838 F. Supp. 2d 1148
D. Colo.2012Background
- MDL securities actions against seven Oppenheimer municipal bond funds and related entities, alleging misrepresentations and omissions about high-risk, leveraged investments and inverse floaters.
- Plaintiffs claim prospectuses overstated capital preservation while concealing risk, liquidity issues, and asset valuation practices.
- Defendants include OFI, Distributor, Fund officers/trustees, MassMutual, and other affiliates; 2008 market crisis exacerbated alleged risks.
- Seven funds’ prospectuses and supplements allegedly failed to disclose the true risk-and-illiquidity profile of inverse floaters and leverage.
- Court consolidated 32 actions, transferred by MDL panel, and challenged common claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, plus ICA claims; granting partial motion to dismiss Rochester group, denying MassMutual’s motion; ICA §13(a) claim dismissed.
- Amended opinion nunc pro tunc to address corrections and withdraw prior order; discovery phase to follow.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Private right of action under §13(a) | Plaintiffs argue ICA §13(a) implies private action for investors | Defendants contend no private right exists under §13(a) | GRANTED; §13(a) private action dismissed |
| Plausibility of §11 and §12(a)(2) claims | Pleading sufficient in context to show misstatements/omissions about capital preservation, inverse floaters, liquidity, and valuation | Disclosures and objective statements were forward-looking or adequately disclosed when viewed in context | DENIED; claims plausibly stated at this stage |
| Loss causation viability for mutual funds | NAV declines causally linked to misstatements/omissions | NAV movement cannot be causally linked to misstatements in mutual funds | DETERMINATION reserved for later; not resolved on motion to dismiss; loss causation plausibility found but to be developed factually |
| Whether OFI/Funds were §12(a)(2) sellers | OFI and Funds should be treated as indirect/direct sellers | Distributor clearly a seller; OFI/Funds argued insufficient to plead seller status | DENIED as to OFI and Funds; §12(a)(2) claims against OFI/Funds preserved |
| Control-person liability (§15) | Officer/Trustee MassMutual had control power over primary violators | Insufficient control-person allegations; dismissal urged | DENIED; claims against Officer Defendants, Trustees, and MassMutual survive |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must show plausible claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard in pleading)
- Pinter v. Dahl, 486 U.S. 622 (U.S. 1988) (defining sellers under §12(a)(2))
- In re Morgan Stanley Information Fund Securities Litigation, 592 F.3d 347 (2d Cir. 2010) (reviewing materiality and pleading standards in securities actions)
- Northstar Fin. Advisors, Inc. v. Schwab Invs., 615 F.3d 1106 (9th Cir. 2010) (no private right of action under §13(a) absent explicit provision)
- Adams v. Kinder-Morgan, Inc., 340 F.3d 1083 (10th Cir. 2003) (control-power considerations for §15 liability)
- State Street Bank & Trust Co. Fixed Income Funds Inv. Litig., 774 F.Supp.2d 584 (S.D.N.Y. 2011) (loss causation considerations in mutual fund context)
- In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410 (3d Cir. 1997) (duty to update vs. liability context (differences cited))