Opinion ID: 3049769
Heading Depth: 3
Heading Rank: 2

Heading: Secondary Liability Under Section 20(a)

Text: In Count II, Jacoby asserted a violation of § 20(a) of the Securities Exchange Act. Section 20(a) provides: Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. 15 U.S.C. § 78t(a). Section 20(a) is not a freestanding claim but rather a means of imposing liability “not only on the person who actually commits a securities law violation, but also on an entity or individual that controls the violator.” Laperriere v. Vesta Ins. Group, Inc., 526 F.3d 715, 721 (11th Cir. 2008). 14 Because a primary violation of the securities law is an essential element of a § 20(a) derivative claim, a plaintiff who pleads a § 20(a) claim can withstand a motion to dismiss only if the primary violation is pleaded with legal sufficiency. Garfield v. NDC Health Corp., 466 F.3d 1255, 1261 (11th Cir. 2006). As the Second Amended Complaint failed to allege primary liability under § 10(b), there can be no secondary liability under § 20(a). Thus, we affirm the district court’s dismissal of Count II for failure to state a cause of action under § 20(a) of the Securities Exchange Act.