UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

______________________________________________ 

 : 

 : 

IN RE BRISTOL-MYERS SQUIBB CO. : No. 07 Civ. 5867 (PAC) 

SECURITIES LITIGATION : 

 : FILED ELECTRONICALLY 

 : 

 : 

 : 

______________________________________________: 

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF 

DEFENDANT ANDREW G. BODNAR’S MOTION TO DISMISS 

Elkan Abramowitz (EA-3987) 

Lawrence S. Bader (LB-5481) 

Jerrold L. Steigman (JS-9137) 

MORVILLO, ABRAMOWITZ, GRAND, 

 IASON, ANELLO & BOHRER, P.C. 

565 Fifth Avenue 

New York, New York 10017 

(212) 856-9600 

Attorneys for Defendant Andrew G. Bodnar 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 1 of 11
TABLE OF AUTHORITIES 

Federal Cases 

ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) ......................................... 7 

Basic, Inc. v. Levinson, 485 U.S. 224 (1988).................................................................................. 5 

Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 

 511 U.S. 164 (1994)........................................................................................................... passim 

Dinsmore v. Squadron, Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837 

 (2d Cir. 1998).......................................................................................................................... 2, 3 

Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) ........................................................ 6 

In re Charter Commc’ns, Inc., 443 F.3d 987 (8th Cir. 2006), cert. granted, 

Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 

127 S. Ct. 1873 (U.S. Mar. 26, 2007) (No. 06-43) ................................................................. 1, 3 

In re Global Crossing, Ltd. Sec. Litig., 322 F. Supp.2d 319 (S.D.N.Y. 2004)................... 2, 3, 4, 6 

In re Parmalat Sec. Litig., 376 F. Supp.2d 472 (S.D.N.Y. 2005).......................................... passim

In re Refco, Inc. Sec. Litig., 503 F. Supp.2d 611 (S.D.N.Y. 2007)................................................. 8 

In re Scholastic Corp. Sec. Litig., 252 F.3d 63 (2d Cir. 2001) ....................................................... 7 

In re Scottish Re Group Sec. Litig., No. 06 Civ. 5853 (SAS), 

 2007 WL 3256660 (S.D.N.Y. Nov. 2, 2007).............................................................................. 7 

Lapin v. Goldman Sachs Group, Inc., 506 F. Supp.2d 221 (S.D.N.Y. 2006)................................. 8 

Mishkin v. Ageloff., No. 07 Civ. 2690 (LAP), 1998 WL 651065 

 (S.D.N.Y. Sept. 23, 1998)........................................................................................................... 4 

Regents of the State of California v. Credit Suisse First Boston (USA), 

 482 F.3d 372 (5th Cir. 2007), petition for cert. filed, 75 U.S.L.W. 3557 

(U.S. Apr. 5, 2007) (No. 06-1341).......................................................................................... 3, 7 

Rich v. Maidstone Financial, Inc., No. 98 Civ. 2569 (DAB), 

 2002 WL 31867724 (S.D.N.Y. Dec. 20, 2002) .......................................................................... 4 

SEC v. Cedric Kushner Promotions, Inc., 417 F. Supp.2d 326 (S.D.N.Y. 2006) .......................... 2 

SEC v. First Jersey Sec., 101 F.3d 1450 (2d Cir. 1996) ............................................................. 4, 7 

i

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 2 of 11
ii

SEC v. U.S. Environmental, Inc., 155 F.3d 107 (2d Cir. 1998)...................................................... 4 

SEC v. PIMCO Advisors Fund Mgmt. LLC, 341 F. Supp.2d 454 (S.D.N.Y. 2004) ....................... 4 

SEC v. Zandford, 535 U.S. 813 (2002)........................................................................................... 6 

Shapiro v. Cantor, 123 F.3d 717 (2d Cir. 1997)............................................................................. 2 

United States v. O’Hagan, 521 U.S. 642 (1997) ............................................................................ 6 

Wright v. Ernst & Young LLP, 152 F.3d 169 (2d Cir. 1998)...................................................... 2, 3 

Statutes

Securities Exchange Act of 1934 § 10(b) .............................................................................. passim 

Securities Exchange Act of 1934 § 20(a) ....................................................................................... 8

SEC Rule 10b-5 .......................................................................................................................... 1, 5 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 3 of 11
 Defendant Dr. Andrew G. Bodnar submits this reply memorandum of law in further 

support of his motion to dismiss the purported Amended Class Action Complaint (“Am. 

