text: Securities Law - Justia Case Law Summaries http://law.justia.com/summaryfeed/securities-law/ 2014-12-20T07:49:20-08:00 Justia Inc http://www.justia.com/ Justia Law https://law.justia.com/sites/law.justia.com/files/justia_law_theme_logo.png Copyright 2014 Justia Inc http://law.justia.com/cases/federal/appellate-courts/ca9/12-15750/12-15750-2014-12-17.html Arduini v. Int'l Gaming Tech. 2014-12-17T10:01:11-08:00 2014-12-17T11:31:23-08:00 Shareholders are required to make a "demand" on the corporation's board of directors before filing a derivative suit, unless they sufficiently allege that demand would be futile. Before Arduini filed his derivative action against IGT and its board, four shareholders filed derivative suits that were consolidated. They argued that a demand was excused because: the IGT board extended the employment contract of IGT's former CEO and chairman of IGT's board of directors, and allowed him to resign rather than terminating him for cause; three directors received such high compensation from IGT that their ability to impartially consider a demand was compromised; six directors faced a substantial likelihood of liability for breaches of their fiduciary duties as committee members; and that other members had engaged in insider trading. The district court dismissed the consolidated suit for failure to make a demand or sufficiently allege futility; the Ninth Circuit affirmed. The district court then dismissed Arduini's action, holding that Arduini had failed to make a demand and could not allege demand futility based on issue preclusion due to its ruling in the prior suit. The Ninth Circuit affirmed, holding that under Nevada law and these facts, issue preclusion barred relitigation of futility.View "Arduini v. Int'l Gaming Tech." on Justia Law 2014-12-17 federal U.S. Court of Appeals for the Ninth Circuit Consuelo Maria Callahan 12-15750 http://law.justia.com/cases/federal/appellate-courts/ca9/12-16624/12-16624-2014-12-16.html OR Pub. Emp. Ret. Fund v. Apollo Group 2014-12-16T10:02:36-08:00 2014-12-16T11:06:09-08:00 Plaintiffs, representatives of a class of investors that purchased stock in Apollo, filed suit alleging, among other things, that defendants violated section 10(b) of the Securities and Exchange Act and SEC Rule 10b-5, 15 U.S.C. 78j and 17 C.F.R. 240.10b-5, by making false and misleading statements of material fact regarding Apollo's enrollment and revenue growth, financial condition, organizational values, and business focus. The district court dismissed the amended complaint under Rule 12(b)(6) for failure to state a claim. The court concluded that the material misrepresentations plaintiffs alleged in Counts I, III, and IV of the Amended Complaint are not objectively false misstatements, but are examples of lawful business puffing; moreover, plaintiff failed to plead scienter or loss causation; Count II contains largely conclusory allegations that Apollo improperly recorded student revenue; plaintiffs' allegations that defendants are guilty of insider trading fail to state a claim because the alleged non-public information to which defendants had access is the same information at issue in Counts I, II, and III, and IV of the Amended Complaint; and plaintiffs cannot establish control person liability. Accordingly, the court affirmed the judgment of the district court.View "OR Pub. Emp. Ret. Fund v. Apollo Group" on Justia Law 2014-12-16 federal U.S. Court of Appeals for the Ninth Circuit Milan D. Smith 12-16624 http://law.justia.com/cases/federal/appellate-courts/ca7/14-2191/14-2191-2014-12-09.html Hayes v. Accretive Health, Inc. 2014-12-09T07:31:29-08:00 2014-12-09T08:19:27-08:00 Accretive provides cost control, revenue cycle management, and compliance services to non-profit healthcare providers. Accretive and Fairview entered into a Revenue Cycle Operations Agreement (RCA), accounting for about 12% of Accretive's revenue during the class period, and a Quality and Total Cost of Care (QTCC) contract, promoted as the future for healthcare services. In 2012, the Minnesota Attorney General sued Accretive for noncompliance with healthcare, debt collection, and consumer protection laws. Accretive wound down its RCA contract short of its term, expecting a loss of $62 to $68 million. The AG released a damaging report on Accretive's business practices. Fairview cancelled its QTCC contract. Accretive's stock fell from over $24 to under $10 per share. Plaintiffs filed a class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that Accretive concealed its practices to artificially inflate its common stock. The parties negotiated a settlement of $14 million: $0.20 per share ($0.14 with attorneys' fees and expenses deducted). Notice was sent to 34,200 potential class members. Only one opted out; only Hayes filed an objection. At the fairness hearing, the district court granted approval, awarding attorneys' fees of 30% and expenses of $63,911.14. Hayes did not attend. The Seventh Circuit affirmed.View "Hayes v. Accretive Health, Inc." on Justia Law 2014-12-09 federal U.S. Court of Appeals for the Seventh Circuit Daniel Anthony Manion 14-2191 http://law.justia.com/cases/federal/appellate-courts/ca3/14-1689/14-1689-2014-12-08.html Khazin v. TD Ameritrade Holding Corp 2014-12-08T09:30:31-08:00 2014-12-08T09:47:27-08:00 When Khazin began working for TD, he signed an employment agreement and agreed to arbitrate all disputes. Khazin was responsible for due diligence on financial products offered by TD . When he discovered that one product was priced in a manner noncompliant with securities regulations, he reported to his supervisor, Demmissie, and recommended changing the price. Demmissie instructed Khazin to analyze the "revenue impact," which revealed that remedying the violation would save customers $2,000,000, but would cost TD $1,150,000 and negatively impact Demmissie's divisions. Demmissie allegedly told Khazin not to correct the problem. Demmissie and TD's human resources department later confronted Khazin about a purported billing irregularity that, he claims, was unrelated to his duties and nonexistent. His employment was terminated. Khazin sued, asserting violation of the Dodd-Frank Act, premised on the allegation that he had been terminated in retaliation for "whistleblowing." Khazin contended that the Act prevented TD from compelling the arbitration of his whistleblower retaliation claim, 18 U.S.C. 1514A(e)(2). The district court held that the provision did not prohibit enforcement of arbitration agreements executed before Dodd-Frank was passed. The Third Circuit concluded that Khazin's whistleblower claim is subject to arbitration because it is not covered by the restrictions.View "Khazin v. TD Ameritrade Holding Corp" on Justia Law 2014-12-08 federal U.S. Court of Appeals for the Third Circuit Julio M. Fuentes 14-1689 http://law.justia.com/cases/federal/appellate-courts/cadc/14-1018/14-1018-2014-12-02.html Siris v. SEC 2014-12-02T07:31:28-08:00 2014-12-02T08:48:23-08:00 After petitioner settled a suit in which the Commission filed a civil complaint against him for committing various securities law violations, petitioner agreed in a consent judgment that he would not contest the allegations of the civil complaint in any related administrative proceeding before the Commission. The Commission then commenced a follow-on proceeding against petitioner to determine whether a remedial sanction was in the public interest and ordered that petitioner be permanently barred from the securities industry and from participating in any offering of penny stock. Petitioner sought vacatur of the Commission's order pursuant to Blinder, Robinson & Co. v. SEC. In Blinder, the court emphasized that, in a follow-on sanctions proceeding, the Commission must abide by a "clear distinction" between the district court's determination of a petitioner's liability under the securities laws and evidence about the circumstances surrounding his misconduct. The court concluded that the Commission considered the relevant record, including petitioner's evidence of the circumstances surrounding his misconduct that did not, in effect, seek to challenge the allegations of the complaint. Accordingly, the court deferred to the Commission's choice of sanction and denied the petition for review.View "Siris v. SEC" on Justia Law 2014-12-02 federal U.S. Court of Appeals for the District of Columbia Circuit Judith Ann Wilson Rogers 14-1018 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1893/13-1893-2014-11-25.html Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., N.A. 2014-11-25T07:30:07-08:00 2014-11-25T08:41:48-08:00 BNY Mellon appealed the district court's judgment declaring that the Notice of Special Early Redemption issued by Chesapeake on March 15, 2013, was timely and effective to redeem certain senior notes (the "Notes") at the "Special Price" of 100% of the principal amount, plus interest accrued to the date of redemption. BNY Mellon argued that section 1.7(b) of the Supplemental Indenture authorized redemption at the Special Price only if accomplished no later than March 15, 2013, with notice given 30 to 60 days before, also during the Special Early Redemption Period. The court conclude that the terms of section 1.7 unambiguously terminated Chesapeake's right to redeem the Notes at the Special Price on March 15, 2013. Notice of such redemption needed to be given no later than February 13, 2013. Therefore, the notice given by Chesapeake on March 15, 2013 for redemption to occur on May 15, 2013 was untimely. Accordingly, the court reversed and remanded with instructions.View "Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., N.A." on Justia Law 2014-11-25 federal U.S. Court of Appeals for the Second Circuit Leval 13-1893 http://law.justia.com/cases/federal/appellate-courts/ca5/13-60323/13-60323-2014-11-12.html Halliburton, Inc. v. Administrative Review Board, Dept. of Labor 2014-11-19T16:55:04-08:00 2014-11-20T14:08:51-08:00 An employee of Halliburton, Anthony Menendez, submitted a complaint to management about the company's questionable accounting practices and also filed a complaint with the SEC. The Review Board subsequently determined that Halliburton's disclosure to Menendez's colleagues of his identity as the SEC whistleblower who had caused an official investigation, resulting in Menendez's workplace ostracism, constituted illegal