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Motion to Dismiss in Securities Fraud Case

January 23, 2015

Motion to Dismiss in Securities Fraud Case

CaseFirst Community Bank, N.A. v. First Tennessee Bank, N.A., et al.

Issue:  Did the Complaint alleging securities fraud sufficiently plead claims for which relief can be granted?

Facts: Plaintiff purchased asset-based securities that turned out to be unmarketable. Plaintiff then sued Defendants for fraud and negligent misrepresentation of the securities on the basis that Plaintiff was deliberately misled. Defendants moved to dismiss on multiple grounds, such as that the statute of limitations was exceeded, the complaint did not provide sufficient particularity, Defendants did not owe a duty, and that the statements in question were non-material opinions rather than misrepresentations. The trial court granted dismissal. On appeal, the COA reversed the dismissal in regard to a statute of limitations argument. The Supreme Court remanded the case for consideration on the trial court’s alternative basis for dismissal: failure to state a claim for which relief can be granted on the substantive issues.

Appellate Decision:  The intermediate court ruled in favor of Plaintiff by reversing the trial court on dismissal for failure to state a claim and remanding for further proceedings. The court reviewed each defense to each claim and ultimately found that the complaint was sufficient to survive a motion to dismiss.

Review Granted:  January 15, 2015.

Prediction:  Ben thinks the Supreme Court will affirm on at least most of the issues. This case itself is very fact and procedurally intensive, but its greater significant to other cases will be in clarifying the appropriate legal standard for assessing a motion to dismiss before discovery has been conducted.