Complaint” or “Complaint”).1 

INTRODUCTION 

 Plaintiffs’ Memorandum of Law in Opposition to Defendants’ Motions to Dismiss 

(“Plaintiffs’ Memo”) frames most of the Section 10(b) and Rule 10b-5(a) and (c) issues relating 

to Dr. Bodnar well, and correctly notes that “[t]he Supreme Court is currently considering the 

parameters of scheme liability under Section 10(b) and Rule 10b-5(a) and (c) in Stoneridge 

Investment Partners, LLC v. Scientific Atlanta, Inc., No. 06-43 (on appeal from In re Charter 

Commc’ns, Inc., 443 F.3d 987 (8th Cir. 2006).” Plaintiffs’ Memo at 32 n.14. The Court’s 

decision in this case will probably be driven by the Supreme Court’s decision in Stoneridge. 

However, until Stoneridge is decided, the parties and the Court must look to the authorities cited 

by both sides and decide which of the competing views of the law is most persuasive. The cases 

cited by plaintiffs on the Section 10(b) issues are either not on point or contradicted by other 

more persuasive authority which plaintiffs have largely ignored. 

 Plaintiffs’ Memo also frames the “control person” issue well, relying principally on In re 

Parmalat Sec. Litig., 376 F. Supp.2d 472 (S.D.N.Y. 2005), for the proposition that plaintiffs need 

not plead “culpable participation” in a “control person” claim. But once again, Plaintiffs’ Memo 

simply ignores the contrary authority that Dr. Bodnar cited in his opening brief (“Bodnar 

Memo”). 

 

1

 Dr. Bodnar joins in the arguments of defendant Bristol-Myers Squibb Co. (“BMS”) in its reply 

brief submitted in further support of the motion to dismiss. 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 4 of 11
 This reply memorandum will focus on which of the cases cited by plaintiffs are 

distinguishable, and why other cases cited by plaintiffs should not be followed because they are 

contrary to more persuasive authority in this and other circuits and districts. 

I 

 As stated in Dr. Bodnar’s opening brief, the Complaint fails to make out a valid claim 

against Dr. Bodnar under Section 10(b) because he is not alleged to have made any statements to 

the public or have engaged in any manipulative trading. Bodnar Memo at 4-9. In the absence of 

such an allegation, Dr. Bodnar argued that the Complaint failed to adequately plead: (1) a 

primary violation of Section 10(b) by Dr. Bodnar, (2) reliance, (3) loss causation, (4) the “in 

connection with” requirement, (5) scienter, or (6) deceptive conduct. 

 In support of the argument that the Complaint failed to adequately plead the first of these 

requirements -- a primary violation of Section 10(b) by Dr. Bodnar in the absence of a public 

statement by him -- Dr. Bodnar cited to the Supreme Court’s decision in Central Bank of Denver, 

N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994), the Second Circuit’s 

decisions in Wright v. Ernst & Young LLP, 152 F.3d 169 (2d Cir. 1998), Dinsmore v. Squadron 

Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837 (2d Cir. 1998), and Shapiro v. Cantor, 123 

F.3d 717 (2d Cir. 1997), and to the Southern District of New York decision in SEC v. Cedric 

Kushner Promotions, Inc., 417 F. Supp.2d 326 (S.D.N.Y. 2006). Apparently, plaintiffs have no 

way to distinguish these cases. Therefore, Plaintiffs’ Memo mentions only Central Bank in its 

discussion of whether Section 10(b) can apply to a defendant who does not make a public 

statement. 

 Instead, plaintiffs rely principally on Parmalat and In re Global Crossing, Ltd. Sec. 