retaliation under section 806 of the Sarbanes-Oxley Act (SOX), 18 U.S.C. 1514A(a). The court held that to maintain an antiretaliation claim under SOX, as in these circumstances here, the employee must prove that his protected conduct was a contributing factor in the employer's adverse action. The court rejected Halliburton's argument that the Review Board committed legal error by failing to require proof that the company had a wrongful motive. The court rejected Halliburton's contention that the damages awarded to Menendez for emotional distress and reputational harm are not noneconomic compensatory damages available under SOX. The court agreed with the Tenth Circuit that the plain language of SOX's text relating to remedies for retaliation affords noneconomic compensatory damages and this conclusion comports with the decisions of the Seventh and Eighth Circuits respecting essential identical statutory text in the False Claims Act, 31 U.S.C. 3729-3733. The court concluded that Halliburton failed to show that the Review Board's decision was arbitrary, capricious, an abuse of discretion, or otherwise contrary to law. Accordingly, the court affirmed the judgment.View "Halliburton, Inc. v. Administrative Review Board, Dept. of Labor" on Justia Law 2014-11-12 federal U.S. Court of Appeals for the Fifth Circuit Per Curiam 13-60323 http://law.justia.com/cases/california/court-of-appeal/2014/a133487.html Overstock.com, Inc. v. Goldman Sachs Grp., Inc. 2014-11-13T14:01:03-08:00 2014-11-13T15:08:38-08:00 Overstock.Com alleged that defendants intentionally depressed the price of Overstock stock by effecting "naked" short sales: sales of shares the brokerage houses and their clients never actually owned or borrowed to artificially increase the supply and short sales of the stock. The parties' discovery demands were extensive, and, pursuant to a stipulation, the trial court issued a protective order that allowed the parties to designate Protected Material, and to further classify it as "Confidential" or "Highly Confidential." The order required the parties to exercise good faith to restrict submissions to Confidential Information reasonably necessary for deliberations. Two years later, the court extended the order to confidential information pertaining to third parties. In 2011, the court allowed plaintiffs to propose a Fifth Amended Complaint. The publicly filed document and opposing documents were heavily redacted; un-redacted versions were conditionally lodged under seal. Defendants made10 motions to seal. Plaintiffs opposed five. The media also opposed sealing. The court then denied leave to file the proposed Fifth Amended Complaint, granted the motions to seal, and entered summary judgment for the defendants. The appeals court affirmed most of the sealing decisions, with exceptions for "irrelevant materials" that never should have burdened the court.View "Overstock.com, Inc. v. Goldman Sachs Grp., Inc." on Justia Law 2014-11-13 state California California Court of Appeal Kathleen M. Banke A133487 http://law.justia.com/cases/california/court-of-appeal/2014/a135682.html Overstock.com, Inc. v. Goldman Sachs Grp., Inc. 2014-11-13T14:01:00-08:00 2014-11-13T15:17:07-08:00 Overstock.Com alleged that defendants intentionally depressed the price of Overstock stock by effecting "naked" short sales: sales of shares the brokerage houses and their clients never actually owned or borrowed to artificially increase the supply and short sales of the stock. The trial court dismissed claims under New Jersey Racketeer Influence and Corrupt Organizations (RICO) Act without leave to amend and rejected California market manipulation claims on summary judgment. The appeals court affirmed dismissal of the belatedly raised New Jersey RICO claim and summary judgment on the California claim as to three defendants, but reversed as to Merrill Lynch. The evidence, although slight, raised a triable issue this firm effected a series of transactions in California and did so for the purpose of inducing others to trade in the manipulated stock. The court concluded that Corporations Code section 25400, subdivision (b), reaches not only beneficial sellers and buyers of stock, but also can reach firms that execute, clear and settle trades; such firms face liability in a private action for damages only if they engage in conduct beyond aiding and abetting securities fraud, such that they are a primary actor in the manipulative trading.View "Overstock.com, Inc. v. Goldman Sachs Grp., Inc." on Justia Law 2014-11-13 state California California Court of Appeal Kathleen M. Banke A135682 http://law.justia.com/cases/federal/appellate-courts/ca3/13-3693/13-3693-2014-11-10.html Manning v. Merrill Lynch Pierce Fenner & Smith, Inc. 2014-11-10T09:30:07-08:00 2014-11-10T11:18:21-08:00 Escala shareholders sued financial institutions that engage in equity trading, alleging that the defendants participated in "naked" short selling of Escala stock, which "increased the pool of tradable shares by electronically manufacturing fictitious and unauthorized phantom shares." Plaintiffs claim dilution of voting rights and decline in value. All claims were under New Jersey law: the New Jersey Racketeer Influenced and Corrupt Organizations Act, based on predicate acts of state securities fraud and theft, and common law claims for unjust enrichment, interference with economic advantage and contractual relations, breach of contract, breach of the covenant of good faith and fair dealing, and negligence. The district court denied Plaintiffs' motion to remand to state court. The Third Circuit reversed, holding that there is no federal-question jurisdiction. Short sales are subject to detailed federal regulation. New Jersey does not have an analogous provision, but whether the naked short selling at issue violated state law requires no reference to federal regulation SHO. The success of those claims does not "necessarily" depend upon federal law, so the case does not "arise under" the laws of the United States. Regulation SHO's exclusive jurisdiction provision does not change the analysis; such provisions cannot independently generate jurisdiction.View "Manning v. Merrill Lynch Pierce Fenner & Smith, Inc." on Justia Law 2014-11-10 federal U.S. Court of Appeals for the Third Circuit Smith 13-3693 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1573/13-1573-2014-11-05.html In re Bank of America 2014-11-05T07:30:09-08:00 2014-11-05T15:53:23-08:00 The district court approved a settlement agreement between representative plaintiffs and Bank of America in a class action lawsuit alleging violations of the Securities Act of 1933, 15 U.S.C. 77a et seq., and the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The underlying litigation stemmed from Bank of America's negotiations with Merrill Lynch in 2008, which resulted in the two financial institutions merging in 2009. The court concluded that the district court did not violate the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(a)(2)(A)(vi), 78u-4(a)(4), when it awarded reimbursement costs to representative plaintiffs; the notice of the statement of average amount of damages per share was not constitutionally deficient in violation of appellants' due process rights and the district court did not exceed the bounds of its discretion in approving the notice; the award of attorneys' fees was reasonable and appellants failed to identify any specific abuse of discretion on the part of the district court; and appellants' remaining arguments are without merit. Accordingly, the court affirmed the judgment.View "In re Bank of America" on Justia Law 2014-11-05 federal U.S. Court of Appeals for the Second Circuit Per curiam 13-1573 http://law.justia.com/cases/federal/appellate-courts/ca2/13-2657/13-2657-2014-10-31.html NASDAQ OMX Grp., Inc. v. UBS Sec., LLC 2014-10-31T07:30:13-08:00 2014-10-31T13:25:53-08:00 NASDAQ conducted the initial public offering (IPO) for Facebook in May 2012. UBS subsequently initiated an arbitration proceeding against NASDAQ seeking indemnification for injuries sustained in the Facebook IPO, as well as damages for breach of contract, breach of an implied duty of good faith and fair dealing, and gross negligence. NASDAQ initiated a declaratory judgment action to preclude UBS from pursuing arbitration. The district court granted a preliminary injunction and UBS appealed. The court concluded that federal jurisdiction is properly exercised in this case; the district court properly decided the question of arbitrability because the parties never clearly unmistakably expressed an intent to submit that question to arbitration, and such an intent cannot be inferred where, as here, a broad arbitration clause contains a carved-out provision that, at least arguably covers the instant dispute; UBS's claims against NASDAQ are not subject to arbitration because they fall within the preclusive language of NASDAQ Rule 4626(a), and the parties specifically agreed that their arbitration agreement was subject to limitations identified in, among other things, NASDAQ Rules; and, therefore, the court affirmed the district court's order preliminarily enjoining UBS from pursuing arbitration against NASDAQ. The court remanded for further proceedings.View "NASDAQ OMX Grp., Inc. v. UBS Sec., LLC" on Justia Law 2014-10-31 federal U.S. Court of Appeals for the Second Circuit Reena Raggi 13-2657 http://law.justia.com/cases/federal/appellate-courts/ca2/13-2581/13-2581-2014-10-31.html In re: Dynegy, Inc., 2014-10-31T07:30:12-08:00 2014-10-31T13:25:50-08:00 Dynegy filed a voluntary Chapter 11 bankruptcy petition. Charles Silsby then filed a securities class action complaint against Dynegy and others alleging dissemination of false and misleading information and failure to disclose material facts about Dynegy's financial performance and prospects, in violation of securities laws. Stephen Lucas was appointed lead plaintiff in Silsby v. Icahn, the securities class action litigation. In this appeal, Lucas challenged the district court's conclusion that he lacked standing to opt out of or object to the joint reorganization plan on behalf of the putative class in the securities litigation. The court concluded that Lucas' status as lead plaintiff of the putative class in the district court securities litigation did not automatically extend to the bankruptcy proceedings; because Lucas did not seek