PLAINTIFFS' REQUEST FOR LEAVE TO FILE RECENT DECISION AND ORDER THEREON

JOSEPH L. TAURO, District Judge.

Pursuant to Civil Local Rule 7-3(d), Plaintiffs hereby request leave to file the recent decision in Akamai Technologies, Inc., et al. v. Deutsche Bank AG, Civil Action No. 10-10254-JLT (D. Mass. Feb. 15, 2011), attached hereto as Exhibit A.

ORDER

The copy of the recent decision attached to this Order is deemed filed.

Good cause appearing, the requested leave is granted.

IT IS SO ORDERED.

CERTIFICATE OF SERVICE

I, Aaron M. Sheanin, hereby certify that on February 16, 2011, I caused the foregoing document to be filed electronically with the United States District Court for the Northern District of California's through the Court's mandated ECF service. Counsel of record are required by the Court to be registered e-filers, and as such are automatically e-served with a copy of the document(s) upon confirmation of e-filing.

I further certify that I caused this document to be forwarded to the following designated Internet site at: http://securities.stanford.edu/.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 16th day of February, 2011 at San Francisco, California.

EXHIBIT A

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

MEMORANDUM

February 15, 2011

TAURO, J.

I. Introduction

Plaintiffs, Akamai Technologies, Inc. and Akamai Securities Corporation (collectively, "Akamai"), allege that Deutsche Bank Securities, Inc. ("DBS"), the wholly owned subsidiary of Defendant Deutsche Bank AG, wrongfully invested $217 million in toxic auction-rate securities ("ARS"). Plaintiffs assert that Defendant is liable under section 20(a) of the Securities and Exchange Act of 19341 and Massachusetts General Laws chapter 110A, section 410(b). Presently at issue are Defendant's Motion to Dismiss [#22] and Plaintiff's Motion for Specific Discovery [#27]. For the following reasons, the Motion to Dismiss is DENIED and the Motion for Specific Discovery is MOOT.

II. Background2

DBS served as Plaintiffs' investment advisor and broker.3 Plaintiffs instructed DBS to invest in safe and liquid securities because Plaintiffs needed ready access to the money to fund their operations.4 DBS represented to Plaintiffs that ARS5 were highly liquid investments that met Plaintiffs' investment guidelines, and DBS further represented that no auction for these securities had ever failed.6

Defendant, however, knew at the time that ARS were riskier than it represented to Plaintiffs and that auctions had indeed failed.7 By no later than August 2007, Defendant also knew that the demand for ARS was diminishing and that investors in ARS faced a risk that the auctions for ARS would fail, and that customers' money would therefore be frozen.8 But Defendant did not reveal those risks to Plaintiffs.9 Nor did Defendant disclose to Plaintiffs that Defendant and other financial institutions were secretly supporting the ARS market.10 As one such means of supporting the ARS market, Defendant and other financial institutions were party to or aware of secret side deals with ARS issuers to ensure that auctions did not fail due to lack of demand.11 In addition, through strategic and undisclosed bidding in ARS auctions, Defendant and other financial institutions sought to set artificially low rates for ARS to make the securities appear less risky and more liquid than they actually were.12 Plaintiffs thus remained unaware of the increasing liquidity risk that ARS posed.13

As a result of its concerns over the potential illiquidity of these securities, Defendant undertook to reduce its own exposure to ARS in the fall of 2007.14 At the same time that it was reducing its own exposure, DBS continued to tout ARS to Plaintiffs as safe and liquid investments, and DBS approximately doubled Plaintiffs' ARS holdings.15

In February 2008, the market for the ARS held by Plaintiffs collapsed.16 Plaintiffs held well over $200 million in illiquid securities that DBS had improperly funneled into their account.17 The market collapse was the result of the undisclosed decision by Defendant and other banks to stop supporting the ARS market in February 2008, and this decision caused the securities in Plaintiffs' account to freeze.18

Defendant has been the subject of multiple regulatory investigations and adverse findings regarding its improper ARS sales practices.19 As part of settlements in connection with these investigations, Defendant has had to agree to buy back, at the full face value, ARS from all its individual retail clients and smaller institutional players and pay a $15 million fine.20 The settlement also requires Defendant to provide "liquidity solutions" to institutional investors like Plaintiffs, which Defendant has failed to do.21 In fact, Defendant has not provided Plaintiffs with any redress for the impairment and illiquidity of the ARS in Plaintiffs' account, which remains frozen.22

III. Discussion

Defendant seeks to dismiss the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b) and the Private Securities Litigation Reform Act of 199523 ("PSLRA").24 Specifically, Defendant argues that "Plaintiffs' `control person' liability claims should be dismissed both for failure to plead facts that support any underlying claim of securities fraud and for failure to plead facts that support a claim that Defendant is a `control person.'"25 Defendant's arguments fail for the following reasons.

