defendants.

ARGUMENT

I.

PLAINTIFFS FAIL TO ALLEGE ANY ACTIONABLE MISSTATEMENTS OR
OMISSIONS IN THE OFFERING DOCUMENTS

For the reasons set forth in the Barclays Defendants' Reply Memorandum, Plaintiffs have

failed to allege any actionable misstatements or omissions in the Offering Documents. (Barclays

Reply Br. at section I.)

II.

PLAINTIFFS LACK STANDING TO SUE UNDER SECTION 12(a)(2)

Plaintiffs acknowledge that, in order to have standing under Section 12(a)(2), they "must

allege that they purchased in the Offerings." (Opp. Br. at 33.) Plaintiffs contend, however, that

this standard is somehow met by simply alleging that the Barclays Securities were purchased

"pursuant or traceable" to the Offerings Documents. (Id.) Plaintiffs are incorrect.

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 7 of 12

As this Court has explicitly held, allegations that a plaintiff purchased securities

"'pursuant or traceable"' to the offering documents "is insufficient to assert standing for Section

12 claims." N.J. Carpenters Health Fund v. DLJ Mortgage Capital, Inc., No. 08 Civ. 5653

(PAC), 2010 WL 1473288, at *4 (S.D.N.Y. Mar. 29, 2010) (Crotty, J.); see also Pub. Employees'

Ret. Sys. v. Merrill Lynch & Co., No. 08 Civ. 10841(JSR), 2010 WL 2175875, at *6 (S.D.N.Y.

June 1, 2010) (dismissing Section 12(a)(2) claims where the complaint did not allege that

plaintiffs purchased the subject securities from the underwriter defendants in the public offerings

at issue and "[i]nstead, rather coyly, the Complaint [made] such allegations as that '[p]laintiffs

and other Class members purchased or otherwise acquired [securities] pursuant and/or traceable

to the defective Prospectus Supplements'"). Instead, Plaintiffs must allege that they "directly

purchased the securities from the underwriting defendants in the subject public offering(s), and

not in the secondary market." Id. (citing Gustafson v. Alloyd Co., 513 U.S. 561, 578 (1995)); see

also In re Citigroup Inc. Bond Litig., No. 08 Civ. 9522 (SHS), 2010 WL 2772439, at *14

(S.D.N.Y. July 12, 2010) (holding that "a plaintiff seeking redress pursuant to Section 12(a)(2)

must establish that it purchased the security directly from defendants through the public offering

at issue").2 Plaintiffs' failure to do so is fatal to their Section 12(a)(2) claims. See DLJ Mortgage

Capital, Inc., 2010 WL 1473288, at *4; Citigroup Inc. Bond Litig., 2010 WL 2772439, at *15;

Merrill Lynch & Co., 2010 WL 2175875, at *6.

Plaintiffs, nevertheless, argue that the Certifications submitted by Lead Plaintiffs

demonstrate that they purchased "in" the April 2006 Offering of Series 2 Securities, the

While the Underwriter Defendants respectfully believe that the complaint in In re

2
Citigroup Bond Litigation did not state a claim for relief, in any event, for the reasons set forth in
the Barclays Defendants' Reply Memorandum, the claims sustained in In re Citigroup Bond
Litigation are distinguishable from those in this case.

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 8 of 12

September 2007 Offering of Series 3 Securities, and the December 2007 Offering of Series 4

Securities.3

(Opp. Br. at 34.) Those Certifications, however, do not specify whether the

securities were actually purchased "in" the subject Offerings. Moreover, the purported fact that

each of the Series 2, Series 3, and Series 4 Securities were purchased on the days in which those

securities were first offered to the public, even if true, is insufficient to confer Section 12(a)(2)

standing upon Plaintiffs. In re Sterling Foster & Co Securities Litigation, 222 F. Supp. 2d 216

(E.D.N.Y. 2002), a case cited by the Underwriter Defendants in their moving brief but ignored

by Plaintiffs, rejected a substantially similar argument. The court dismissed a Section 12(a)(2)

claim where "the plaintiffs fail[ed] to allege that they purchased the securities in the public

offering, as opposed to in the aftermarket," despite the fact that "[s]ome of the purchase dates

listed in the complaint [were] close enough in time to suggest that the plaintiffs could have made

their purchases in the offering." Id. at 245-46; see also, e.g., Citigroup Inc. Bond Litig., 2010