application of Rule 23 in bankruptcy court, he represented no one but himself; and since he opted out of the release in his individual capacity, Lucas lacks standing to appeal the order confirming the Plan. Accordingly, the court affirmed the judgment.View "In re: Dynegy, Inc.," on Justia Law 2014-10-31 federal U.S. Court of Appeals for the Second Circuit John Garvan Murtha 13-2581 http://law.justia.com/cases/federal/appellate-courts/ca2/13-2095/13-2095-2014-10-31.html Pennsylvania Public School Employees' Retirement System v. Morgan Stanley 2014-10-31T07:30:11-08:00 2014-10-31T13:25:47-08:00 This case arose out of the collapse of SIV, managed by Cheyne and structured by Morgan Stanley. PSERS and Commerzbank appealed from the final order of judgment denying class certification, dismissal of Commerzbank's claim for lack of standing; and dismissal of PSERS's claim because its presence as a party would destroy complete diversity, the sole basis of subject matter jurisdiction. The court affirmed the denial of class certification and dismissal of PSERS; held that it was not a permissible exercise of discretion for the district court to limit Commerzbank's ability to establish its standing; certified to the New York Court of Appeals the question of whether a reasonable trier of fact could find that Commerzbank had acquired from a third party that had purchased securities a fraud claim against Morgan Stanley; and certified the question whether, if Commerzbank has standing, a reasonable trier of fact could hold Morgan Stanley liable for fraud based on the present record.View "Pennsylvania Public School Employees' Retirement System v. Morgan Stanley" on Justia Law 2014-10-31 federal U.S. Court of Appeals for the Second Circuit Ralph K. Winter, Jr. 13-2095 http://law.justia.com/cases/federal/appellate-courts/ca11/12-15351/12-15351-2014-10-23.html Zelaya/Capital Int'l Judgment, LLC v. Zelaya, et al. 2014-10-28T18:19:24-08:00 2014-10-28T18:41:45-08:00 A 2004 judgment entered against John Zelaya was rendered in the United States District Court for the Southern District of New York and was registered in the Southern District of Florida. ZC was not party to the suit that led to the judgment and, instead, the prevailing parties assigned their interests in the judgment to ZC. ZC then sought a writ of execution against Zelaya from the Southern District of Florida. In 2010, Zelaya deposited the full amount of the judgment into the district court's registry where the district court then dissolved writs of garnishment against all of the banks at issue, granted Zelaya's motion for a satisfaction judgment, and awarded attorney fees and costs to Deutsche Bank. The court concluded that it had jurisdiction over the consolidated appeal; the district court did not err in allowing Zelaya to deposit the disputed funds into the court's registry; the district court did not err in granting Zelaya's motion for a satisfaction of the judgment; the district court did not err in its award of attorney fees and costs to Deutsche Bank; and, therefore, the court affirmed the judgment.View "Zelaya/Capital Int'l Judgment, LLC v. Zelaya, et al." on Justia Law 2014-10-23 federal U.S. Court of Appeals for the Eleventh Circuit Gilman 12-15351 13-10005 http://law.justia.com/cases/federal/appellate-courts/ca6/13-5597/13-5597-2014-10-10.html Ansfield v. Omnicare, Inc. 2014-10-10T07:30:56-08:00 2014-10-10T08:46:58-08:00 KBC Asset Management sued Omnicare (a pharmaceutical company) and affiliated individuals, on behalf of Ansfield and other similarly situated shareholders, alleging that the defendants had committed securities fraud in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b) and 78t(a), and Securities and Exchange Commission (SEC) Rule 10b-5. KBC charged the defendants with making various material misrepresentations and omissions between January 10, 2007 and August 5, 2010 in public and in SEC filings regarding Omnicare's compliance with Medicare and Medicaid regulations. The district court dismissed. The Sixth Circuit affirmed, based on the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u-4, which created heightened pleading standards for securities-fraud cases and requires that plaintiffs identify each misleading or false statement and explain how it is misleading. Plaintiffs also must "state with particularity facts giving rise to a strong inference that the defendant[s] acted with the required state of mind." KCB did not meet those requirements.View "Ansfield v. Omnicare, Inc." on Justia Law 2014-10-10 federal U.S. Court of Appeals for the Sixth Circuit http://law.justia.com/cases/federal/appellate-courts/ca5/13-30580/13-30580-2014-10-02.html Bach, et al. v. Amedisys, Inc., et al. 2014-10-03T05:00:43-08:00 2014-10-06T11:45:09-08:00 Plaintiffs filed suit against Amedisys and others, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4). Plaintiffs claimed that Amedisys defrauded investors by concealing a Medicare fraud scheme. The district court granted a motion to dismiss for failure to state a claim under Rule 12(b)(6) and dismissed the suit with prejudice. Plaintiffs filed a motion for reconsideration but the district court denied the motion. The court concluded that the motion to dismiss should be denied as to the element of loss causation. The district court's application of the "actual fraud" standard to the partial disclosures at issue, and when viewed against the stark results of Amedisys's second quarter of 2010 earnings report, requires reversal and vacating the prior dismissal. View "Bach, et al. v. Amedisys, Inc., et al." on Justia Law 2014-10-02 federal U.S. Court of Appeals for the Fifth Circuit Gilstrap 13-30580 http://law.justia.com/cases/federal/appellate-courts/ca9/11-17708/11-17708-2014-10-02.html In Re: Nvidia Corp. Sec. Litig. 2014-10-02T10:31:09-08:00 2014-10-06T11:45:10-08:00 Plaintiffs, purchasers of NVIDIA's stock, filed suit alleging that the company violated Section 10(b) of the Securities Exchange Act of 1934 and corresponding SEC Rule 10b-5, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5. The district court dismissed plaintiffs' amended complaint because they failed to adequately allege scienter. The court held that Item 303 of Regulation S-K did not create a duty to disclose for purposes of Section 10(b) and Rule 10b-5. Such a duty to disclose must be separately shown according to the principles set forth in Basic, Inc. v. Levinson and Matrixx Initiatives, Inc. v. Siracusano. Further, neither the collective scienter doctrine nor the core operations doctrine alone gives rise to a strong inference of scienter in this case. There is no allegation that the issue of an inherent defect in NVIDIA's Material Set was ever publicly raised prior to NVIDIA's disclosure, nor is there any allegation that NVIDIA knowingly issued a false press release, attempting to discount any public discussion regarding its chips' defects. Accordingly, the court affirmed the judgment of the district court.View "In Re: Nvidia Corp. Sec. Litig." on Justia Law 2014-10-02 federal U.S. Court of Appeals for the Ninth Circuit O'Connell 11-17708 http://law.justia.com/cases/illinois/supreme-court/2014/116362.html Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman 2014-10-02T08:01:55-08:00 2014-10-06T11:45:13-08:00 Plaintiffs purchased FCH stock through Shearson's broker, Steinberg, between 1987 and 1990. FCH filed for bankruptcy in 1991. Plaintiffs retained the law firm to represent them in claims under the Illinois Securities Law. At that time, they had a viable claim for rescission. The firm failed to serve the required rescission notice. In 1992, plaintiffs hired new counsel to pursue their claims against Shearson, which were later dismissed as time-barred. In 1994 plaintiffs filed a malpractice action against the law firm. The appellate court affirmed the dismissal of the Illinois Securities Law claim, but reversed as to common law fraud and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. In 2007, plaintiffs settled those claims for $3.2 million. Later, the trial court found the law firm liable and calculated damages: plaintiffs' $3.2 million settlement would be deducted from the total they paid for their 11 stock purchases, and 10% interest would be calculated on the remaining amount based on the dates of the stock purchases, for a total award of $4,091,752.19 plus attorney fees of $1,636,700.80, and $207,167.28 in costs and expenses. The appellate court affirmed, but remanded for recalculation of damages and attorney fees. The Illinois Supreme Court remanded for calculation of statutory interest damages on the full amount paid for each security from the date of purchase to the 2007 date of settlement, then deducting the $3.2 million recovery. View "Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman" on Justia Law 2014-10-02 state Illinois Supreme Court of Illinois Thomas L. Kilbride 116362 http://law.justia.com/cases/federal/appellate-courts/ca6/13-6486/13-6486-2014-09-30.html Laborers' Local 265 Pension Fund v. iShares Trust 2014-09-30T07:31:41-08:00 2014-10-01T16:37:16-08:00 Securities lending is a common practice: securities are temporarily transferred by the lender to a borrower, who is obliged to return the securities, either on demand, or at the end of any agreed term. For the period of the loan the lender is secured by acceptable collateral (in the U.S., often cash) valued at 102% [to] 105% of the market value of the loaned securities. The borrower may be motivated by desire to cover a short position, to sell the borrowed securities in hopes of buying them back at a lower price before returning them, or to gain tax advantages associated with the temporary transfer of ownership. The plaintiffs are pension funds that are shareholders in exchange-traded funds issued by iShares. iShares, as part of its mutual-fund operations, lends its securities holdings to various borrowers to generate substantial revenue. BTC, a related company, serves as iShares's middleman between iShares and those who seek to borrow iShares's securities and receives 35% of all securities-lending net revenue. BFA, another related company, is the investment adviser for iShares and manages its portfolios for a separate fee. Plaintiffs alleged that BFA and BTC violated the Investment Company Act, 15 U.S.C. 80a-35(a), (b), by charging an excessive lending fee because the fee charged by