Opinion ID: 75504
Heading Depth: 2
Heading Rank: 2

Heading: Post-Central Bank

Text: Following Central Bank, the federal courts have split over the threshold requirement to show that a secondary actor, such as a lawyer or an accountant, is primarily liable under § 10(b). Compare In re Software Toolworks, Inc., 50 F.3d 615, 628 n.3 (9th Cir. 1994) (holding that accountants may be primarily liable for statements made by others where the accountants reviewed the statements and played a significant role in the drafting and editing of the statements); Carley Capital Group v. Deloitte & Touche, L.L.P., 27 F. Supp. 2d 1324, 1334 (N.D. Ga. 1998) (holding that “a secondary actor can be primarily liable when it, acting alone or with others, creates a misrepresentation even if the misrepresentation is not publicly attributed to it”); In re ZZZZ Best Sec. Litig., 864 F. Supp. 960, 970 (C.D. Cal. 1994) (concluding that primary liability attaches to accounting firm that was 19 “intimately involved” in the creation of false documents) with Anixter v. HomeStake Prod. Co., 77 F.3d 1215 (10th Cir. 1996) (rejecting “a rule allowing liability to attach to an accountant or other outside professional who provided ‘significant’ or ‘substantial assistance’ to the representations of others” and holding that, to be liable, secondary actors “must themselves make a false or misleading statement (or omission) that they know or should know will reach potential investors”); Wright v. Ernst & Young LLP, 152 F.3d 169, 175 (2d Cir. 1998) (holding that “a secondary actor cannot incur primary liability under the [Securities] Act for a statement not attributed to that actor at the time of its dissemination”). In order for a secondary actor, such as a law firm or accounting firm, to be primarily liable under § 10(b), the Plaintiffs “must show reliance on the defendant’s misstatement or omission to recover under 10b-5.” See Central Bank, 511 U.S. at 180, 114 S. Ct. at 1449 (citing Basic Inc. v. Levinson, 485 U.S. 224, 243, 108 S. Ct. 978, 989-90 (1988)). Following the Second Circuit, we conclude that, in light of Central Bank, in order for the defendant to be primarily liable under § 10(b) and Rule 10b-5, the alleged misstatement or omission upon which a plaintiff relied must have been publicly attributable to the defendant at the time that the plaintiff’s investment decision was made. See Wright, 152 F.3d at 175. We apply the Central Bank principles first to the allegations made with respect to 20 GY&S and then to the allegations made with respect to C&L.