allege facts sufficient to find control person liability. Because
the Court finds, as discussed above, that Plaintiffs adequately
allege Section 12 violations against Luckygold, the Court only
must consider whether the Complaint adequately alleges that Li is
a control person in order to sustain Plaintiffs' Section 15 claim
as to Li.
Section 15 of the Securities Act provides liability for every
person who "controls any person liable" under §§ 11 and 12(a)(2).
15 U.S.C. § 77o. To establish a prima facie showing of control
person liability, a plaintiff must plead "that the individual
defendants each controlled a primary violator of the securities
laws." In re: APAC Teleservice, Inc. Sec. Litig., No. 97 Civ.
9145, 1999 WL 1052004, at *11 (S.D.N.Y. Nov. 19, 1999).
"Adequately alleg[ing] underlying violations of the securities
laws as well as the individual defendants' control" is sufficient
to overcome a motion to dismiss. Id. at *12.
Under this standard, the Court holds that, the Complaint
adequately alleges control person liability. The Complaint sets
forth that Li is the Chairman of the Board and Chief Executive
Officer of Peak, Chairman of the Board of QPL Holdings, and the
sole shareholder of Luckygold. There can be no dispute that as
Chairman of Peak, and as the sole shareholder of Luckygold, Li
had some degree of control over the activities of the various
Peak entities and Luckygold. Therefore, the Court denies Li's
motion to dismiss Plaintiffs' Section 15 claim.
D. Section 34(b) of the Investment Company Act of 1940
Plaintiffs' Complaint asserts a cause of action against the
Trust under Section 34(b) of the Investment Company Act of 1940
("ICA"). 15 U.S.C. § 80a-33(b). The Trust moves to dismiss this
claim on the grounds that there is no private right of action
under Section 34(b). The Court agrees.
Surprisingly, neither the United States Supreme Court nor any
circuit court of appeals has addressed the issue of whether the
ICA provides for a private right of action under Section 34(b).
Plaintiffs rely on In re Nuveen Fund Litig., No. 94 C 360, 1996
WL 328006 (N.D.Ill. June 11, 1996), and a liberal interpretation
of Fogel v. Chestnutt, 668 F.2d 100, 110-11 (2d Cir. 1981) and
Hunt, IRA v. Alliance N.A Gov't Income Trust, Inc.,
159 F.3d 723, 729 (2d Cir. 1998), in support of their argument that
Section 34(b) permits a private right of action.
However, this Court is persuaded by the decision in Olmsted v.
Pruco Life Ins. Co. of New Jersey, No. CV 00-1340, 2000 WL
1739307 (E.D.N.Y. Oct.30, 2000), where the court declined to find
a private right of action under various provisions of the ICA. In
Olmsted, Judge Garaufis held that "Congress did not intend to
give investors a private right of action under [various other
sections of the ICA]. To infer otherwise would encroach upon the
powers of legislation reserved for Congress. This court will not
graft onto [provisions of the ICA] a remedy which Congress did
not intend to provide." Id. at *4.
This Court agrees with the analysis of Olmsted and declines
to infer a private right of action under Section 34(b) of the
ICA. Accordingly, the Trust's motion to dismiss Plaintiffs'
fourth cause of action is granted.
For the reasons set forth above, Defendants' motion to dismiss
is granted in part and denied in part. Plaintiffs' Section 11
claims are dismissed with leave to replead;*fn14 Plaintiffs'
Section 12 claim
against Defendant Li is dismissed with leave to replead; and
Plaintiffs' Section 34(b) claim against the Trust is dismissed
with prejudice. Defendants' motion is denied in all other