Litig., 322 F. Supp.2d 319 (S.D.N.Y. 2004). Plaintiffs’ Memo at 28-29. It is respectfully 

2 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 5 of 11
submitted that Parmalat cannot be reconciled with the cases Dr. Bodnar cited and should not be 

followed for the reasons set forth therein. See e.g., Wright, 152 F.3d at 175 (“if Central Bank is 

to have any real meaning, a defendant must actually make a false or misleading statement in 

order to be held liable under Section 10(b). Anything short of such conduct is merely aiding and 

abetting, and no matter how substantial that aid may be, it is not enough to trigger liability under 

Section 10(b)....”) (internal quotation marks and citations omitted); Dinsmore, 135 F.3d at 843

(“where the requirements for primary liability are not independently met, they may not be 

satisfied based solely on one’s participation in a conspiracy in which other parties have 

committed a primary violation”) (emphasis in original).2

 Moreover, Global Crossing is 

distinguishable because in that case the court approved the view that: 

. . . a plaintiff may state a claim for primary liability under section 

10(b) for a false statement (or omission), even where the statement 

is not publicly attributed to the defendant, where the defendant’s 

participation is substantial enough that s/he may be deemed to have 

made the statement, and where investors are sufficiently aware of 

defendant’s participation that they may be found to have relied on 

it as if the statement had been attributed to the defendant. 

322 F. Supp.2d at 333 (emphases in original). The complaint in this case does not allege that Dr. 

Bodnar’s alleged participation was substantial enough that he may be deemed to have made 

BMS’s public statements or that investors were sufficiently aware of Dr. Bodnar’s alleged 

participation so that they would have attributed BMS’s public statements to Dr. Bodnar. 

 In a lengthy footnote, Plaintiffs’ Memo (at 32 n.14) cites to other cases for the 

proposition that a defendant can be sued privately under Section 10(b) even in the absence of a 

 

2 Parmalat is also clearly in conflict with In re Charter Commc’ns, Inc., 443 F.3d 987 (8th Cir. 

2006), cert. granted, Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 127 S. Ct. 

1873 (U.S. Mar. 26, 2007) (No. 06-43) and with Regents of the State of California v. Credit 

Suisse First Boston (USA), 482 F.3d 372 (5th Cir. 2007), petition for cert. filed, 75 U.S.L.W. 

3557 (U.S. Apr. 5, 2007) (No. 06-1341). 

3 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 6 of 11
false statement by him. However, those cases are clearly distinguishable. For example, in SEC 

v. U.S. Environmental, Inc., 155 F.3d 107 (2d Cir. 1998), the defendant’s “participation” was 

actually making the manipulative trades.3 Id. at 112 (“Indeed, if the trader who executes 

manipulative buy and sell orders is not a primary violator, it is difficult to imagine who would 

remain liable after Central Bank”). And in SEC v. First Jersey Sec., 101 F.3d 1450 (2d Cir. 

1996), and Rich v. Maidstone Financial, Inc., No. 98 Civ. 2569 (DAB), 2002 WL 31867724 

(S.D.N.Y. Dec. 20, 2002), while the defendants did not make any statements, they were found to 

have orchestrated schemes to make false statements or omissions. There is no allegation in this 

case which suggests that Dr. Bodnar orchestrated the making of the public statements which 

plaintiffs allege were false.4

 On the separate issues of whether plaintiffs have adequately alleged reliance, loss 

causation, the “in connection with” requirement, and a “deceptive device” by Dr. Bodnar, 

Plaintiffs’ Memo again does not address the authorities cited in Dr. Bodnar’s opening brief. 

Instead, for all these subjects, they rely almost exclusively on Parmalat, which, it is respectfully 

submitted, cannot be reconciled with the many cases on which Dr. Bodnar relied. 

 For example, on the reliance issue, Dr. Bodnar’s opening brief cited to (and quoted from) 

Central Bank and Wright for the proposition that plaintiffs must allege reliance on the 

defendants’ misstatements, and not on the representations of others. Bodnar Memo at 6-7. 

Plaintiffs do not address these quotations at all. Instead they cite to cases which hold that 

 

3

 Also cited by plaintiffs are SEC v. PIMCO Advisors Fund Mgmt. LLC, 341 F. Supp.2d 454, 469 

(S.D.N.Y. 2004), and Mishkin v. Ageloff, No. 97 Civ. 2690 (LAP), 1998 WL 651065, *13-*18 

(S.D.N.Y. Sept. 23, 1998). Those cases involve making or supervising manipulative trades and 

are distinguishable for the same reasons as U.S. Environmental. 