To state a claim for liability under section 20(a) of the Exchange Act, a plaintiff must plead (1) "an underlying violation of the same chapter of the securities laws by the controlled entity" and (2) "control of the primary violator by defendant" with "culpable participation."26 Here, the underlying violation that Plaintiffs must properly plead is a violation of section 10(b) of the Exchange Act.

The elements of a 10(b) claim are: "(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation."27 Defendant challenges the sufficiency of Plaintiffs' pleadings with regard to each element.28

First, Defendant argues that Plaintiffs failed to plead any misleading statements or omissions with the specificity required under Rule 9(b) and the PSLRA.29 But this court is satisfied that Plaintiffs have pled the material misrepresentations and omissions with sufficient specificity. The Complaint challenges each specific ARS transaction that DBS undertook on behalf of Plaintiffs.30 And Plaintiffs' failure to identify the DBS employees who made specific statements about ARS is irrelevant.31 Plaintiffs' claim is essentially a claim of omission of material facts — that is, Defendant's failure to disclose the risk of ARS. Plaintiffs cannot identify a speaker if the heart of the claim is a failure to disclose. To the extent that Plaintiffs' claim is one of misrepresentation, it is "reasonable to presume" that the ARS purchases were prepared collectively by the DBS employees responsible for Plaintiffs' account.32

Moreover, Defendant's contention that it owed Plaintiffs no duty to disclose material facts33 does not excuse it, as Defendant in fact owed Plaintiffs a broad fiduciary duty.34 Additionally, if an entity decides to make a disclosure, as Defendant did in its statements regarding ARS, that entity must ensure that the disclosure is "complete and accurate."35

With regard to the second element, Defendant argues that Plaintiffs have not properly pled scienter.36 But for a claim under section 20(a), the PSLRA's heightened pleading standard for scienter is inapplicable.37 Plaintiffs are not required, therefore, to meet the "strong inference" requirement of the PSLRA.38 The appropriate alternative pleading standard is thus Federal Rule of Civil Procedure 9(b).39 Under Rule 9(b), a plaintiff must "`set forth specific facts to make it reasonable to believe that defendants knew that a statement was fraudulent or misleading.'"40 Here, Plaintiffs have alleged sufficient facts such that it is reasonable that believe that Defendant knew that its statements regarding ARS were false and misleading.

Third, Defendant argues that Plaintiffs failed to plead that any of the alleged misstatements or omissions were made in "connection with the purchase or sale of a security."41 But the Complaint alleges that Defendant invested in ARS on behalf of Plaintiffs42 and even alleges that during the relevant time period, Defendant approximately doubled Plaintiffs' ARS holdings.43 Defendant's argument therefore fails.

Fourth, Defendant argues that Plaintiffs have failed to plead reliance.44 A plaintiff pleading reliance must plead individual reasonable reliance on a material misrepresentation.45 Here, this court agrees with Plaintiffs that the "very premise of the complaint is that Akamai relied on DBS[] for brokerage and cash management services in its discretionary account and on [DBS's] representations that DBS[] would abide by its instructions to purchase only safe and liquid investments."46 For that reason, Plaintiffs have properly pled reasonable reliance.

Finally, Defendant argues that Plaintiffs have not pled any cognizable economic loss or loss causation.47 A plaintiff must allege that the defendant's misconduct caused an economic loss.48 To plead loss causation, a complaint "need[] only `provide a defendant with some indication of the loss and the causal connection that the plaintiff has in mind.'"49 Here, Defendant argues that Plaintiffs' loss causation is the allegation that Defendant caused the ARS market to freeze.50 Actually, the loss causation is that "but for [Defendant's] misconduct, Akamai would not have owned ARS when the ARS market froze."51 This is a causal connection that Plaintiffs have pled sufficiently.

Defendant also argues that Plaintiffs have failed to adequately plead that Defendant is a "control person."52 A claim under section 20(a) must allege a defendant's "control of the primary violator."53 As the First Circuit has explained, "[t]o meet the control element, the alleged controlling person must not only have the general power to control the company, but must also actually exercise control over the company."54 Quite simply, control is "a question of fact that `will not ordinarily be resolved summarily at the pleading stage.'"55 Because Plaintiffs have clearly pled Defendant's control over DBS,56 it is premature for Defendant to challenge that element.

Because this court hereby denies Defendant's Motion to Dismiss, the PSLRA's automatic stay on discovery is no longer in effect.57 For that reason, Plaintiffs' Motion for Specific Discovery to Preserve Evidence and Prevent Undue Prejudice is moot and the Parties may proceed with discovery.

IV. CONCLUSION

For the foregoing reasons, the Motion to Dismiss [#22] is DENIED and the Motion for Specific Discovery [#27] is MOOT.

IT IS SO ORDERED.