BTC bears no relationship to actual services rendered. The district court dismissed. The Sixth Circuit affirmed, finding that the Act does not create a private cause of action.View "Laborers' Local 265 Pension Fund v. iShares Trust" on Justia Law 2014-09-30 federal U.S. Court of Appeals for the Sixth Circuit Ronald Lee Gilman 13-6486 http://law.justia.com/cases/federal/appellate-courts/ca11/13-12778/13-12778-2014-09-25.html SEC v. Quest Energy Mgmt. Grp. 2014-09-26T08:01:23-08:00 2014-10-01T16:36:52-08:00 The SEC filed suit against Arthur Nadel and two of his investment companies for operating a Ponzi scheme. The district court appointed a receiver to take possession and control over Quest because the officers were funding the company with proceeds from a Ponzi scheme. The district court enjoined the current officers from taking any actions on behalf of Quest and vested the receiver with the authority to "[d]efend, compromise or settle legal actions, including the instant proceeding." The officers now appeal the appointment of the receiver. The court granted the receiver's motion to dismiss for lack of jurisdiction because the officers did not have standing to appeal in the name of Quest where the district court enjoined the officers from taking any action on behalf of Quest.View "SEC v. Quest Energy Mgmt. Grp." on Justia Law 2014-09-25 federal U.S. Court of Appeals for the Eleventh Circuit William Holcombe Pryor, Jr. 13-12778 http://law.justia.com/cases/federal/appellate-courts/ca5/13-10266/13-10266-2014-09-11.html Janvey, et al. v. Brown, et al. 2014-09-12T05:32:59-08:00 2014-10-01T16:32:40-08:00 Plaintiff, the receiver for the Stanford entities, filed suit seeking to recover funds that were paid to defendants, purchasers of certificate of deposits from Standard International Bank (SIB) as part of a Ponzi scheme. The court concluded that the district court properly applied the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code 24.010, to the receiver's claims; the receiver has standing to bring the TUFTA claims on behalf of the Stanford entities; and the receiver's claims are not barred by the statute of limitations. On the merits, the court concluded that the receiver established that the Stanford principles transferred monies to the investor-defendants with fraudulent intent; unlike interest payments, it is undisputed that the principal payments were payments of an antecedent debt, namely fraud claims that the investor-defendants have as victims of the Stanford Ponzi scheme; the district court did not err in denying an exemption under Texas Property Code 42.0021(a) where investor-defendants have offered no evidence that they have a legal right to the funds despite those funds being the product of a fraudulent transfer; and the court declined to reach the investor-defendants' argument that certain factual issues remain. Accordingly, the court affirmed the district court's grant of the receiver's motion for summary judgment.View "Janvey, et al. v. Brown, et al." on Justia Law 2014-09-11 federal U.S. Court of Appeals for the Fifth Circuit Higginbotham 13-10266 13-10272 13-10276 13-10279 http://law.justia.com/cases/california/court-of-appeal/2014/h037391.html People v. Doolittle 2014-09-08T13:02:40-08:00 2014-10-01T16:30:56-08:00 Doolittle was a registered securities broker/dealer, and a registered investment advisor. He or his corporations held licenses, permits, or certificates to engage in real estate and insurance brokerage and tax preparation. Around 1990 his primary business became "trust deeds investments," in which he "would arrange groups of investors together to buy those loans or to fund those transactions for different types of individuals and institutional borrowers." After investors lost money, Doolittle was convicted and sentenced to 13 years in prison for three counts of theft by false pretenses; six counts of theft from an elder or dependent adult; nine counts of false statements or omissions in the sale of securities; selling unregistered securities; and sale of a security by willful and fraudulent use of a device, scheme, or artifice to defraud The appeals court reversed in part, holding that Doolittle's challenge that the trial court's implied finding of timely prosecution was not supported by substantial evidence required remand with respect to two of the charges. A further hearing may be necessary with respect to applicability of a sentence enhancement for aggregate losses over $500,000. Doolittle's conviction for sale of unregistered securities and sale of securities by means of a fraudulent device did not rest on the same conduct as his convictions for fraud against specific victims; his sentence on the former counts therefore does not offend the proscription against duplicative punishment. View "People v. Doolittle" on Justia Law 2014-09-08 state California California Court of Appeal Rushing H037391 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1658/13-1658-2014-09-08.html Dalberth v. Xerox Corp. 2014-09-08T07:30:06-08:00 2014-10-01T16:30:52-08:00 Plaintiffs filed a class action on behalf of all persons who purchased common stock from Xerox during a certain period, alleging that Xerox violated the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. Plaintiffs alleged that Xerox and executive officers violated federal securities law by materially misrepresenting that Xerox's worldwide restructuring initiative was financially beneficial to the corporation, when, in fact, one specific component of the restructuring - the "Customer Business Organization Reorganization" - was causing significant and ongoing economic distress to the company. The court affirmed the district court's grant of summary judgment in favor of defendants because there was no genuine dispute of material fact with respect to the sufficiency of Xerox's disclosures about the successes and failures of this component of its worldwide restructuring.View "Dalberth v. Xerox Corp." on Justia Law 2014-09-08 federal U.S. Court of Appeals for the Second Circuit Pooler 13-1658 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1624/13-1624-2014-09-04.html Loginovskaya v. Batratchenko 2014-09-04T07:04:41-08:00 2014-10-01T16:30:02-08:00 Plaintiff appealed the district court's judgment dismissing her claims under Rule 12(b)(6) under the Commodities Exchange Act (CEA), 7 U.S.C. 1 et seq., and declining to exercise supplemental jurisdiction over her state law claims. Applying the domestic transaction test in Morrison v. National Australia Bank Ltd., the court agreed with the district court that a private right of action brought under CEA section 22 is limited to claims alleging a commodities transaction within the United States. The court affirmed the district court's judgment because plaintiff failed to allege a domestic commodities transaction and, because the court affirmed on the basis of section 22, the court did not reach plaintiff's argument regarding the territorial reach of the antifraud provision in CEA section 4o.View "Loginovskaya v. Batratchenko" on Justia Law 2014-09-04 federal U.S. Court of Appeals for the Second Circuit Dennis G. Jacobs 13-1624 http://law.justia.com/cases/federal/appellate-courts/ca9/12-55516/12-55516-2014-09-02.html Rosenbloom v. Pyott 2014-09-02T10:31:08-08:00 2014-10-01T16:29:15-08:00 Allergan, the pharmaceutical manufacturer of Botox, settled several qui tam suits concerning allegations that it had acted illegally in marketing and labeling Botox, and pled guilty in a criminal case. Plaintiffs, all Allergan shareholders, subsequently filed a derivative action alleging that Allergan's directors are liable for violations of various state and federal laws, as well as breaches of their fiduciary duties to Allergan. Plaintiffs failed to make a demand on Allergan's board requesting that Allergan bring the derivative claims in its own name. The court concluded that the district court misapplied governing Delaware law and improperly drew inferences against plaintiffs rather than in their favor when the district court dismissed the action on the ground that plaintiffs failed to allege particularized facts showing that demand was excused under Federal Rule of Civil Procedure 23.1. The court concluded that demand was excused where plaintiffs' particularized allegations established a reasonable doubt as to whether the Board faces a substantial likelihood of liability and as to whether the Board is protected by the business judgment rule. Accordingly, the court reversed the judgment of the district court.View "Rosenbloom v. Pyott" on Justia Law 2014-09-02 federal U.S. Court of Appeals for the Ninth Circuit Stephen Roy Reinhardt 12-55516 http://law.justia.com/cases/federal/appellate-courts/ca2/11-397/11-397-2014-08-15.html Parkcentral v. Porsche 2014-08-15T09:30:06-08:00 2014-10-01T16:23:28-08:00 Plaintiffs, international hedge funds, filed suit alleging violations of U.S. securities laws because defendants made various fraudulent statements and took various manipulative actions to deny and conceal Porsche's intention to take over Volkswagen AG (VW), a German corporation. The securities transactions upon which plaintiffs brought suit were so-called "securities-based swap agreements" relating to the stock of VW. The district court granted defendants' motion to dismiss the complaint because the swaps were essentially transactions in securities on foreign exchanges. The court affirmed on the basis of different reasoning, concluding that the imposition of liability under section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), on these foreign defendants with no alleged involvement in plaintiffs' transactions, on the basis of defendants' largely foreign conduct, for losses incurred by plaintiffs in securities-based swap agreements based on the price movements of foreign securities would constitute an impermissibly extraterritorial extension of the statute. The court remanded for further proceedings.View "Parkcentral v. Porsche" on Justia Law 2014-08-15 federal U.S. Court of Appeals for the Second Circuit 11-397 http://law.justia.com/cases/federal/appellate-courts/ca3/13-3183/13-3183-2014-08-14.html United States v. McGee 2014-08-14T09:30:07-08:00 2014-10-01T16:22:44-08:00 A financial advisor with more than 20 years of experience, McGee met Maguire between 1999 and 2001 while attending Alcoholics Anonymous meetings. McGee assured