4

 Similarly, Global Crossing is distinguishable because one of the theories accepted by the court 

in that case was that defendant Arthur Anderson LLP “masterminded” fraudulent activity 

intended to deceive the public. See Global Crossing, 322 F. Supp.2d at 336. No such allegation 

was made in this case against Dr. Bodnar. 

4 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 7 of 11
reliance need not be alleged when there is a “fraud on the market presumption.” Plaintiffs’ 

Memo at 30. However, plaintiffs do not address at all the argument that the “fraud on the market 

presumption” is not available against Dr. Bodnar “because it only applies to publicly 

disseminated information.” Bodnar Memo at 7 n.9, citing Basic, Inc. v. Levinson, 485 U.S. 224, 

247 (1988). 

 Interestingly, the position advocated by Dr. Bodnar on reliance was the exact position 

taken by the United States Solicitor General’s Office in Stoneridge. See Brief for the United 

States as Amicus Curiae Supporting Affirmance.5 Before the Supreme Court, the Solicitor 

General argued: 

 Words or actions by a secondary actor that facilitate an 

issuer’s misstatement, but are not themselves communicated to 

investors, simply cannot give rise to reliance (and thus primary 

liability in a private action). That principal is at the heart of the 

distinction between primary liability and secondary liability of the 

kind rejected in Central Bank. 

Id. at 22. 

 The Solicitor General also disagreed with the theory espoused by plaintiffs in this case 

that the “fraud on the market theory” can create a presumption of reliance against one who does 

not make a false public statement: 

By its very terms, the presumption [of reliance] applies only to 

publicly disseminated misrepresentations: “Because most publicly 

available information is reflected in market price, an investor’s 

reliance on any public material misrepresentations * * * may be 

presumed for purposes of a Rule 10b-5 action.” Basic, 485 U.S. at 

247 (emphases added). Petitioner’s complaint does not identify 

any public statements or actions by respondents. Accordingly, 

petitioners cannot rely on the fraud-on-the-market theory to satisfy 

the reliance requirement here. 

 

5

 The Solicitor General’s amicus brief can be found online at: 

http://law.du.edu/jbrown/corporateGovernance/secGovernance/stonebridge/documents/Stoneridg

eSGAmicus.pdf. 

5 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 8 of 11
Id. at 24-25. 

 On the loss causation issue that is particular to Dr. Bodnar, Dr. Bodnar argued that 

plaintiffs do not allege that their loss was caused by his conduct, and that therefore, the 

Complaint does not adequately allege “loss causation” as to Dr. Bodnar. Bodnar Memo at 7-8. 

Once again, Plaintiffs’ Memo relies only on Parmalat. Not only is Parmalat wrong on this 

issue, but again, the Solicitor General sides with Dr. Bodnar: 

 For many of the same reasons that the complaint does not 

satisfy the reliance (or transaction-causation) requirement, it also 

does not satisfy the related loss-causation requirement. [footnote 

omitted]. In order to show loss causation, a plaintiff must prove 

that the defendant’s fraudulent conduct “proximately caused the 

plaintiff’s economic loss.” [Dura Pharmaceuticals, Inc. v. 

Broudo, 544 U.S. 336, 346 (2005) (additional citation omitted)]. 

In its complaint, petitioner alleges only that it purchased stock 

during a specified class period. . . . Petitioner does not allege that 

respondents’ conduct caused its loss . . . 

Brief for the United States as Amicus Curiae Supporting Affirmance at 25. Here, the Complaint 

essentially argues that plaintiffs’ alleged loss was caused by BMS’s public disclosures, not by 

Dr. Bodnar’s alleged conduct prior to those disclosures. 

 Plaintiffs’ Memo (at 30) also relies exclusively on Parmalat in opposition to Dr. 

Bodnar’s argument that his alleged conduct was not “in connection with” plaintiffs’ purchases of 

BMS stock. However, plaintiffs make no attempt to address SEC v. Zandford, 535 U.S. 813 

(2002) or United States v. O’Hagan, 521 U.S. 642 (1997), both of which support Dr. Bodnar’s 

“in connection with” argument. See Bodnar Memo at 8. 

