978-1285770178 Case Printout Case CPC-07-07 Part 1

S.D.N.Y.,2012.

Dodona I, LLC v. Goldman, Sachs & Co.

847 F.Supp.2d 624 United States District Court,

Background: Investor in residential mortgage backed securities (RMBS) issued as part of two synthetic collateral-

ized debt obligations (CDOs) filed putative class action against investment bank, its subsidiary, and bank’s officers

alleging securities fraud, common law fraud, and unjust enrichment. Defendants moved to dismiss.

(5) conclusory allegations that investment bank had “artificially inflated” prices were insufficient to plead efficient

market:

(6) complaint stated claim for control person liability against investment bank’s subsidiary and bank’s officers; and

(7) complaint stated claim for unjust enrichment.

170AVII Pleadings and Motions

170AVII(A) Pleadings in General

170Ak633 Certainty, Definiteness and Particularity

170Ak636 k. Fraud, mistake and condition of mind. Most Cited Cases

Plaintiffs claiming fraud, including securities fraud and common law fraud, must satisfy the heightened plead-

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.53 k. Misrepresentation. Most Cited Cases

A complaint alleging securities fraud must meet the requirements of PSLRA, specifying each statement alleged

to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the

statement or omission is based on information or belief, complaint must state with particularity all facts on which

that belief is formed. Private Securities Litigation Reform Act of 1995, § 101(b), 15 U.S.C.A. § 78u–4(b).

[3] Securities Regulation 349B 60.25

349B Securities Regulation

349BI Federal Regulation

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

[4] Securities Regulation 349B 60.18

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

of 1934, § 10(b), 15 U.S.C.A. § 78j(b).

[5] Securities Regulation 349B 60.53

349B Securities Regulation

349Bk60.53 k. Misrepresentation. Most Cited Cases

In order to satisfy requirements of PSLRA and federal rule for pleading fraud, a securities fraud complaint

based on misstatements must: (1) specify the statements that plaintiff contends were fraudulent; (2) identify the

speaker; (3) state where and when the statements were made; and (4) explain why the statements were fraudulent.

Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); Private Securities Litigation Reform Act of 1995, §

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

349Bk60.28 Nondisclosure; Insider Trading

349Bk60.28(2) Duty to Disclose or Refrain from Trading

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

[8] Federal Civil Procedure 170A 1831

170A Federal Civil Procedure

170AXI Dismissal

170AXI(B) Involuntary Dismissal

their importance. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[9] Securities Regulation 349B 60.25

349Bk60.25 k. Fraud on the market; price manipulation. Most Cited Cases

A claim of market manipulation under § 10(b) and Rule 10b–5 requires a plaintiff to allege: (1) manipulative

acts, (2) damage, (3) caused by reliance on an assumption of an efficient market free of manipulation, (4) scienter,

(5) in connection with the purchase or sale of securities, (6) furthered by defendant’s use of the mails or any facility

of a national securities exchange. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. §

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

349Bk60.25 k. Fraud on the market; price manipulation. Most Cited Cases

Allegations of misrepresentations or omissions alone cannot support a claim of market manipulation under §

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

[12] Securities Regulation 349B 60.45(1)

349B Securities Regulation

349BI Federal Regulation

A complaint has sufficiently alleged motive and opportunity to commit fraud, for purposes of stating claim for

securities fraud, if it pleads facts showing that defendant benefited in some concrete and personal way from the pur-

ported fraud. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

349BI(C)7 Fraud and Manipulation

349Bk60.43 Grounds of and Defenses to Liability

349Bk60.45 Scienter, Intent, Knowledge, Negligence or Recklessness

349Bk60.45(1) k. In general. Most Cited Cases

The opportunity to commit fraud, as element of claim for securities fraud, is generally assumed where defendant

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

[18] Securities Regulation 349B 60.51(2)

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

§ 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[19] Securities Regulation 349B 60.48(2)

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.43 Grounds of and Defenses to Liability

349Bk60.48 Reliance

349Bk60.48(2) k. Nondisclosure. Most Cited Cases

Securities Regulation 349B 60.48(3)

349Bk60.48(3) k. Fraud on the market. Most Cited Cases

Reliance, as element of securities fraud claim, may be presumed in two circumstances: (1) in the case of omis-

sions, reliance on omitted information may be presumed where such information is material, and (2) fraud on the

market theory creates a presumption of reliance if the securities were traded in an efficient market, that is, an open

and developed market in which the price of securities are, in theory, determined by all available information. Securi–

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

349Bk60.51(1) k. In general. Most Cited Cases

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

184I Deception Constituting Fraud, and Liability Therefor

205H Implied and Constructive Contracts

205HI Nature and Grounds of Obligation

205HI(A) In General

205Hk2 Constructive or Quasi Contracts

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

bank’s own long exposure to subprime risk by betting against CDOs, and that bank had used its subsidiary to serve

as sole credit protection buyer, while knowing that the assets it was selling were toxic and were unlikely to profit

investors. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[28] Securities Regulation 349B 60.54

349Bk60.54 k. Nondisclosure. Most Cited Cases

Investor’s complaint sufficiently alleged that investment bank had made misstatements or omissions of material

fact, as required to state claim for securities fraud with particularity required by PSLRA, by asserting that since bank

had made affirmative representations in offering circulars and marketing book about the risks of investing in its syn-

thetic collateralized debt obligations (CDOs), it had a duty, beyond boilerplate language, to ensure that those state-

349Bk60.53 k. Misrepresentation. Most Cited Cases

A complaint alleging securities fraud must meet the requirements of PSLRA, specifying each statement alleged

to have been misleading, the reason or reasons why the statement is misleading, and, if an allegation regarding the

statement or omission is based on information or belief, complaint must state with particularity all facts on which

that belief is formed. Private Securities Litigation Reform Act of 1995, § 101(b), 15 U.S.C.A. § 78u–4(b).

