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Plaintiff Feldman asserted claims for
securities fraud, common law fraud, breach of contract,
and violation of G.L. c. 93A in connection with the
acquisition of a software business. The defendants
allegedly misrepresented the value of Aspen’s stock.
Feldman subsequently learned that Aspen had
significantly overstated the value of its shares and had
engaged in a number of improper accounting practices.
Taking plaintiff’s allegations as true
for purposes of the motion to dismiss, the Court held
that the complaint stated a claim. The opinion is
primarily of interest for its discussion of the
differences between state and federal securities law.
For example, the court noted that while Section 12(2) of
the Federal Securities Act of 1933 does not apply to
private transactions (i.e., those not involving a
prospectus), Section 410(a)(2) of the Massachusetts
Uniform Securities Act bears no such limitation. Id.
at *5. Thus, Feldman’s claim was not subject to |
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dismissal merely because the
acquisition at issue did not involve a prospectus. The
court further noted that although Fed. R. Civ. P. 9(b)
and the Federal Private Securities Litigation Reform Act
require a plaintiff to plead both scienter and specific
facts which demonstrate the misleading nature of a
defendant’s alleged statements, Massachusetts law does
not impose the same requirements. Id. at *9.
Finally, the court rejected defendants’
argument that plaintiff would be unable to prove damages
and that jurisdiction was therefore wanting under Rule
12(b)(1). In so doing, the court noted that the “loss
causation” theory that originated in the Federal
securities fraud context had not been recognized in
Massachusetts – in other words, the fact that a false
representation was not revealed until after stock shares
were sold (and thus did not cause a loss in value at the
time of the sale) did not defeat Feldman’s right of
recovery under Massachusetts law.
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