In re Charles Schwab Corp. Securities Litigation

Filing 234

ORDER DENYING DEFENDANT DAIFOTIS' MOTION FOR RECONSIDERATION by Judge Alsup denying #200 Motion for Leave to File (whalc2, COURT STAFF) (Filed on 8/21/2009)

1 2 3 4 5 6 7 8 9 10 IN RE CHARLES SCHWAB CORPORATION SECURITIES LITIGATION. / No. C 08-01510 WHA ORDER DENYING DEFENDANT DAIFOTIS' MOTION FOR RECONSIDERATION IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

United States District Court

11
For the Northern District of California

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In this securities action, defendant Kimon Daifotis, one of numerous defendants, filed a motion to reconsider a prior order granting in part and denying in part a motion to dismiss filed by all Schwab defendants. Defendant Daifotis argues that the order had applied the nowsuperseded pleading standard of Conley v. Gibson, 355 U.S. 41 (1957), rather than the more recent standards of Ashcroft v. Iqbal, 2009 WL 1361536 (2009) and Bell Atlantic v. Twombley, 550 U.S. 544 (2007). The motion is denied. When the order had occasion to consider the sufficiency of the pleadings, rather than purely legal issues, it applied the Twombley standard and, although Iqbal had yet to be decided, the order was entirely consistent with that decision. Defendant's motion complains of the order's citation to In re Westinghouse Securities Litigation, 90 F.3d 696 (3d Cir. 1996), a pre-Twombley decision that had applied the Conley pleading standard, in its discussion of the Section 12 claim. Westinghouse was cited for the proposition that: "[w]hether or not defendants actually solicited plaintiffs' sales is a factual question which should generally be left to the jury; at this stage plaintiffs need only satisfy Rule 8(a)'s lenient pleading standards." Id. at 717. All of that remains true. Twombley and Iqbal had no occasion to consider whether the Section 12 "solicitation" inquiry is a factual issue for the jury rather than a legal issue for the Court. Nor did they address whether Rule 8 is the

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appropriate pleading standard (under the circumstances of this action, it is). Granted, the order had previously ruled that "plaintiffs adequately pled solicitation." It so ruled, however, under the current understanding of Rule 8, not the Conley standard. It explained (Order at 15): Plaintiffs alleged more than mere participation. As many courts have found, the registration statement is itself a solicitation document. Although the act of signing a registration statement, alone, may not always suffice, it is at least suggestive of solicitation activity. As stated, the complaint also alleges that defendants "actively solicited the sale of the fund's shares" and that certain defendants were involved in marketing the fund. The complaint raises plausible allegations of solicitation activity satisfying the Twombley (and now Iqbal) standards. Defendant's motion is DENIED.

United States District Court

11
For the Northern District of California

IT IS SO ORDERED.

12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Dated: August 21, 2009.

WILLIAM ALSUP UNITED STATES DISTRICT JUDGE