WL 2772439, at *15 (holding that the court would not "scour the various documents provided

[by the plaintiffs] to determine precisely which plaintiff purchased which security from which

defendants" (citing Sterling Foster & Co., 222 F. Supp. 2d at 246)).4

Plaintiffs do not dispute that they lack standing to assert a Section 12(a)(2) claim in

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connection with the April 2008 Offering of Series 5 Securities. As mentioned, Plaintiff Ettin is
the only named Plaintiff alleged to have purchased the Series 5 Securities. According to his
Certification, Ettin first purchased the Series 5 Securities on September 19, 2008, more than five
months after the April 2008 Offering. (Perrin Decl. Ex. E.) Because Ettin's Certification makes
clear that he did not purchase Series 5 Securities in the April 2008 Offering, Plaintiffs lack
standing under Section 12(a)(2) to assert a claim in connection with the Offering.

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Plaintiffs cite Caifa v. Sea Containers Ltd., 331 F. App'x 14, 16 (2d Cir. 2009) and In re
Century Aluminum Co. Securities Litigation, Nos. C 09-1001 SI, C 09-1205 SI, C 09-1103 SI, C
09-1162, SI, 2010 WL 1729426, at *10-11 (N.D. Cal. Apr. 27, 2010) for the proposition that,
"[i]n determining §12(a)(2) standing, courts look both to the face of the complaint and to the
certifications incorporated by reference therein." (Opp. Br. at 33.) Significantly, in both cases,
the plaintiffs' Section 12(a)(2) claims were dismissed for lack of standing because, like Plaintiffs
here, the plaintiffs failed to allege that they purchased the subject securities in the public
offerings at issue. See Caifa, 331 F. App'x at 16 (upholding district court's dismissal of Section

4

Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 9 of 12

Plaintiffs must also allege that they directly purchased the Barclays Securities from a

particular Underwriter Defendant or as a result of a particular Underwriter Defendant's

solicitation. See Merrill Lynch & Co., 2010 WL 2175875, at *6 (holding that Section 12(a)(2)

standing is limited to "persons who have directly purchased the securities from the underwriting

defendants in the subject public offering(s)"); see also DeMaria v. Andersen, 153 F. Supp. 2d

300, 307 (S.D.N.Y. 2001) (dismissing Section 12 claim against underwriter defendants because

"the amended complaint [did] not aver that any defendant was the immediate seller to any named

plaintiff," or that any defendant "actively solicited any named plaintiff in connection with the

sale" of the securities at issue), aff'd, 318 F.3d 170 (2d Cir. 2003); In re Deutsche Telekom AG

Sec. Litig., No. 00 CIV 9475 SHS, 2002 WL 244597, at *3 (S.D.N.Y. Feb. 20, 2002) (in order to

qualify as a "seller" for Section 12(a)(2) liability, a plaintiff must allege a defendant "(1) passed

title of the security to the plaintiff or (2) successfully solicited the purchase motivated at least in

part by [its] own financial interest" (citing Pinter v. Dahl, 486 U.S. 622, 642 (1988))). Plaintiffs

admittedly have not so alleged (Opp. Br. at 34) and their Section 12(a)(2) claims fail for this

reason as well. See Merrill Lynch & Co., 2010 WL 2175875, at *6; In re Deutsche Telekom,

2002 WL 244597, at *5.

"'If [P]laintiffs did in fact purchase the [Barclays Securities] directly from the

[D]efendants, they should have said so. An evasive circumlocution does not suffice as a

substitute.'" DLJ Mortgage Capital, Inc., 2010 WL 1473288, at *4 (quoting Plumbers' Union

12(a)(2) claims where "plaintiffs failed to allege they purchased the securities at issue in an
initial public offering"); In re Century Aluminum Co., 2010 WL 1729426, at *11 (dismissing
Section 12(a)(2) claims where plaintiffs alleged that they purchased securities "'pursuant and/or
traceable to' the [subject] offering" because "such conclusory allegations are insufficient to
establish standing"). While, in both cases, the plaintiffs' certifications demonstrated that they
could not have purchased in the public offerings at issue, it was the plaintiffs' failure to allege
that they purchased securities "in" those public offerings that the courts found dispositive. See
Caifa, 331 F. App'x at 16; In re Century Aluminum Co., 2010 WL 1729426, at *11.

