In a 105-page ruling today, Judge Marrero denied the defendants’ motion to dismiss a securities fraud class action arising from the collapse of MF Global. The ruling forcefully rejected as “extreme” the notion that none of the 23 defendants could be legally responsible for the sudden loss of billions of dollars:
Defendants, all twenty-three of them, now ask the Court to dismiss the complaint every claim in it. Curiously, they suggest that Plaintiffs’ exhaustive pleadings give Defendants both too much detail and too little — more information than necessary to present a concise statement of the facts, and yet not enough to give Defendants fair notice of why they are being sued. By Defendants’ account, and giving a broad interpretation to the logic and end result of their theories, nothing happened at MF Global for which a single one of the twenty-three Defendants could possibly bear any legal responsibility. As Defendants read the complaint and construe the applicable statutes, nothing in law or legal theory now exists — not even simple negligence principles — under which any of the individuals and entities involved in MF Global’s management, or in its issuance of securities during the Company’s destruction, can be held accountable for any of the wrongdoing that Plaintiffs claim. The natural implications of this extreme perspective are far-reaching. Defendants’ contentions would suggest that the fall of MF Global Plaintiffs portray either never happened, or, if it did occur, that since no one associated with the Company played a causal role in the events perhaps the debacle must have been the fateful work of supernatural forces, or else that the explanation for a spectacular multi-billion dollar crash of a global corporate giant is simply that “stuff happens” instantaneously, of its own accord, without any knowledge or causal agency whatsoever by anyone of the many sophisticated business executives in charge of the company’s day to day affairs. Perhaps worse yet, a fair inference that follows from the conception of the law Defendants advocate is that, even assuming the truth of everything Plaintiffs allege, what transpired at MG Global over the course of the year before the Company’s collapse — including the sudden unexplained disappearance of $1.6 billion of customer money — represents the governing industry standard for doing business, the acceptable model for how corporate managers should be permitted to run a company’s affairs in the ordinary course, insulated from accountability that not only Plaintiffs but also the public should rightfully expect from issuers of securities. . . . To end this prologue on a higher lyrical note, if on this record as pled Plaintiffs cannot make out a plausible claim here, they could not make it anywhere.