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Home / Case Files / DBSI Litigation

Case file 02

One complaint, three exits.

A liquidating trust pursued claims assigned by DBSI investors against the brokers who had sold the securities. The defense briefed three independent reasons the complaint could not go forward, and the complaint had to survive all three.

The setup.

Lead caption

James R. Zazzali, Trustee for the DBSI Private Actions Trust v. Brewer Financial Services, LLC, et al.

Forums

U.S. District Court, District of Idaho · U.S. District Court, District of Delaware · Related securities arbitrations

Role

Defense

Nearly 100 Diversified Business Services & Investments (“DBSI”) entities filed for bankruptcy in November 2008. Under the Second Amended Joint Chapter 11 Plan of Liquidation, DBSI’s creditors and equity holders assigned their causes of action against securities brokers and dealers to the Private Actions Trust.

The trustee’s theory was that the assignors had acquired DBSI securities through the defendants — brokers, registered representatives and their control persons — and that those defendants facilitated the sale of securities that turned out to be part of a fraudulent Ponzi scheme.

The amended complaint pleaded six causes of action: violations of section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, control person liability under section 20(a), breach of contract, common law fraud, negligence, and breach of fiduciary duty.

Three grounds, each on its own.

Rule 12(b)(6)

Failure to state a claim

Whether the complaint, taken as pleaded, stated a claim at all.

Rule 12(b)(3)

Improper venue

Whether this was the right court to bring it in.

Rule 12(b)(1)

Standing and jurisdiction

Whether the trustee could bring these claims, and whether the court could hear them.

Why three

Each ground stood alone, so the complaint had to survive all three. The court issued written opinions on two of them.

The proceedings were related but separate. Claims assigned to the trust were pursued against representative defendants in more than one forum, which is why venue and standing were live questions in their own right rather than technicalities.

What happened.

More than half

of the representative defendants were dismissed with prejudice. The remainder were positioned to settle for nominal amounts measured against the damages claimed.

The defendants were not only broker-dealers. A registered investment adviser named in the action was also dismissed.

The record.

Seventeen principal filings from the federal actions, including both written opinions, grouped by ground. They are published on the firm’s website, and each link below opens there. The arbitrations are not represented here.

The complaint

Rule 12(b)(6) — failure to state a claim

Rule 12(b)(3) — improper venue

Rule 12(b)(1) — standing and subject matter jurisdiction

Named in someone else’s bankruptcy?

Assigned claims tend to arrive long after the sale. Tell us the forum and when the response is due. Hold the details until a conflicts check is complete and an engagement is confirmed in writing.

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Footnotes

  1. Facts on this page are drawn from the firm’s case file at bgelaw.com as published on September 20, 2026. The filings are public court records and are linked, not reproduced. Filing titles are shortened here; the full titles appear on the firm’s page.
  2. The related arbitrations are not part of the record linked here.
  3. Prior results do not guarantee or predict a similar outcome in any other matter. Nothing on this page is legal advice.
  4. The advertising department’s notes are fictional. So, for now, is the stamp.