[3] Securities Regulation 349B 60.25

349B Securities Regulation

349BI Federal Regulation

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

[4] Securities Regulation 349B 60.18

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

of 1934, § 10(b), 15 U.S.C.A. § 78j(b).

[5] Securities Regulation 349B 60.53

349B Securities Regulation

349Bk60.53 k. Misrepresentation. Most Cited Cases

In order to satisfy requirements of PSLRA and federal rule for pleading fraud, a securities fraud complaint

based on misstatements must: (1) specify the statements that plaintiff contends were fraudulent; (2) identify the

speaker; (3) state where and when the statements were made; and (4) explain why the statements were fraudulent.

Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); Private Securities Litigation Reform Act of 1995, §

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

349Bk60.28 Nondisclosure; Insider Trading

349Bk60.28(2) Duty to Disclose or Refrain from Trading

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

[8] Federal Civil Procedure 170A 1831

170A Federal Civil Procedure

170AXI Dismissal

170AXI(B) Involuntary Dismissal

their importance. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[9] Securities Regulation 349B 60.25

349Bk60.25 k. Fraud on the market; price manipulation. Most Cited Cases

A claim of market manipulation under § 10(b) and Rule 10b–5 requires a plaintiff to allege: (1) manipulative

acts, (2) damage, (3) caused by reliance on an assumption of an efficient market free of manipulation, (4) scienter,

(5) in connection with the purchase or sale of securities, (6) furthered by defendant’s use of the mails or any facility

of a national securities exchange. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. §

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.17 Manipulative, Deceptive or Fraudulent Conduct

349Bk60.25 k. Fraud on the market; price manipulation. Most Cited Cases

Allegations of misrepresentations or omissions alone cannot support a claim of market manipulation under §

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

[12] Securities Regulation 349B 60.45(1)

349B Securities Regulation

349BI Federal Regulation

A complaint has sufficiently alleged motive and opportunity to commit fraud, for purposes of stating claim for

securities fraud, if it pleads facts showing that defendant benefited in some concrete and personal way from the pur-

ported fraud. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

349BI(C)7 Fraud and Manipulation

349Bk60.43 Grounds of and Defenses to Liability

349Bk60.45 Scienter, Intent, Knowledge, Negligence or Recklessness

349Bk60.45(1) k. In general. Most Cited Cases

The opportunity to commit fraud, as element of claim for securities fraud, is generally assumed where defendant

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

[18] Securities Regulation 349B 60.51(2)

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

§ 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[19] Securities Regulation 349B 60.48(2)

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.43 Grounds of and Defenses to Liability

349Bk60.48 Reliance

349Bk60.48(2) k. Nondisclosure. Most Cited Cases

Securities Regulation 349B 60.48(3)

349Bk60.48(3) k. Fraud on the market. Most Cited Cases

Reliance, as element of securities fraud claim, may be presumed in two circumstances: (1) in the case of omis-

sions, reliance on omitted information may be presumed where such information is material, and (2) fraud on the

market theory creates a presumption of reliance if the securities were traded in an efficient market, that is, an open

and developed market in which the price of securities are, in theory, determined by all available information. Securi–

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

349Bk60.50 Pleading

349Bk60.51 In General

349Bk60.51(1) k. In general. Most Cited Cases

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

184I Deception Constituting Fraud, and Liability Therefor

205H Implied and Constructive Contracts

205HI Nature and Grounds of Obligation

205HI(A) In General

205Hk2 Constructive or Quasi Contracts

349B Securities Regulation

349BI Federal Regulation

349BI(C) Trading and Markets

349BI(C)7 Fraud and Manipulation

bank’s own long exposure to subprime risk by betting against CDOs, and that bank had used its subsidiary to serve

as sole credit protection buyer, while knowing that the assets it was selling were toxic and were unlikely to profit

investors. Securities Exchange Act of 1934, § 10(b), 15 U.S.C.A. § 78j(b); 17 C.F.R. § 240.10b–5.

[28] Securities Regulation 349B 60.54

349Bk60.54 k. Nondisclosure. Most Cited Cases

Investor’s complaint sufficiently alleged that investment bank had made misstatements or omissions of material

fact, as required to state claim for securities fraud with particularity required by PSLRA, by asserting that since bank

had made affirmative representations in offering circulars and marketing book about the risks of investing in its syn-

thetic collateralized debt obligations (CDOs), it had a duty, beyond boilerplate language, to ensure that those state-