Alki Partners, L.P. v. Vatas Holding GmbH
769 F. Supp. 2d 478
S.D.N.Y.2011Background
- Plaintiffs Alki Partners, L.P. and Alki Fund allege a market manipulation scheme around RemoteMDX, Inc. (RMDX) stock involving Vatas, Windhorst, Ogrisek, Hersov, Sapinda, Credit Suisse, and Ruiz.
- Vatas acquired RMDX shares off-market to avoid open-market purchases and arranged delivery-versus-payment transfers through Credit Suisse to create artificial demand.
- RMDX, a Utah company, traded on OTCBB; prior to 2006 it was thinly traded, with a volume surge in 2007-2008.
- From 2007 to early 2008, Wilfong of Alki managed large RMDX purchases for resale to Vatas, at Windhorst's direction, with payments routed via Credit Suisse.
- Credit Suisse froze Vatas' account in February 2008; after the freeze, trades with Vatas ceased and RMDX declined in price.
- Vatas and Windhorst proposed a settlement in 2008; partial payment occurred but negotiations failed, and Alki later incurred over $10 million in losses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Credit Suisse and Ruiz | Credit Suisse and Ruiz had US-facing conduct via DVP trade processing and rely on US-based effects. | No US-based presence, and transactions were client-driven; no US accounts or purposeful availment. | Ruiz has prima facie jurisdiction; Credit Suisse lacks adequate US presence for general/specific jurisdiction. |
| Personal jurisdiction over Ogrisek | Ogrisek as Vatas MD directed activities affecting US market. | No US travel, no contact with Plaintiffs, and no facts showing participation. | Dismissal for lack of specific personal jurisdiction. |
| Personal jurisdiction over Hersov and Sapinda | Hersov/Sapinda control or influence over Vatas and Sapinda ownership justify jurisdiction. | Stock ownership does not assume liability; no control or agency shown. | No basis for personal jurisdiction; dismiss claims against Hersov and Sapinda. |
| Elements of §10(b) market manipulation claim | Defendants engaged in prearranged outside-market actions and price manipulation to deceive investors. | Alki acted as a market participant with guaranteed profit; reliance on efficient market not established; no scienter. | Plaintiffs fail on reliance, scienter, and/or manipulative acts; §10(b) claim fails. |
| §20(a) control-person liability | Primary violations by controlled persons; controlling defendants participated. | No proven primary violation by any named person; no control-based liability shown. | Dismissed §20(a) claims for lack of primary violation and control culpability. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standards require factual allegations)
- ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (market manipulation elements; pleading standards for §10(b))
- Gurary v. Winehouse, 190 F.3d 37 (2d Cir. 1999) (manipulation requires deceptive pricing signal)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (U.S. 2007) (strong inference of scienter; holistic pleading standard)
- United States v. Bestfoods, 524 U.S. 51 (U.S. 1998) (corporate veil and parent-subsidiary liability principles)
- Parmalat Securities Litigation, 375 F. Supp. 2d 278 (S.D.N.Y. 2005) (pleading and collective-fraud considerations in Parmalat I)