Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 1 of 19 CHRISTOPHER J. CORDARO, UNITED STATES DISTRICT COURT individually and on behalf of all others DISTRICT OF NEW JERSEY similarly situated, Plaintiffs, Civil Action No. V, Civil Action UBS FINANCIAL SERVICES INC., RICHARD S. FULD, JR., CHRISTOPHER M. O'MEARA, CLASS ACTION COMPLAINT MICHAEL L. AINSLIE, JOHN F. AND JURY TRIAL REQUESTED AKERS, ROGER S. BERLIND, THOMAS H. CRUIKSHANK, MARSHA JOHNSON EVANS, SIR CHRISTOPHER GENT, ROLAND A. HERNANDEZ, HENRY KAUFMAN and JOHN D. MACOMBER, Defendants. Plaintiff, Christopher J. Cordaro, by way of complaint against defendants says: NATURE OF THE CASE 1. This is a class action under Sections 11, 12(x)(2) and 15 of the Securities Act of 1933. The Class Period is between May 30, 2006 and September 15, 2008. The Class consists of Plaintiff and all persons or entities who, during the Class Period, purchased "100% Principal Protection" notes issued pursuant to Lehman Brothers Holdings Inc.'s Medium-Term Notes, Series I Prospectus Supplement that were underwritten and sold by Defendants ("Lehman Principal Protection Notes"). Plaintiff and other Class Members were damaged as the proximate result of their purchases of Lehman Principal Protection Notes. 2. Defendants violated the Securities Act of 1933 by filing with the SEC a registration statement and prospectus relating to an investment in Lehman Principal Protection Notes which contained material untrue statements of material facts or omitted to state certain 1
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 2 of 19 material facts that were necessary in order to make the statements not misleading relating to an investment. 3. More specifically, Defendants failed to inform Plaintiff and Class Members that LBHI intended to use the proceeds from Lehman Principal Protection Notes for general operating purposes for its operating units and subsidiaries. Defendants also failed to inform Plaintiff and Class Members, among other things, that there was a risk that the Lehman Principal Protection Notes would be subject to a diminution in value or worthless in light of LBHI's undisclosed risk of losses from its real estate and mortgage investments, insufficient resources and questionable accounting practices. 4. On September 15, 2008, LBHI filed a bankruptcy petition. As a result, Lehman Principal Protection Notes are in default. Consequently, Plaintiff and other Class Members are senior unsecured creditors in the LBHI bankruptcy proceedings. The entire investments of Plaintiff and other Class Members are in jeopardy. 5. As a result of Defendants' violations of the Securities Act of 1933, Plaintiff and Class Members are entitled to rescind their purchases of Lehman Principal Protection Notes and recover the consideration paid for those securities. Plaintiff and Class Members are also entitled to an award of damages. JURISDICTION AND VENUE 6. The claims asserted herein arise under Sections 11, 12(2) and 15 of the Securities Act, 15 U.S.C. 77k, 771(x)(2), and 770. Therefore, this Court has jurisdiction over this action pursuant to 28 U.S.C. 1331 and 1337, and Section 22 of the Securities Act, 15 U.S.C. 77v. 7. Venue is proper in the District of New Jersey, pursuant to Section 22 of the Securities Act, 15 U.S.C. 77v, and 28 U.S.C. 1391(b), in that Lehman and UBS transact 2
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 3 of 19 business within this District, the offer or sale occurred in this District, and some of the wrongful acts, including the dissemination of untrue statements of material facts, occurred in this District. PARTIES & Plaintiff is a citizen and resident of the United States of America, State of New Jersey, County of Burlington. Plaintiff purchased Lehman Principal Protection Notes underwritten and sold by UBS during the Class Period. As a proximate result of such purchase, Plaintiff was damaged. 9. Defendant UBS Financial Services Inc. ("Defendant UBS") is a corporation organized under the laws of the State of Delaware with its principal place of business in the County of New York, State of New York. Defendant UBS is registered with the SEC as a broker-dealer and. investment adviser pursuant to the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940. Defendant UBS is also a member of the Securities Industry and Financial Markets Association which offers investment advice and brokerage services to its clients. 10. At all relevant times herein, Defendant Richard S. Fuld, Jr. ("Fuld") was the Chairman of the Board of Directors and Chief Executive Officer of LBHL Defendant Fuld signed the shelf registration statement dated May 30, 2006, and filed with the SEC on Form S-3 (the "Shelf Registration Statement"), in the aforesaid capacities. 11. Defendant Christopher M. O'Meara ("O'Meara") served as LBHI's Chief Financial Officer, Controller and Executive Vice President from 2004 until December 1, 2007, and signed the Shelf Registration Statement in those capacities. 12. At all relevant times herein, Defendant Michael L. Ainslie ("Ainslie") was a director of LBHI and signed the Shelf Registration Statement in such capacity. 3