5

Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 10 of 12

Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 658 F. Supp. 2d 299, 305 (D.

Mass. 2009)). Clearly, Plaintiffs know whether or not they purchased "in" the offerings at issue

and, if so, from whom they purchased the securities. Their failure to so plead is fatal to their

Section 12(a)(2) claims. See Citigroup Inc. Bond Litig., 2010 WL 2772439, at *15 (holding that,

"[f]or a complaint to plausibly plead standing to raise a claim pursuant to Section 12, it must

identify a particular purchase from a particular defendant pursuant to a particular prospectus that

it contends contained a particular false or misleading statement" and "[f]ailing to do so fails to

meet even the lessened pleading requirements of Rule 8").

III.

PLAINTIFFS CANNOT RECOVER UNDER SECTIONS 11 OR 12(a)(2) IN
CONNECTION WITH THE APRIL 2008 OFFERING OF SERIES 5 SECURITIES

As set forth in the Underwriter Defendants' moving brief, a plaintiff "may not recover

under §§ 11 or 12(a)(2) if [he] knew of the alleged untruth or omission at the time of purchase."

In re Livent, Inc. Noteholders Sec. Litig., 151 F. Supp. 2d 371, 441 (S.D.N.Y. 2001) (citing 15

U.S.C. §§ 77k(a) & 77l(a)(2)). "Knowledge that a misstatement or omission exists is sufficient

to defeat a § 11 or 12(a)(2) claim; defendants need not demonstrate plaintiffs' actual knowledge

of the truth." Id. (citation omitted).

Plaintiff Ettin, the only named Plaintiff alleged to have purchased the Series 5 Securities

issued in the April 2008 Offering, purportedly purchased those securities on September 19, 2008

(Perrin Decl. Ex. E), more than a month after Plaintiffs allege that Barclays "[began] to make

adequate disclosures of its capital credit market exposures." (Am. Compl. ¶ 184.) Thus, at the

time Ettin purchased the Series 5 Securities, he had knowledge of the alleged "untruths or

omissions" in the Offering Documents.

While not disputing these facts, Plaintiffs nevertheless argue that the August 2008

disclosures were only "partial disclosures" because "'certain vital disclosures were not made until

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 11 of 12

the annual report as of December 31, 2008.'" (Opp. Br. at 33 (quoting Am. Compl. ¶ 184).)

Such an argument, however, is belied by the fact that the Amended Complaint does not provide a

description of any such "vital disclosures" – a point made in the Underwriter Defendants' moving

brief but, tellingly, ignored by Plaintiffs in the Opposition Brief.

Thus, because Ettin indisputably had knowledge of the alleged "untruths or omissions" at

the time he purchased the Series 5 Securities, Plaintiffs' Securities Act claims regarding the April

2008 Offering of those securities should be dismissed. See Livent, 151 F. Supp. 2d at 441; see

also, e.g., In re Am. Int'l Group, Inc. Sec. Litig., 265 F.R.D. 157, 167 (S.D.N.Y. 2010) (holding

that plaintiffs did not have standing to bring a Section 11 claim where they purchased securities

despite "[knowing] that some or many of the statements contained in the Registration Statement

were false when they relied on that Statement in purchasing the [subject securities]").

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Case 1:09-cv-01989-PAC Document 51 Filed 08/03/10 Page 12 of 12

CONCLUSION

For the foregoing reasons, as well as those set forth in the Underwriter Defendants'

moving brief and the Barclays Defendants' moving and reply briefs, the Underwriter Defendants

respectfully request that Counts I and II of the Amended Complaint be dismissed in their entirety

with prejudice.

Dated: New York, New York

August 3, 2010

Respectfully submitted,

/s/ Jay B. Kasner
Jay B. Kasner
([email protected])
Scott D. Musoff
([email protected])
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP

Four Times Square
New York, New York 10036
(212) 735-3000

Attorneys for the Underwriter Defendants

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