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March 12, 2004.


The opinion of the court was delivered by: DENISE COTE, District Judge


Plaintiffs in this action have attempted to plead a violation of Section 11 of the Securities Act of 1933 ("Section 11", and the "Securities Act") against corporate parents of underwriters. On October 27, 2003, defendants Bank of America Corp., Deutsche Bank AG, Goldman Sachs Group, Inc., J.P. Morgan Chase & Co., Lehman Brothers Holdings Inc., and Citigroup, Inc. (collectively, the "Holding Company Defendants") moved to dismiss with prejudice pursuant to Rule 12(b)(6), Fed.R. Civ. P., the Section 11 claim asserted against them in the amended complaint in Alameda County Employees' Retirement Association et al. v. Page 3 Ebbers, et al., No. 03 Civ. 0890 (the "Alameda Complaint" and "Alameda Action"), an action which has been consolidated for pretrial purposes in In re WorldCom, Inc. Securities Litigation, No. 02 Civ. 3288 (DLC) (S.D.N.Y)("Securities Litigation").*fn1 The Holding Company Defendants seek dismissal on the ground that they do not fall within any of the five categories of defendants against whom a claim under Section 11 may be asserted. For the reasons set forth below, the Holding Company Defendants' motion is granted.


  The Alameda Action is one of many individual, as opposed to class, actions ("Individual Actions") filed by the law firm Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss Actions") to assert claims principally against underwriters of WorldCom bond offerings. At a conference on September 12, 2003, defense counsel gave notice of their intent to bring two separate sets of motions to dismiss claims that are common to many Page 4 Individual Actions.*fn2 The instant motion came with the second tranche of those motions to dismiss and addresses the liability of holding companies under Section II.*fn3 As instructed by a September 22 Scheduling Order, defendants have brought their motion against one of the Individual Actions and the plaintiffs in the similarly situated Individual Actions have been given an opportunity to submit an amicus brief and will also have an opportunity to show cause why the Opinion issued today does not control any similar motion to dismiss their actions.*fn4

  The Alameda Action was initially filed on November 6, 2002 in Superior Court of the State of California, County of Los Angeles on behalf of 17 retirement associations, plans, and systems. The action was removed on November 22 and transferred by the Judicial Panel on Multi-District Litigation to this Court on January 30, 2003. The initial complaint included a Section 11 Page 5 claim for two offerings of WorldCom debt securities: a May 2000 public offering (the "2000 Offering") and a May 2001 public offering (the "2001 Offering").*fn5 Pursuant to a scheduling order which required certain Individual Actions that wished to file an amended complaint to do so by July 11, on or about that day, the Alameda Plaintiffs served the Alameda Complaint. This amended pleading added certain defendants, including members of the underwriting syndicates that were not included in the initial pleading.

  The Alameda Complaint asserts a single claim under Section 11 of the Securities Act. It challenges the accuracy of disclosures in the Registration Statements filed in connection with the 2000 and 2001 Offerings. With respect to these documents, the Alameda Plaintiffs allege that the defendants failed to disclose accurate financial information relating to a number of items, including WorldCom's allegedly improper capitalization of costs, uncollectible receivables and goodwill. The Alameda Complaint states that "[e]ach bank is sued only for bond offerings in which it participated as an underwriter."

  The complaint claims that each of the six Holding Company Defendants is liable under Section 11 "through" the acts of a Page 6 subsidiary that directly underwrote the WorldCom security offerings at issue. For example, it alleges that,
Defendant Bank of America Corp., is a large integrated financial services institution that through its controlled subsidiaries (such as defendant Bane of America Securities LLC (collectively "Bank America")) provides commercial and investment banking services, commercial loans to corporate entities, and acts as underwriter in the sale of corporate securities. Bank America was an underwriter of the WorldCom Bonds sold in 5/00 and 5/01.
(emphasis added). The Alameda Complaint makes parallel allegations against three other Holding Company Defendants. With regard to Citigroup, Inc. and J.P. Morgan Chase & Co., however, the complaint omits the adjective "controlled" as a modifier of the noun subsidiary. Thus, the allegation against these two parent companies is that each "is a large integrated financial services institution that through subsidiaries and divisions . . ."*fn6


  The Holding Company Defendants move to dismiss the Section 11 claim against them on the ground that it fails to plead a cause of action since it alleges culpability based on their ownership or control of a subsidiary rather than on their participation in the underwriting. The pleading standard for a Page 7 Section 11 claim has been described in prior Opinions in the Securities Litigation.*fn7 In brief, all factual allegations in a complaint must be taken as true, and a claim may only be dismissed "if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Rombach v. Chang, 355 F.3d 164, 169 (2d Cir. 2004) (citation omitted).

  The starting point for this motion must be the text of Section 11 itself. The canons of statutory construction recently described in In re WorldCom, Inc. Securities Litigation, 2004 WL 315143, at *5-6, are incorporated herein and will not be repeated. Section 11 of the Securities Act enumerates five classes against whom such a claim may be asserted. The fifth class, underwriters, is at issue here. Section 11 states in pertinent part

[i]n case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security . . . may sue —
(1) every person who signed the registration statement;
(2) every person who was a director of . . . the issuer . . .;
(3) every person who . . . is named in the registration statement as being or about to become a director . . . or partner;
  (4) every accountant . . . who has with his consent been named as having prepared or Page 8 certified any part of the registration statement . . .;
(5) every underwriter with respect to such security.
15 U.S.C. § 77k (emphasis supplied).

  Section 11 "was designed to assure compliance with the disclosure provisions of the [Securities] Act by imposing a stringent standard of liability on the parties who play a direct role in a registered offering." Herman & MacLean v. Huddleston, 459 U.S. 375, 381-82 (1983). In return for that broad-based imposition of liability, Section 11 places an unambiguous limitation on the categories of persons or entities against whom a claim may be brought. Section 11 claims for misleading statements made in a registration statement allow purchasers of a registered security to sue only "certain enumerated parties." Id. at 381 (distinguishing between the specific requirements of a Section 11 and Section 10(b) claim); see also Pinter v. Dahl, 486 U.S. 622, 650 n.26 (1988) ("Section 11(a) explicitly enumerates the various categories of persons involved in the registration process who are subject to suit under that section, including many who are participants in the activities leading up to the sale."); Barker v. Henderson, Franklin, Starnes ...

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