The Eleventh Circuit recently reversed in part and upheld in part a ruling by the United States District Court for the Southern District of Florida dismissing a complaint brought by investors in a hedge fund and a corporation. The plaintiffs brought claims against the persons in control of the fund and corporation for, among other things, violations of the federal securities laws. The plaintiffs alleged that the defendants made material misrepresentations that convinced them to invest. The magistrate judge, to whom the district court judge referred the case, held that the plaintiffs had alleged that the claims were common to “all investors” and therefore should have been brought as a derivative, rather than a direct claim. The district court adopted the magistrate judge’s recommendation and granted the defendants’ motion for judgment on the pleadings. The circuit court overruled the district court and called the magistrate judge’s findings “inaccurate.” The circuit court held that the complaint alleged that although “other investors” may have heard the misstatements, the plaintiffs had relied on the misrepresentations when investing their money. Therefore, the plaintiffs had alleged a direct injury. The circuit court held that “the fact that some other investors may also have been similarly injured does not transform these direct claims into derivative ones.” Accordingly, the circuit court reinstated the plaintiffs’ common law fraud and federal securities law claims against the defendants. By way of contrast, the circuit court affirmed the dismissal of the plaintiffs’ claims that the defendants mismanaged the fund and engaged in self-dealing because those claims belong to the corporation and could only be brought derivatively. (Medkser v. Feingold, 2008 WL 4797512 (11th Cir. Nov. 5, 2008))