Maguire that their conversations were going to remain private. Maguire never repeated information that McGee entrusted to him. In 2008, Maguire was closely involved in negotiations to sell PHLY, a publicly-traded company. During this time, Maguire experienced sporadic alcohol relapses. McGee saw Maguire after a meeting and inquired about his frequent absences. In response, Maguire "blurted out" inside information about PHLY's imminent sale. He later testified that he expected McGee to keep this information confidential. Before the information became public, McGee borrowed $226,000 to finance the purchase of 10,750 PHLY shares. Shortly after the public announcement of PHLY's sale, McGee sold his shares, resulting in a $292,128 profit. After an SEC investigation, McGee was convicted of securities fraud under the misappropriation theory of insider trading (15 U.S.C. 78j(b) and 78ff), and SEC Rules 10b-5 and 10b5-2(b)(2), and of perjury (18 U.S.C. 1621). The Third Circuit affirmed, rejecting arguments that Rule 10b5-2(b)(2) is invalid because it allows for misappropriation liability absent a fiduciary relationship between a misappropriator of inside information and its source; that there was insufficient evidence to sustain his convictions; and that the court erred in denying his motion for a new trial based on newly discovered evidence. View "United States v. McGee" on Justia Law 2014-08-14 federal U.S. Court of Appeals for the Third Circuit Ruggero John Aldisert 13-3183 http://law.justia.com/cases/federal/appellate-courts/ca2/13-4385/13-4385-2014-08-14.html Liu v. Siemens AG 2014-08-14T07:30:17-08:00 2014-10-01T16:22:34-08:00 Plaintiff, a citizen and resident of Taiwan, filed suit alleging that by firing him Siemens had violated the antiretaliation provision of the Dodd-Frank Act, 15 U.S.C. 78u-6(h)(1)(A). The court concluded that the district court properly dismissed the complaint because legislation is presumed to apply only domestically unless there is evidence Congress intended otherwise; (2) there is no indication Congress intended the whistleblower protection provision to have extraterritorial application; and (3) the facts in the complaint unequivocally demonstrate that applying the statute in this case would constitute an extraterritorial application. Therefore, section 78u-6(h) does not protect a foreign worker employed abroad by a foreign corporation where all events related to the disclosures occurred abroad. View "Liu v. Siemens AG" on Justia Law 2014-08-14 federal U.S. Court of Appeals for the Second Circuit Lynch 13-4385 http://law.justia.com/cases/federal/appellate-courts/ca10/13-6165/13-6165-2014-08-08.html United Food & Comm. Workers v. Chesapeake Energy, et al 2014-08-08T10:07:16-08:00 2014-10-01T16:21:12-08:00 In 2008 Chesapeake Energy Corporation was one of the largest producers of natural gas in the United States, with thousands of wells in several states. By early July of that year the price of natural gas had risen and Chesapeake's stock price had risen about 50% in the prior six months. On July 9, 2008, Chesapeake sold 25 million shares of common stock in a public offering. Soon thereafter, a financial crisis rocked the global economy. The New York Stock Exchange Composite Index fell more than 30% in the three months after the Chesapeake offering. Chesapeake was hit even harder, with sharp drops in the prices of natural gas and Chesapeake's stock. Plaintiff United Food and Commercial Workers Union Local 880 Pension Fund represented the class of all persons who purchased securities in the offering, argued that Chesapeake and named individual defendants violated sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. sections 77k, 77l(a)(2), and 77o, because the Registration Statement for the offering was materially false and misleading. According to Plaintiff, Chesapeake should have disclosed: (1) that it had expanded a risky gas-price hedging strategy that made it vulnerable to a fall in natural-gas prices; and (2) that CEO Aubrey McClendon had pledged substantially all his company stock as security for margin loans and lacked the resources to meet margin calls. The district court granted summary judgment for Chesapeake. Plaintiff appealed. But finding that Chesapeake's alleged omissions were not material or misleading, the Tenth Circuit affirmed.View "United Food & Comm. Workers v. Chesapeake Energy, et al" on Justia Law 2014-08-08 federal U.S. Court of Appeals for the Tenth Circuit Harris L. Hartz 13-6165 http://law.justia.com/cases/federal/appellate-courts/ca2/13-235/13-235-2014-08-08.html Nielsen v. AECOM Technology Corp. 2014-08-08T07:08:41-08:00 2014-10-01T16:20:40-08:00 Plaintiff filed suit against AECOM and AME under the whistleblower retaliation provision created by the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A. The district court dismissed plaintiff's claim against AECOM and plaintiff appealed. The court concluded that an alleged whistleblowing employee's communications need not "definitively and specifically" relate to one of the listed categories of fraud or securities violations in section 1514A in order for that employee to claim protection under the statute; a complaint under section 1514A must, however, plausibly plead that plaintiff engaged in protected activity - that plaintiff reasonably believed the conduct he challenged constituted a violation of an enumerated provision; in this case, plaintiff did not plausibly allege that it was objectively reasonable for him to believe that there was such a violation here; and, therefore, the court affirmed the judgment of the district court.View "Nielsen v. AECOM Technology Corp." on Justia Law 2014-08-08 federal U.S. Court of Appeals for the Second Circuit Debra Ann Livingston 13-235 http://law.justia.com/cases/federal/appellate-courts/ca9/12-15100/12-15100-2014-08-07.html Loos v. Immersion Corp., et al. 2014-08-07T10:09:02-08:00 2014-10-01T16:20:15-08:00 Plaintiff appealed the dismissal of his securities fraud class action for failure to state a claim. The court, agreeing with the Eleventh Circuit, held that the announcement of an investigation, standing alone, is insufficient to establish loss causation; plaintiff cannot establish loss causation on the facts alleged in the amended complaint because he has not attempted to correlate his losses to anything other than the announcement of an internal investigation; and, therefore, the court affirmed the district court on this loss causation issue. The court did not reach plaintiff's arguments regarding scienter.View "Loos v. Immersion Corp., et al." on Justia Law 2014-08-07 federal U.S. Court of Appeals for the Ninth Circuit Rice 12-15100 http://law.justia.com/cases/federal/appellate-courts/ca10/13-1016/13-1016-2014-08-01.html MHC Mutual Conversion Fund, et al v. Sandler O'Neill & Partners, et al 2014-08-01T09:03:16-08:00 2014-10-01T16:18:34-08:00 In 2009, Bancorp sought to conduct a secondary stock offering to raise about $90 million. In its securities filings the company alerted potential investors that it had significant investments in mortgage backed securities, and that these investments had suffered badly during the financial crisis of 2008. The company stated that it had conducted internal analyses and consulted independent experts and now expected the level of delinquencies and defaults to level off and the market for its securities to rebound soon. But the company also stressed that if adverse market conditions persisted longer than the company expected it would have to recognize further losses. Bancorp's opinion about the immediate future didn't bear out. In the fifteen months after the offering, the company had to recognize about $69 million more in losses. Plaintiffs alleged in their lawsuit against Bancorp that the statements rendered in the offering statement about the prospects for its securities portfolio was false and should have given rise to liability under section 11 of the Securities Act of 1933. The district court disagreed, holding that Bancorp's failed market predictions, without more, weren't enough to trigger liability. "To establish liability for an opinion about the future more is required. But what?" Agreeing with the district court, the Tenth Circuit affirmed.View "MHC Mutual Conversion Fund, et al v. Sandler O'Neill & Partners, et al" on Justia Law 2014-08-01 federal U.S. Court of Appeals for the Tenth Circuit Neil M. Gorsuch 13-1016 http://law.justia.com/cases/federal/appellate-courts/cadc/13-7041/13-7041-2014-08-01.html Campbell v. AIG, et al. 2014-08-01T07:34:22-08:00 2014-10-01T16:18:30-08:00 Plaintiff filed a securities class action contending that AIG and its board of directors wrongfully reduced the value of certain securities issued by AIG. The court affirmed the district court's dismissal of the suit for lack of subject matter jurisdiction because the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 77p(d) and 78bb(f)(3), does not confer federal jurisdiction over plaintiff's state-law claims.View "Campbell v. AIG, et al." on Justia Law 2014-08-01 federal U.S. Court of Appeals for the District of Columbia Circuit 13-7041 http://law.justia.com/cases/federal/appellate-courts/ca2/13-616/13-616-2014-07-31.html Meyer v. JinkoSolar Holding Co. 2014-07-31T08:06:53-08:00 2014-10-01T16:17:23-08:00 Plaintiffs, purchasers of securities issued by JinkoSolar in two public offerings, appealed from the district court's dismissal of their complaint alleging violations of the federal securities laws. JinkoSolar manufactures various solar cells and solar panel products. The court vacated and remanded, concluding that serious pollution problems rendered misleading statements in a prospectus describing prophylactic measures taken to comply with Chinese environmental regulations.View "Meyer v. JinkoSolar Holding Co." on Justia Law 2014-07-31 federal U.S. Court of Appeals for the Second Circuit Ralph K. Winter, Jr. 13-616 http://law.justia.com/cases/federal/appellate-courts/ca9/12-55620/12-55620-2014-07-30.html Petrie v. Electronic Game Card, Inc. 2014-07-30T10:09:02-08:00 2014-10-01T16:17:06-08:00 Plaintiffs, a group of investors, filed suit alleging that Electronic Game Card's former CEO and CFO violated section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j, 17 C.F.R. 240.10b-5, and that others violated section 20(a) of the Act. The court concluded that the district court did not