A complaint involving misrepresentation in an IPO may not properly be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) on the ground that the alleged misstatements or omissions are not material unless they are so obviously unimportant to a reasonable investor that reasonable minds could not differ on the question of their importance.
Plaintiff class members filed an action in the state court (Connecticut) under the Securities Act of 1933 against defendant software and consulting corporation alleging misrepresentations and omissions in connection with an initial public offering of shares of the corporation. The corporation filed a motion to dismiss the action under Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ. P. 9(b).
Was the motion to dismiss of the corporation proper?
The court denied the corporation's motion to dismiss. The court held that dismissal of a complaint under Fed. R. Civ. P. 12(b)(6) was inappropriate unless it was clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. A plaintiff could establish a prima facie case under the § 11 of the act by demonstrating that plaintiff purchased the security and that the registration statement contained false or misleading statements concerning a material fact. Materiality of a statement was usually a question of fact and it was unlikely that a determination of materiality could be dismissed as a matter of law. Additionally, the class member's complaint complied with the short and plain statement requirement of Fed. R. Civ. P. 9(b).