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 4 of 19 13. At all relevant times herein, Defendant John F. Akers ("Akers") was a director of LBHI and signed the Shelf Registration Statement in such capacity. 14. At all relevant times herein, Defendant Roger S. Berlind ("Berlind") was a director of LBHI and signed the Shelf Registration Statement in such capacity. Defendant Berlind also was a director of LBI. 15. At all relevant times herein, Defendant Thomas H. Cruikshank ("Cruikshank") was a director of LBHI and signed the Shelf Registration Statement in such capacity. Defendant Cruikshank also was a director of LBI. 16. At all relevant times herein, Defendant Marsha Johnson Evans ("Evans') was a director of LBHI and signed the Shelf Registration Statement in such capacity. 17. At all relevant times herein, Defendant Sir Christopher Gent ("Gent") was a director of LBHI and signed the Shelf Registration Statement in such capacity. Defendant Gent also was a. director of LBI. 18. At all relevant times herein, Defendant Roland Hernandez ("Hernandez") was a director of LBHI and signed the Shelf Registration Statement in such capacity. 19. At all relevant times herein, Defendant Henry Kaufman ("Kaufman") was a director of LBHI and signed the Shelf Registration Statement in such capacity. 20. At all relevant times herein, Defendant John D. Macomber ("Macomber") was a director of LBHI and signed the Shelf Registration Statement in such capacity. STATEMENT OF THE CASE 21. LBHI is a corporation organized under the laws of the State of Delaware with its principal place of business in the County of New York, State of New York. LBHI operated as a global investment bank and marketed itself as a business with a "leadership position in equity 4
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 5 of 19 and fixed income sales, trading and research." The common stock of LBHI traded on the New York Stock Exchange. On September 15, 2008, LBHI filed a bankruptcy petition. 22. LBI is a corporation organized under the laws of the State of Delaware with its principal place of business in the County of New York, State of New York. LBI is a whollyowned subsidiary of LBHI. LBI is registered with the SEC as a broker-dealer in accordance with federal law. LBI's services included brokerage, mergers and acquisitions and restructuring advice, debt and equity underwriting, market making, debt and equity research, and real estate and private equity investments. 23. On September 17, 2008, the Securities Investor Protection Corporation ("SIPC") applied to the United States Bankruptcy Court for the Southern District of New York an order commencing liquidation and protection under the automatic stay provisions of the Bankruptcy Code, 24. On September 19, 2008, the aforesaid Court granted the SIPC's application. 25. Thus, neither LBHI nor LBI are parties in this action. 26. The subjects of this class action are principal protection notes, which are investment vehicles that are structured for 'investors seeking to protect their entire principal investments while having the potential to obtain a return on their investments based on variations in the value of the underlying derivatives (e.g., equities, indices, properties) or the happening or nonhappening of an event during the term of the note. Principal protection notes guarantee that investors will receive returns of their principal investments at maturity. If the derivatives perform, investors receive additional returns on their investments, 27. On May 30, 2005, LBHI filed with the SEC a Shelf Registration Statement pursuant to Form S-3, a prospectus dated May 30, 2006 ("the 2006 Prospectus"), and a 5
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 6 of 19 prospectus supplement for Medium-Term Notes, Series I ("the MTN Prospectus"). These documents, prospectus supplements, pricing supplements and/or free writing prospectuses ("the Offering Documents") are the basis by which LBHI offered for sale Lehman Principal Protection Notes and other senior unsecured debt securities. 28. According to the MTN Prospectus, Lehman Principal Protection Notes are structured investment instruments whose return hinges on the performance of one or more securities, one or more currencies, one or more commodities, one or more financial or economic things of value, or one or more occurrence or non-occurrence of any event or circumstance. 29. Lehman Principal Protection Notes promise investors that, upon maturity, they will receive their principal investments, and that if the derivatives achieve certain levels specified in the pricing supplement or free writing prospectus, they will receive returns on their investments. 30. Contrary to the terms of the relevant documents, in fact, Plaintiff and Class Members who bought Lehinan Principal Protection Notes made unsecured loans to LHBI which were used by LHBI for the general business and operating purposes of LHBI and its subsidiaries. 31. According to the MTN Prospectus: No note will have an established trading market when issued. Unless otherwise specified in the applicable pricing supplement, the notes will not be listed on any securities exchange. The agents may make a market in the notes, but no agent is obligated to do so. The agents may discontinue any market-making at any time without notice, at their sole discretion. There can be no assurance of the existence or liquidity of a secondary market for any notes, or that the maximum amount of the notes will be sold. 32. As described in the Offering Documents, UBS, LBI and their affiliates underwrote and sold Lehman Principal Protection Notes in initial sales directly to investors. In 6