properly strike allegations and exhibits from the Third Amended Complaint because the Auditor discovery materials at issue were not obtained in violation of the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u-4(b)(3)(B). The court also concluded that the Third Amended Complaint adequately pleaded false statements and scienter. Accordingly, the court reversed and remanded for further proceedings.View "Petrie v. Electronic Game Card, Inc." on Justia Law 2014-07-30 federal U.S. Court of Appeals for the Ninth Circuit Morgan Christen 12-55620 http://law.justia.com/cases/federal/appellate-courts/cadc/12-5286/12-5286-2014-07-18.html SEC v. Securities Investor Protection Corp. 2014-07-18T08:14:00-08:00 2014-10-01T16:13:25-08:00 The SEC sought a court order compelling SIPC to liquidate a member broker-dealer, SGC. SGC played an integral role in a multibillion-dollar financial fraud carried out through a web of companies. At issue was whether SIPC could instead be ordered to proceed against SGC to protect the CD investors' property. The court affirmed the district court's denial of the application to order SIPC to liquidate SGC where, under the Securities Investor Protection Act, 15 U.S.C. 78ccc(a)(1), the CD investors did not qualify as customers of SGC under the operative statutory definition.View "SEC v. Securities Investor Protection Corp." on Justia Law 2014-07-18 federal U.S. Court of Appeals for the District of Columbia Circuit Srikanth Srinivasan 12-5286 http://law.justia.com/cases/washington/supreme-court/2014/89303-9.html Futureselect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc. 2014-07-17T09:16:50-08:00 2014-10-01T16:12:58-08:00 FutureSelect invested nearly $200 million in the Rye Funds, which pooled and fed money into Bernard Madoff's fraudulent securities investment scheme. The investments were lost when Madoff's fraud collapsed. FutureSelect sued Tremont Group Holdings (proponent of the Rye Funds), Oppenheimer Acquisition Corporation and Massachusetts Mutual Life Insurance Company (Tremont's parent companies) and Ernst & Young, LLP (Tremont's auditor) for their failure to conduct due diligence on Madoff's investments. The trial court dismissed on the pleadings, finding Washington's security law did not apply, and that Washington courts lacked jurisdiction over Oppenheimer. The Court of Appeals reversed, and the defendants sought to reinstate the trial court's findings. Finding no error with the Court of Appeals' decision, the Washington Supreme Court affirmed.View "Futureselect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc." on Justia Law 2014-07-17 state Washington Washington Supreme Court Steven González 89303-9 http://law.justia.com/cases/federal/appellate-courts/ca9/12-16430/12-16430-2014-07-16.html Police Retirement Sys. v. Intuitive Surgical 2014-07-16T10:31:24-08:00 2014-10-01T16:12:15-08:00 PRS filed a class action against Intuitive on behalf of purchasers of Intuitive common stock, alleging violations of sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Securities and Exchange Commission Rule 10b.5, 15 U.S.C. 78j(b), 78t(a), 17 C.F.R. 240.10b-5. PRS alleged that Intuitive, through its executives, knowingly issued false and misleading statements regarding the company's growth and financial health which caused artificial inflation of the share price. The court concluded that, read as a whole, PRS's allegations did not satisfy the heightened pleading requirements imposed in the securities fraud cases and did not identify any material misstatements made with scienter. Intuitive's statements were mostly forward-looking statements or garden variety corporate optimism, and PRS failed to suggest that the executives made false statements with knowing or reckless disregard for Intuitive's economic circumstances. Accordingly, the court affirmed the district court's dismissal of the complaint with prejudice.View "Police Retirement Sys. v. Intuitive Surgical" on Justia Law 2014-07-16 federal U.S. Court of Appeals for the Ninth Circuit M. Margaret McKeown 12-16430 http://law.justia.com/cases/federal/appellate-courts/ca5/13-20519/13-20519-2014-07-15.html In Re: Houston Amer. Energy Corp. 2014-07-16T05:00:50-08:00 2014-10-01T16:12:16-08:00 Plaintiffs, investors, alleged that they purchased defendants' stock in reliance of defendants' material misrepresentations. The district court granted defendants' motion to dismiss. The court concluded that plaintiffs have sufficiently pled their claims for securities fraud in accordance with the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4 and 78u-5; the court need not consider the parties' arguments as to whether the district court abused its discretion by denying plaintiffs' request to amend their complaint; and, therefore, the court reversed and remanded for further proceedings.View "In Re: Houston Amer. Energy Corp." on Justia Law 2014-07-15 federal U.S. Court of Appeals for the Fifth Circuit Davis 13-20519 http://law.justia.com/cases/california/court-of-appeal/2014/g047495m.html Hasso v. Hapke 2014-07-15T16:01:14-08:00 2014-10-01T16:11:55-08:00 In August 2007, the initial trustee of two family trusts invested millions in the Rockwater American Municipal Fund, LLC (RAM Fund), a hedge fund engaged in municipal arbitrage. The RAM Fund was managed by Rockwater Municipal Advisors, LLC (RMA), its managing member. In November 2007, Charles Fish Investments, Inc. (CFI) transferred its assets to Rockwater CFI, LLC, a wholly owned subsidiary of RMA, in exchange for a 15 percent interest in RMA. CFI had an option to unwind the transaction, if its interest in RMA did not meet certain benchmark values. The RAM Fund was devastated by the stock market crash and the trust investments were largely wiped out by 2008. CFI exercised its option to unwind the transaction with RMA and Rockwater CFI, LLC, and obtained a return of the assets originally belonging to it. The successor trustee of the trusts sued the RAM Fund, RMA, Bryan Williams (founder of the RAM Fund and the chief executive officer of RMA), John Hapke (the chief financial officer of the RAM Fund), CFI, and Charles Fish (the chairman and chief executive officer of CFI). After it had seen clips from the movie Wall Street 2 (Twentieth Century Fox 2010) and a power point presentation with eight screens captioned "Greed," a jury awarded the successor trustee a $4.6 million judgment against the RAM Fund, RMA, Williams, and Hapke. The successor trustee was unsuccessful in obtaining a judgment against CFI and Fish. The RAM Fund, RMA, Williams, and Hapke, on the other hand, have each filed an appeal claiming the RAM Fund was simply the victim of the market crash. The successor trustee appealed too, seeking to hold liable CFI and Fish, the defendants who "got away." After review, the Supreme Court: reversed the judgment in favor of RAM, RMA and Willians, and affirmed the judgment against CFI and Fish on actual and constructive fraudulent transfer; to the extent the judgment held the Rockwater Defendants and Hapke liable on the causes of action for fraud by intentional misrepresentation, fraud by concealment, and/or negligent misrepresentation, it was reversed. The judgment in favor of CFI and Fish on those causes of action was affirmed. The judgment against the RAM Fund and Hapke for breach of fiduciary duty and professional negligence was reversed. However, the judgment against RMA and Williams on those causes of action was affirmed. The judgment in favor of CFI and Fish on the breach of fiduciary duty cause of action was affirmed. The ruling that CFI was not liable for the debts of RMA was affirmed. The ruling that Fish was not liable for the debts of CFI was moot, and the judgment in favor of CFI on all causes of action is affirmed. View "Hasso v. Hapke" on Justia Law 2014-07-15 state California California Court of Appeal Moore G047495M http://law.justia.com/cases/federal/us/573/12-751/ Fifth Third Bancorp v. Dudenhoeffer 2014-07-15T02:08:10-08:00 2014-07-15T02:56:52-08:00 Fifth Third maintains a defined-contribution retirement savings plan for its employees. Participants may direct their contributions into any of several investment options, including an "employee stock ownership plan" (ESOP), which invests primarily in Fifth Third stock. Former participants sued, alleging breach of the fiduciary duty of prudence imposed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1104(a)(1)(B) in that the defendants should have known—on the basis of both public information and inside information available to Fifth Third officers—that the stock was overpriced and risky. The price of Fifth Third stock fell, reducing plaintiffs' retirement savings. The district court dismissed; the Sixth Circuit reversed. A unanimous Supreme Court vacated. ESOP fiduciaries are not entitled to any special presumption of prudence, but are subject to the same duty that applies to ERISA fiduciaries in general, except that they need not diversify the fund's assets. There is no requirement that plaintiffs allege that the employer was, for example, on the "brink of collapse." Where a stock is publicly traded, allegations that a fiduciary should have recognized, on the basis of publicly available information, that the market was over- or under-valuing the stock are generally implausible and insufficient to state a claim. To state a claim, a complaint must plausibly allege an alternative action that could have been taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it. ERISA's duty of prudence never requires a fiduciary to break the law, so a fiduciary cannot be imprudent for failing to buy or sell in violation of insider trading laws. An allegation that fiduciaries failed to decide, based on negative inside information, to refrain from making additional stock purchases or failed to publicly disclose that information so that the stock would no longer be overvalued, requires courts to consider possible conflicts with complex insider trading and corporate disclosure laws. Courts confronted with such claims must also consider whether the complaint has plausibly alleged that a prudent fiduciary in the same position could not have concluded that stopping purchases or publicly disclosing negative information would do more harm than good to the fund. View "Fifth Third Bancorp v. Dudenhoeffer" on Justia Law 2014-06-25 federal U.S. Supreme Court Stephen G. Breyer 12-751 