Opinion ID: 425977
Heading Depth: 2
Heading Rank: 2

Heading: Morgan Stanley's Derivative Liability

Text: 46 Plaintiff claims that pursuant to section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. Sec. 78t(a) (1976), Morgan Stanley is a controlling person who should be found derivatively liable for the unlawful securities violations committed by its employees. Section 20(a) provides: 47 (a) 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. 48 15 U.S.C. Sec. 78t(a) (1976). In considering this claim the district court noted initially that [a]s the claims against the individuals have been dismissed, Morgan Stanley cannot be derivatively liable. 553 F.Supp. at 1356. We agree. Because the section 20(a) claim was correctly dismissed on this threshold ground, we need not review the case law defining section 20(a) derivative liability.