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 7 of 19 general, LBHI paid these underwriters between 125 and 300 basis points in connection with the distribution of each Lehman Principal Protection Notes issuance. 33. The Offering Documents identify these securities as "100% Principal Protection" and guaranteed preservation of investors' capital stating, "At maturity, you will receive a cash payment equal to at least 100% of your principal," or "100% principal protection if held to maturity." 34, In a section describing "Investor Suitability," the Offering Documents state that Lehman Principal Protection Notes "may be suitable for you if, among other considerations... You seek an investment that offers 100% principal protection if the Notes are held to maturity." 35. The Offering Documents identify several risks associated with Lehman Principal Protection Notes including: To protect his principal, an investor must hold his Lehman Principal Protection Note until maturity; The return on Lehman Principal Protection Notes may depend on the market value of the referenced instruments; If Lehman Principal Protection Notes do not perform within specified criteria, investors may only recoup their principal; Investors in the referenced instruments will not receive dividend payments or have voting or distribution rights in the referenced instruments; The value of Lehman Principal Protection Notes prior to maturity will likely be affected by sales agent commissions and hedging and other costs; Lehman may choose to redeem Lehman Principal Protection Notes before maturity; 7
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 8 of 19 Lehman may pay dealer incentives to its agents and affiliates in connection with the sales of Lehman Principal Protection Notes; Lehman Principal Protection Notes will not be listed on any securities exchange; Lehman Principal Protection Notes may be illiquid prior to maturity, and Lehman is not obligated to maintain a secondary market for Lehman Principal Protection Notes; Lehman and its affiliates have various roles with respect to the issuance and holding of Lehman Principal Protection Notes, some of which may be adverse to the interests of holders of Lehman Principal Protection Notes; Lehman and its affiliates may publish research or express opinions that are pejorative with respect to investing in or holding Lehman Principal Protection Notes, which recommendations or analyses could affect the referenced instruments or the value of Lehman Principal Protection Notes; Investors should rely on their own evaluation of the merits on an investment in the referenced instruments; The value of Lehman Principal Protection Notes may be influenced by economic and market circumstances, which may be unpredictable; Investing in the referenced instrument may have tax consequences to the investors; and An investment in the referenced instruments depends upon the actual and perceived creditworthiness of LBHI, which may affect the market value of Lehman Principal Protection Notes. 8
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 9 of 19 36. The Offering Documents fail to identify the risk that: upon maturity, LBHI would be unable to repay the guaranteed return of principal on Lehman Principal Protection Notes. 37. The Offering Documents also fail to identify the risk that Lehman Principal Protection Notes' guarantee of 100% principal protection was subject to LBHI's undisclosed exposure to losses from its real estate and mortgage portfolio and other material undisclosed risks associated with LBHI's business and accounting practices. 38. On September 15, 2008, LBHI filed in the Southern District of New York a voluntary petition for bankruptcy protection, The bankruptcy proceeding exposed that LBHI had excessive, undisclosed exposure to losses from its real estate and mortgage investments, and that LBHI lacked sufficient capital to cover those losses. 39. Following the bankruptcy petition, UBS notified holders of Lehman Principal Protection Notes as follows: "The immediate effect of LBHPs bankruptcy filing is that you will not receive any payments on your LBHI structured product as scheduled under the terms of the structured product. Instead, as a holder of a senior unsecured debt instrument of LBHI, you have a claim as a senior unsecured creditor against LBHI's bankruptcy estate." (Emphasis original.) UBS also stated that holders of Lehman Principal Protection Notes "may not receive anything" in the bankruptcy. 40. On September 23, 2008, UBS published a document entitled, "Structured Products: Lehman Q&A," which stated the following: 9