http://law.justia.com/cases/federal/us/573/13-317/ Halliburton Co. v. Erica P. John Fund, Inc. 2014-07-15T02:08:06-08:00 2014-07-15T02:56:51-08:00 Investors can recover damages in a private securities fraud action only with proof that they relied on misrepresentation in deciding to buy or sell stock. The Supreme Court held, in "Basic," that the requirement could be met by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information, including material misrepresentations; a defendant can rebut the presumption by showing that the alleged misrepresentation did not actually affect the stock price. EPJ filed a putative class action, alleging misrepresentations designed to inflate Halliburton's stock price, in violation of the Securities Exchange Act of 1934 and SEC Rule 10b–5. The Supreme Court vacated denial of class certification, concluding that securities fraud plaintiffs need not prove causal connection between the alleged misrepresentations and their economic losses at the class certification stage. On remand, Halliburton argued that certification was nonetheless inappropriate because it had shown that alleged misrepresentations had not affected stock price. Without that presumption, investors would have to prove reliance on an individual basis, so that individual issues would predominate over common ones and class certification was inappropriate under FRCP 23(b)(3). The district court certified the class. The Fifth Circuit affirmed. The Supreme Court vacated and remanded, while declining to reject the Basic presumption. The Court rejected arguments that "a robust view of market efficiency" is no longer tenable in light of evidence that material, public information often is not quickly incorporated into stock prices and that investors do not invest in reliance on the integrity of market price. Congress could alter Basic's presumption, given recent decisions construing Rule 10b–5 claims, but has not done so, although it has responded to other concerns. The Basic doctrine includes two presumptions: if a plaintiff shows that the misrepresentation was public and material and that the stock traded in a generally efficient market, there is a presumption that the misrepresentation affected price. If the plaintiff also shows that he purchased stock at market price during the relevant period, there is a presumption that he purchased in reliance on the misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first presumption. Defendants, however, must have an opportunity to rebut the presumption of reliance before class certification with evidence of lack of price impact. That a misrepresentation has price impact is Basic's fundamental premise and has everything to do with predominance. If reliance is to be shown by that presumption, the publicity and market efficiency prerequisites must be proved before certification. Because indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact. View "Halliburton Co. v. Erica P. John Fund, Inc." on Justia Law 2014-06-23 federal U.S. Supreme Court Owen Josephus Roberts 13-317 http://law.justia.com/cases/federal/us/571/12-3/ Lawson v. FMR LLC 2014-07-15T02:06:42-08:00 2014-07-15T02:56:45-08:00 To safeguard investors and restore trust in financial markets after the Enron collapse, Congress passed the Sarbanes-Oxley Act of 2002, which provides that no public company nor any contractor or subcontractor of such a company, may discharge, demote, suspend, threaten, harass, or discriminate against an employee in the terms and conditions of employment because of whistleblowing activity, 18 U. S. C. 1514A(a). Plaintiffs are former employees of FMR, private companies that contract to advise or manage mutual funds. As is common in the industry, those mutual funds are public companies with no employees. Plaintiffs allege that they blew the whistle on putative fraud relating to the mutual funds and suffered retaliation by FMR. FMR argued that the Act protects only employees of public companies, and not employees of private companies that contract with public companies. The district court denied FMR's motion to dismiss. The First Circuit reversed, concluding that the term "an employee" refers only to employees of public companies. The Supreme Court reversed and remanded, concluding that section 1514A's whistleblower protection includes employees of a public company's private contractors and subcontractors. FMR's interpretation would shrink the protection against retaliation by contractors to insignificance. The Court stated that its reading fits the goal of warding off another Enron debacle; fear of retaliation was the primary deterrent to reporting by the employees of Enron's contractors. FMR's reading would insulate the entire mutual fund industry from section 1514A. Virtually all mutual funds are structured to have no employees of their own and are managed, instead, by independent investment advisors. View "Lawson v. FMR LLC" on Justia Law 2014-03-04 federal U.S. Supreme Court Ruth Bader Ginsburg 12-3 http://law.justia.com/cases/federal/us/571/12-79/ Chadbourne & Parke LLP v. Troice 2014-07-15T02:06:39-08:00 2014-07-15T02:56:44-08:00 The Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. 78bb(f)(1), forbids large securities class actions "based upon the statutory or common law of any State" in which plaintiffs allege "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security," and defines "covered security" to include only securities traded on a national exchange. Plaintiffs filed civil class actions under state law, contending that defendants helped Stanford and his companies perpetrate a Ponzi scheme by falsely representing that uncovered securities (certificates of deposit in Stanford Bank) were backed by covered securities. The district court dismissed, reasoning that, for purposes of the Act, the Bank's misrepresentation that its holdings in covered securities made investments in its uncovered securities more secure provided the requisite "connection" between the state-law actions and transactions in covered securities. The Fifth Circuit reversed. The Supreme Court affirmed, holding that the Act does not preclude the state-law class action. The Court noted the Act's basic focus on transactions in covered, not uncovered, securities, and that use of the phrase "material fact in connection with the purchase or sale" suggests a connection that matters. A connection matters where the misrepresentation makes a significant difference to someone's decision to purchase or to sell a covered security, not an uncovered one; the "someone" making that decision must be a party other than the fraudster. The Act and the underlying Securities Exchange Act of 1934 and the Securities Act of 1933, are intended to protect investor confidence in the securities markets, not to protect persons whose connection with the statutorily defined securities is more remote than buying or selling. A broader interpretation of "connection" would interfere with state efforts to provide remedies for ordinary state-law frauds. This interpretation does not curtail the Securities and Exchange Commission's enforcement powers under 15 U S.C. 78c(a)(10). The SEC brought successful actions against Stanford and his associates, based on the Bank's fraudulent sales of certificates of deposit. View "Chadbourne & Parke LLP v. Troice" on Justia Law 2014-02-26 federal U.S. Supreme Court Stephen G. Breyer 12-79 http://law.justia.com/cases/federal/us/568/11-1085/ Amgen Inc. v. CT Ret. Plans & Trust Funds 2014-07-15T02:04:12-08:00 2014-07-15T02:56:31-08:00 To recover damages in a private securities-fraud action under section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5, a plaintiff must prove reliance on a material misrepresentation or omission made by the defendant. The Supreme Court has endorsed a "fraud-on-the-market" theory, which permits plaintiffs to invoke a rebuttable presumption of reliance on public, material misrepresentations regarding securities traded in an efficient market. The theory facilitates the certification of securities-fraud class actions by permitting reliance to be proved on a class-wide basis. Connecticut Retirement sought FRCP 23(b)(3) certification of a securities-fraud class action against a biotechnology company (Amgen). The district court certified the class. The Ninth Circuit affirmed, rejecting an argument that Connecticut Retirement was required to prove materiality before class certification under Rule23(b)(3)'s requirement that "questions of law or fact common to class members predominate over any questions affecting only individual members." The Supreme Court affirmed. Proof of materiality is not a prerequisite to certification of a securities-fraud class action. Materiality is judged by an objective standard and can be proved through evidence common to the class. Failure of proof of materiality would not result in individual questions predominating, but would end the case. A requirement that putative class representatives establish that they executed trades "between the time the misrepresentations were made and the time the truth was r¬vealed" relates primarily to typicality and adequacy of representation, not to the predominance inquiry. The Court rejected Amgen's argument that, because of pressure to settle, materiality may never be addressed by a court if it is not evaluated at the class-certification stage. The potential immateriality of Amgen's alleged misrepresentations and omissions was no barrier to finding that common questions predominate. View "Amgen Inc. v. CT Ret. Plans & Trust Funds" on Justia Law 2013-02-27 federal U.S. Supreme Court Ruth Bader Ginsburg 11-1085 http://law.justia.com/cases/federal/us/568/11-1274/ Gabelli v. Sec. & Exch. Comm'n 2014-07-15T02:04:11-08:00 2014-07-15T02:56:31-08:00 The Investment Advisers Act makes it illegal to defraud clients, 15 U.S.C. 10b–6(1),(2), and authorizes the Securities and Exchange Commission to bring enforcement actions against investment advisers and against individuals who aid and abet violations. If the SEC seeks civil penalties, it must file suit "within five years from the date when the claim first accrued," 28 U. S. C. 2462. In 2008 the SEC sought civil penalties, alleging that individuals aided and abetted investment adviser fraud from 1999 until 2002. The district court dismissed the claim as time barred. The Second Circuit reversed, reasoning that the underlying