In re Stillwater Capital Partners Inc. Litigation, 858 F. Supp. 2d 277

This is a putative federal securities class action arising from Gerova’s acquisitions of Allied Provident, SCP Stillwater funds, and Wimbledon Funds, with claims under Section 10(b)/Rule 10b-5 and Section 20(a).
Plaintiffs sue ten named Gerova and Stillwater defendants alleging misstatements and omissions in the January 2010 proxy statement and related presentations about related-party transactions and asset valuations.
The January 2010 transactions involved acquiring SCP assets, Amalphis (parent of Allied Provident), and Wimbledon, funded by issuance of preferred stock to Gerova and later conversion to ordinary shares.
Plaintiffs allege related-party nature and undisclosed conflicts, including insiders’ roles in Amalphis and Wimbledon transactions and undisclosed fees, with assertions that SCP valuations and SCP/Stillwater disclosures were misleading.
Gerova faced liquidity issues after the January 2010 transactions, including investor redemptions, delisting risk, and disclosure of capital constraints, which allegedly worsened the investors’ losses.
The court granted in part and denied in part the motions to dismiss: Counts I and II as to Bianco were dismissed; Counts III and IV were dismissed; Counts I and II as to Gerova, Hirst, Hlavsa, van Roon, and Laslop may proceed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Liability of Gerova and officers under 10(b).	Proxies misstated related-party nature and financial health; omissions misled investors.	Disclosures were already made; omissions were not material or attributable to all defendants.	Gerova and Hirst/Hlavsa liable; Bianco not liable for statements made before June 2010.
Liability of SCP and SCP principals under 10(b).	Stillwater valuations and related disclosures misled investors.	SCP did not control the statements; omissions not attributable to SCP.	Count III as to SCP dismissed.
Control person liability under Section 20(a) as to the Gerova defendants.	If 10(b) claims survive against certain individuals, 20(a) claims should follow.	If no primary violation exists for a defendant, 20(a) fails; attribution issues apply to Bianco.	20(a) claims survive for Hirst, Hlavsa, van Roon, and Laslop; Bianco’s 20(a) claim fails; Doueck and Rudy fail due to lack of primary liability.

Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (elements and standard for pleading falsity and scienter in securities fraud)
Kalnit v. Eichler, 264 F.3d 131 (2d Cir. 2001) (motive, opportunity, and conscious misbehavior in scienter pleading)
In re Parmalat Secs. Litig., 414 F. Supp. 2d 428 (S.D.N.Y. 2006) (reliance on omissions and scienter standards in complex fraud actions)
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (scienter and loss causation standards in securities cases)
Janus Capital Grp., Inc. v. First Derivative Traders, 131 S. Ct. 2296 (U.S. 2011) (maker of a statement and attribution in corporate disclosures)
In re American Int’l Grp., Inc. Secs. Litig., 741 F. Supp. 2d 511 (S.D.N.Y. 2010) (lead case on securities fraud pleading standards and loss causation)
In re Stillwater Capital Partners Inc. Litig., 853 F. Supp. 2d 441 (S.D.N.Y. 2012) (board/management disclosures and related-party transaction considerations)
In re Alstom SA, 406 F. Supp. 2d 433 (S.D.N.Y. 2005) (securities fraud pleading and predicate facts denying dismissal)
In re Gildan Activewear, Inc. Secs. Litig., 636 F. Supp. 2d 261 (S.D.N.Y. 2009) (fraud-on-the-market style considerations and materiality in disclosures)
Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161 (2d Cir. 2005) (loss causation pleading standard)