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 10 of 19 Q: What about Lehman-issued structured products? A. Lehman-issued structured products are senior unsecured debt instruments of LBHI. There is no security interest or collateral supporting these debt instruments. Holders of Lehman-issued structured products are senior unsecured creditors of LBHI in the bankruptcy. Q: What about 100% Principal Protection Notes? A. All structured products, including 100% Principal Protection Notes, are subject to the creditworthiness of the issuer. Similar to traditional bonds, if the issuer is unable to pay its obligations under the tenns of the structured product, then the structured product becomes a defaulted obligation of the issuer. Q: Can clients sell their Lehman-issued structured products now? A. The secondary market for Lehman-issued structured products was provided by Lehman Brothers Inc., a subsidiary of LBHI. Lehman Brothers Inc. stopped making a market for its structured products last weep.. Q: What will Lehman-issued structured products look like on statements? A. Client statements will display "Price was unavailable", and On-line Services (OLS) will display "N/A". Effectively, these structured products will contribute zero to the account valuation. 42. In connection with the wrongful acts set forth in this Class Action Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commence including, the mails, wires, and the facilities of the national securities markets. defined as: CLASS ACTION ALLEGATIONS 43. Plaintiff and Class Members brings this class action on behalf of a Class, which is All persons or entities who, between May 30, 2006 and September 15, 2005 purchased Lehman Principal Protection Notes and suffered damage as a result of such purchases. 44. Excluded from the Class are: Defendants; the subsidiaries and affiliates of any Defendant; any person or entity who is a partner, officer, director, employee or controlling 10
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 11 of 19 person of any Defendant; members of Defendants' immediate families and their legal representatives, heirs, successors or assigns; and any entity in which any Defendant has or had a controlling interest. 45. The members of the Class are so numerous that joinder of all members is impracticable. LBHI issued hundreds of millions of dollars of Lehman Principal Protection Notes that were underwritten and sold by UBS during the Class Period. 46. Plaintiff believes that there are thousands of Class Members of the proposed Class. 47. Records maintained by Defendants and Lehman will identify Class Members, who may be notified of this action by mail, using the form of notice similar to that customarily used in securities class actions. 4$. The following common class claims, issues and defenses pertain to Plaintiff and Class Members: (a) (b) (c) (d) Whether the federal securities laws were violated by Defendants' acts as alleged herein; Whether Plaintiff and/or Class Members knew that there was a risk that they would lose substantially all of their principal investments; Whether Defendants made false and misleading statements or omissions of material fact about the risk factors with respect to Lehman Principal Protection Notes in the Shelf Registration Statement and the relevant prospectuses; and Whether Class Members have suffered damages and the amount of those damages. 49. These common questions of law and fact predominate over any issues solely affecting individual Class Members. 11
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 12 of 19 50. Plaintiff's claims are typical of the claims of Class Members in that all Class Members purchased Lehman Principal Protection Notes and are similarly affected by Defendants' unlawful conduct. 51. Plaintiff will fairly and adequately protect the interests of the members of the Class and is committed to the vigorous prosecution of this action. Plaintiff has retained counsel who is competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class. 52. A class action is superior to ail other available methods for the fair and efficient adjudication of this controversy because joinder of all Class Members is impracticable, because the damages suffered by individual Class members may be relatively small (although significant to each of them), and because the burden and expense of individual litigation male it impossible for Class Members to individually redress the harm done to them. Given the uniform policies and practices at issue, there will also be no difficulty in the management of this litigation as a class action. 53. Even if Class Members could afford such individualized litigation, the court system could not. Individualized litigation would create the danger of inconsistent or contradictory judgments and increase the delay and expense to all parties and the court system. By contrast, the class action device presents far fewer management difficulties, is manageable, and provides the benefits of single adjudication, economies of scale, and comprehensive supervision by a single court. The benefits of adjudicating this controversy as a class action far outweigh any difficulties in managing the Class. 54. In the alternative, the Class may be certified under the provisions of Fed. R. Civ. P. 23(b)(1)(A), 23(b)(1)(B) and/or 23(b)(2) because: 12