 Finally, Plaintiffs’ Memo (at 31-32) relies exclusively on Parmalat and Global Crossing

in opposition to Dr. Bodnar’s argument that plaintiffs have failed to allege a “deceptive device or 

contrivance” by Dr. Bodnar as that term is used in Section 10(b). But plaintiffs fail to 

6 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 9 of 11
acknowledge or address the authority that contradicts their position. It is respectfully submitted 

that a careful reading of Regents of the State of California v. Credit Suisse First Boston (USA), 

482 F.3d 372, 386-90 (5th Cir. 2007), petition for cert. filed, 75 U.S.L.W. 3557 (U.S. Apr. 5, 

2007) (No. 06-1341) will show why Dr. Bodnar has the better of this argument.6

II 

With regard to plaintiffs’ “control person” claim against Dr. Bodnar, it was pointed out in 

Dr. Bodnar’s opening brief that (i) the failure to allege a primary violation in this matter 

eliminates the possibility of control person liability, (ii) plaintiffs failed to adequately allege Dr. 

Bodnar’s control of BMS, and (iii) plaintiffs have not alleged facts regarding Dr. Bodnar’s 

“culpable participation” in the statements which plaintiffs claim were false. Bodnar Memo at 

10-11. 

Plaintiffs argue that they are not required to plead “culpable participation” to survive a 

motion to dismiss on the pleadings. Plaintiffs’ Memo at 25-27. It is true that there is a 

difference of opinion among judges in the Southern District of New York as to whether plaintiffs 

must do so. In In re Parmalat Sec. Litig., 474 F. Supp.2d 547, 554 n.34 (S.D.N.Y. 2007), the 

court recognized the existence of a split in the Southern District on this point. However, the 

weight of Second Circuit and Southern District decisions requires allegations of “culpable 

participation.” Bodnar Memo at 11. Most recently, in ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 

493 F.3d 87 (2d Cir. 2007), the Second Circuit identified culpable participation as an element of 

a prima facie case of control person liability. 493 F.3d at 108. See also In re Scholastic Corp. 

Sec. Litig., 252 F.3d 63, 78-79 (2d Cir. 2001), citing First Jersey, 101 F.3d at 1472 (same); In re 

Scottish Re Group Sec. Litig., No. 06 Civ. 5853 (SAS), 2007 WL 3256660, *9 (S.D.N.Y. Nov. 2, 

 

6

 Indeed, the Court in Regents of California specifically disagreed with the analysis in Parmalat

on the meaning of “deceptive” conduct under Section 10(b). 482 F.3d at 377-90.

7 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 10 of 11
8 

2007) (culpable participation an element); Lapin v. Goldman Sachs Group, Inc., 506 F. Supp.2d 

221, 244-49 (S.D.N.Y. 2006) (same). 

Plaintiffs’ fallback position is that they have, in any event, adequately alleged “culpable 

participation” by Dr. Bodnar. But they nowhere allege that Dr. Bodnar made any statements to 

the public. This makes plaintiffs’ control person claim against Dr. Bodnar inadequate. See In re 

Refco, Inc. Sec. Litig., 503 F. Supp.2d 611, 663 (S.D.N.Y. 2007) (“a claim under § 20(a) requires 

culpable participation -- that is, actual involvement in the making of the fraudulent statements by 

the putatively controlled entity”) (emphasis in original). 

CONCLUSION 

 For all of the foregoing reasons, plaintiffs’ claims against defendant Andrew G. Bodnar 

should be dismissed with prejudice. 

Dated: New York, New York 

 January 10, 2008 

MORVILLO, ABRAMOWITZ, GRAND, 

 IASON, ANELLO & BOHRER, P.C. 

 By: /s Lawrence S. Bader 

Elkan Abramowitz (EA-3987) 

Lawrence S. Bader (LB-5841) 

Jerrold L. Steigman (JS-9137) 

565 Fifth Avenue 

 New York, New York 10017 

 (212) 856-9600 

 Email: lbader@maglaw.com

Attorneys for Defendant Andrew G. Bodnar

 

Case 1:07-cv-05867-PAC Document 44 Filed 01/10/2008 Page 11 of 11