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 13 of 19 (a) (b) (c) the prosecution of separate actions by the individual Class Members would create a risk of inconsistent or varying adjudications with respect to individual Class Members that would establish incompatible standards of conduct for Defendants; the prosecution of separate actions by individual Class Members would create a risk of adjudications with respect to them which would, as a practical matter, be dispositive of the interests of other Class Members not parties to the individual adjudications, or would substantially impair or impede their ability to protect their interests; and the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; and NO SAFE HARBOR 55. The statutory safe harbor provided for forward-looking statements does not apply to any of the allegedly false statements pleaded in this Class Action Complaint. 56. The relevant statements were not identified as "forward-looking statements" when made. 57. Even if the relevant statements were forward-looking statements, there were no sufficient cautionary statements identifying important factors that could cause actual results to differ materially from those in the allegedly forward-looking statements. 58. Even if the statutory safe harbor applies to any relevant forward looking statements, Defendants are liable for those false forward-looking statements because the particular speaker knew that the particular forward-looking statement, when it was made, was false, and/or the forward-looking statement was authorized and/or approved by a director or an executive officer of LBID who knew that the relevant forward-looking statement was false when it was made. 13
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 14 of 19 CLAIMS FOR RELIEF FIRST CLAIM FOR RELIEF (As To All Defendants, Violation Of 15 U.S.C. 17K) 59. Plaintiff repeats and realleges each and every allegation set forth in.the paragraphs above as if fully set forth herein. 60. For purposes of this cause of action for violation of 15 U.S.C. 17k, Plaintiff excludes any allegation that can be construed to allege that Defendants committed intentional or reckless misconduct or that Defendants acted with knowledge or intent to defraud. 61. The basis for the liability of Defendants under 15 U.S.C. 17k is their participation in the Lehman Principal Protection Notes offerings conducted pursuant to the Shelf Registration Statement which contained false statements of material fact and omitted other material facts necessary to make the statements not misleading. That involvement includes and incorporates the other Offering Documents, including, but not limited to the 2006 Prospectus, MTN Prospectus, prospectus, supplement, pricing supplements and free writing prospectus. 62. Defendants caused to be issued, and participated in the issuance of, the Shelf Registration Statement, Defendants Fuld and O'Meara were executive officers and representatives of LBHI who were responsible for the contents and dissemination of the Shelf Registration Statement and other Offering Documents. Defendants Ainslie, Alters, Berlin, Cruikshank, Evans, Gent, Hernandez, Kaufman. and Macomber were directors of Lehman at the time the Shelf Registration Statement became effective as to each Lehman Principal Protection Notes offering. The Individual Defendants also signed the Shelf Registration Statement, and/or documents incorporated therein by reference, in their capacities as officers or directors of LBHI. UBS was an underwriter of Lehman Principal Protection Notes. 14
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 15 of 19 63. Defendants owed to Plaintiff and Class Members the duty to make a reasonable and diligent investigation of the statements contained in the Shelf Registration Statement and all incorporated documents at the time the Shelf Registration Statement became effective to ensure that those statements were true and that there were no omissions of material fact which' rendered those statements materially untrue and misleading. 64. Plaintiffs and Class Members did not know, or in the exercise of reasonable diligence could not have known, of the untruths and omissions of material facts necessary to make the statements not misleading contained in the Shelf Registration Statement and all incorporated documents. 65. This Complaint was filed less than one year elapsed after Plaintiff discovered or reasonably could have discovered the facts upon which this Class Action Complaint is based. 66. This Complaint was filed less than three years after the time Lehman Principal Protection Notes were offered in good faith to the public. 67. Plaintiff and Class Members have sustained damages. As the proximate result of Defendants' wrongdoing, Plaintiff and other Class Members will not be able to receive a return of their principal investments as guaranteed and the value of Lehman Principal Protection Notes has declined. 68. Consequently, Defendants are liable for violations to Plaintiff and Class Members for violation of 15 U.S.C. 17k. SECOND CLAIM FOR RELIEF (As To USB, Violation Of 15 U.S.C. 17k) 69. Plaintiff repeats and realleges each and every allegation set forth in the paragraphs above as if fully set forth herein. 15
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 16 of 19 70. For purposes of this cause of action for violation of 15 U.S.C. 17k, Plaintiff excludes any allegation that can be construed to allege that Defendants committed intentional or reckless misconduct or that Defendants acted with knowledge or intent to defraud. 71. UBS was a seller, offer and/or solicitor of sales of Lehman Principal Protection Notes offered pursuant to the 2006 Prospectus, MTN Prospectus, prospectus supplement, pricing supplements, free writing prospectuses and other documents incorporated by reference therein. These documents contained untrue statements of material fact and omitted other material facts necessary to make the statements not misleading. 72. UBS is a "seller" within the meaning of the Securities Act because it: (a) transferred title to Plaintiff and other Class Members who purchased Lehman Principal Protection Notes upon UBS offerings; and (b) solicited Plaintiff and Class Members to purchase Lehman Principal Protection Notes, with the goal, at least in part, to promote its own financial interest and the financial interests of LBHI, including, but not limited, to receive commissions on UBS' sales of Lehman Principal Protection Notes. 73. UBS used means and instrumentalities of interstate commerce and the United States mails and wires to effectuate the aforesaid wrongdoing. 74. UBS owed to Plaintiffs and all other purchasers of Lehman Principal Protection Notes the duty to make a reasonable and diligent investigation of the statements contained in the 2006 Prospectus, MTN Prospectus, prospectus supplement, pricing supplements and free writing prospectuses, to ensure that such statements were true and that there was no omission of material fact necessary to prevent the statements contained therein from being misleading. UBS failed to make a reasonable and diligent investigation of such statements. UBS did not possess reasonable grounds to believe, that at the time of the offerings, the statements contained and incorporated by 16
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 17 of 19 reference in the 2006 Prospectus, MTN Prospectus, prospectus supplement, pricing supplements and free writing' prospectuses were true and that there were no omissions of material fact which rendered the statements therein materially untrue and misleading. 75. Plaintiff and Class Members purchased Lehman Principal Protection Notes in the offerings based upon the materially untrue and misleading 2006 Prospectus, MTN Prospectus, prospectus supplement, pricing supplements and free writing prospectuses. 76. When they made such purchases, Plaitniff and Class Members did not know, or in the exercise of reasonable diligence could not have known, of the untruths and omissions contained in the documents. 77. Plaintiff and Class Members hereby elect to rescind and offer to tender to UBS the Lehman Principal Protection Notes they purchased pursuant to the aforesaid offerings and continue to own in exchange for the consideration they paid for those securities, together with interest thereon. 78. As a result of its unlawful conduct alleged herein, UBS violated 15 U.S.C. 17k. 79. Accordingly, Plaintiff and Class Members who purchased Lehman Principal Protection Notes pursuant to the aforesaid Offering Document and have sold Lehman Principal Protection Notes at a loss, are entitled to damages. THIRD CLAIM FOR RELIEF (As To The Individual Defendants, "Violation Of Section 15 Of The Securities Act) 80. Plaintiff repeats and realleges each and every allegation set forth in the paragraphs above as if fully set forth herein. 17
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 18 of 19 81. For purposes of this cause of action, for violation of Section 15 of the Securities Act, Plaintiff excludes any allegation that can be construed to allege that Defendants committed intentional or reckless misconduct or that Defendants acted with knowledge or intent to defraud. 82. The Individual Defendants were controlling persons of LBHI within the meaning of Section 15 of the Securities Act. Considering their positions, stock ownership, management, and/or participation in the operations of LBHI, the Individual Defendants possessed and exercised the power to influence and control the decision-making of LBHI, including the content and dissemination of the 2006 Prospectus, MIN Prospectus, prospectus supplement, pricing supplements and free writing prospectuses which contained the relevant untrue statements and omissions of material fact. 83. As a result of the influence and control over the decision-malting of LBHI, including the content and dissemination of the aforesaid documents, each of the Individual Defendants was a culpable participant in the violations of Sections 11 and 12(a)(2) of the Securities Act. 84. As the proximate result of the unlawful conduct of the Individual Defendants, Plaintiff and Class Members suffered damages in connection with their purchase of Lehman Principal Protection Notes. PRAYER FOR RELIEF WHEREFORE, Plaintiff and Class Members pray for relief and judgment, as follows: A. Determining that this action is a proper class action, certifying Plaintiff as a representative of the Class under Rule 23 of the Federal Rules of Civil Procedure and Plaintiff's counsel as counsel for the Class; 18
Case 1:10-cv-01196-JBS -JS Document 1 Filed 03/04/10 Page 19 of 19 B. Awarding Plaintiff and Class Members compensatory damages against all Defendants, jointly and severally, for any and all damages sustained as a result of Defendants' wrongful conduct; C. Awarding Plaintiff and Class Members rescission or a measure of damages comporting with recession; D. Awarding Plaintiff and Class Members pre judgment and post-judgment 'interest; E. Awarding Plaintiff and Class Members their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; F. Awarding all equitable relief as permitted by law; and G. Granting such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby requests a trial by jury on all issues that may be tried by jury. NAGEL RICE, LLP 103 Eisenhower Parkway Roseland, NJ 07068 (973) 618-0400 Dated: March 4, 2010 By: sl Brace H. Nagel Bruce H. Nagel, Esq. Attorneys for Plaintiff 19