violations sounded in fraud, so the "discovery rule" applied, and the limitations period did not begin to run until the SEC discovered or reasonably could have discovered the fraud. The Supreme Court reversed. The limitation period begins to run when the fraud occurs, not when it is discovered. In common parlance a right accrues when it comes into existence. The discovery rule is an exception to the standard rule and has never been applied where the plaintiff is not a defrauded victim seeking recompense, but is the government bringing an enforcement action for civil penalties. The government is a different kind of plaintiff. The SEC's very purpose is to root out fraud. The discovery rule helps to ensure that the injured receive recompense, but civil penalties go beyond compensation and are intended to punish. Deciding when the government knew or reasonably should have known of a fraud would also present particular challenges for the courts. View "Gabelli v. Sec. & Exch. Comm'n" on Justia Law 2013-02-27 federal U.S. Supreme Court Owen Josephus Roberts 11-1274 http://law.justia.com/cases/federal/us/566/10-1261/ Credit Suisse Securities (USA) LLC v. Simmonds 2014-07-15T02:02:13-08:00 2014-07-15T02:56:21-08:00 In 2007, respondent filed numerous actions under section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78p(b), claiming that, in underwriting various initial public offerings in the late 1990's and 2000, petitioners and others inflated the stocks' aftermarket prices, allowing them to profit from the aftermarket sales. She also claimed that petitioners had failed to comply with section 16(a)'s requirement that insiders disclose any changes to their ownership in interests. That failure, according to respondent, tolled section 16(b)'s 2-year time period. The district court dismissed and the Ninth Circuit reversed, citing its decision in Whittaker v. Whittaker Corp. The Court held that, even assuming that the 2-year period could be extended, the Ninth Circuit erred in determining that it was tolled until a section 16(a) statement was filed. The text of section 16(b) simply did not support the Whittaker rule. The rule was also not supported by the background rule of equitable tolling for fraudulent concealment. Accordingly, the Court vacated the judgment of the Ninth Circuit and remanded for further proceedings.View "Credit Suisse Securities (USA) LLC v. Simmonds" on Justia Law 2012-03-26 federal U.S. Supreme Court Antonin Scalia 10-1261 http://law.justia.com/cases/federal/us/564/09-525/ Janus Capital Group, Inc. v. First Derivative Traders 2014-07-15T01:41:04-08:00 2014-07-15T02:56:09-08:00 Respondent, First Derivative Traders, representing a class of stockholders in petitioner Janus Capital Group, Inc. ("JCG"), filed a private action under the Securities and Exchange Commission ("SEC") Rule 10b-5, alleging that JCG and its wholly owned subsidiary, petitioner Janus Capital Management LLC ("JCM"), made false statements in mutual funds prospectuses filed by Janus Investment Fund, for which JCM was the investment adviser and administrator, and that those statements affected the price of JCG's stock. Although JCG created Janus Investment Fund, it was a separate legal entity owned entirely by mutual fund investors. At issue was whether JCM, a mutual fund investment adviser, could be held liable in a private action under Rule 10b-5 for false statements included in its client mutual funds' prospectuses. The Court held that, because the false statements included in the prospectuses were made by Janus Investment Fund, not by JCM, JCM and JCG could not be held liable in a private action under Rule 10b-5. The Court found that, although JCM could have been significantly involved in preparing the prospectuses, it did not itself "make" the statements at issue for Rule 10b-5 purposes where its assistance in crafting what was said was subject to Janus Investment Fund's ultimate control. Accordingly, respondent had not stated a claim against JCM under Rule 10b-5 and the judgment of the Fourth Circuit was reversed.View "Janus Capital Group, Inc. v. First Derivative Traders" on Justia Law 2011-06-13 federal U.S. Supreme Court Clarence Thomas 09-525 http://law.justia.com/cases/federal/us/563/09-1403/ Erica P. John Fund, Inc. v. Halliburton Co., et al. 2014-07-15T01:40:05-08:00 2014-07-15T02:56:08-08:00 Petitioner, the lead plaintiff in a putative securities fraud class action, filed suit against respondent alleging violations under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., and Securities and Exchange Commission Rule 10b-5, and sought to have its proposed class certified pursuant to Federal Rule of Civil Procedure 23. The Court of Appeals affirmed the District Court's conclusion that the "loss causation" element of class certification was not satisfied and denied class certification. At issue was whether securities fraud plaintiffs must also prove loss causation in order to obtain class certification. The Court held that securities fraud plaintiffs need not prove loss causation in order to obtain class certification and that the Court of Appeals' rule contravened Basic Inc. v. Levinson's fundamental premise that an investor presumptively relied on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The Court also distinguished that, where loss causation was a familiar and distinct concept in securities law, it was not price impact. Accordingly, the Court vacated the judgment and remanded for further proceedings.View "Erica P. John Fund, Inc. v. Halliburton Co., et al." on Justia Law 2011-05-26 federal U.S. Supreme Court Owen Josephus Roberts 09-1403 http://law.justia.com/cases/federal/appellate-courts/ca2/12-1769/12-1769-2014-07-11.html Chechele v. Sperling 2014-07-11T08:00:11-08:00 2014-10-01T16:10:33-08:00 Plaintiff appealed the district court's grant of insider defendants' motion to dismiss her short-swing trading complaint. The court agreed with the district court that the requirements of a claim under section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78p(b), mandating disgorgement of short-swing profits by statutory insiders, had not been satisfied. The prepaid variable forward contracts in this case were properly analyzed under traditional, and not hybrid, derivative analysis. When that was done, it became evidence that no "purchase" occurred against which a "sale could be matched for section 16(b) purposes. View "Chechele v. Sperling" on Justia Law 2014-07-11 federal U.S. Court of Appeals for the Second Circuit Walker, Jr. 12-1769 http://law.justia.com/cases/federal/appellate-courts/ca1/13-1574/13-1574-2014-07-10.html Hidalgo-Velez v. San Juan Asset Mgmt., Inc. 2014-07-10T07:30:11-08:00 2014-10-01T16:10:01-08:00 At issue in this case was whether alleged misrepresentations made by Defendants were made "in connection with" a transaction in covered securities under the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Plaintiffs, investors in a licensed non-diversified investment company, filed a putative class action in Puerto Rico court against the Fund and others alleging fraud or misrepresentation in violation of Puerto Rico law after the Fund invested the majority of its assets in notes sold by Lehman Brothers, resulting in the Fund adopting a plan of liquidation. Defendants removed the action to the federal district court, asserting that it fell within the ambit of the SLUSA. Plaintiffs unsuccessfully sought remand on jurisdictional grounds. Ultimately, the district court granted Defendants' motions to dismiss premised on SLUSA preclusion. The First Circuit vacated the judgment of dismissal and remitted with instructions to return the case to the Puerto Rico Court, holding that the link between the misrepresentations alleged and the covered securities in the Fund's portfolio was too fragile to support a finding of SLUSA preclusion under Chadbourne & Parke LLP v. Troice. View "Hidalgo-Velez v. San Juan Asset Mgmt., Inc." on Justia Law 2014-07-10 federal U.S. Court of Appeals for the First Circuit Selya 13-1574 http://law.justia.com/cases/federal/appellate-courts/ca10/13-6121/13-6121-2014-07-08.html Weinstein, et al v. McClendon, et al 2014-07-08T10:31:31-08:00 2014-10-01T16:08:46-08:00 Plaintiffs filed this complaint on behalf of a class of all persons and entities who purchased or otherwise acquired Chesapeake common stock from 2009 to 2012, and who were damaged from those purchases/acquisitions. The complaint alleged that Defendants materially misled the public through false statements and omissions regarding two different types of financial obligations: (1) Volumetric Production Payment transactions (under which Chesapeake received immediate cash in exchange for the promise to produce and deliver gas over time); and (2) the Founder Well Participation Program (under which Chesapeake CEO Aubrey McClendon was allowed to purchase up to a 2.5% interest in the new gas wells drilled in a given year). With respect to the "VPP program," Plaintiffs alleged Defendants touted the more than $6.3 billion raised through these transactions but failed to disclose that the VPPs would require Chesapeake to incur future production costs totaling approximately $1.4 billion. Plaintiffs contended the failure to disclose these future production costs was a material omission that misled investors into believing there would be no substantial costs associated with Chesapeake's obligations to produce and deliver gas over time. The district court granted Defendants' motion to dismiss the complaint, holding that Plaintiffs had failed to plead with particularity facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act of 1995. Viewing all of the allegations in the complaint collectively, the Tenth Circuit was not persuaded they gave rise to a cogent and compelling inference of scienter. Accordingly, the Court affirmed the district court's dismissal of the case. View "Weinstein, et al v. McClendon, et al" on Justia Law 2014-07-08 federal U.S. Court of Appeals for the Tenth Circuit Monroe G. McKay 13-6121 http://law.justia.com/cases/federal/appellate-courts/ca11/12-13947/12-13947-2014-06-30.html Finnerty v. Stiefel Laboratories, Inc., et al. 2014-06-30T07:04:01-08:00 2014-10-01T16:06:07-08:00 Plaintiff filed suit against SLI alleging violations of section 10(b) of the Securities Exchange Act of 1934 and accompanying Rule 10b-5, 15 U.S.C. 78j and 17 C.F.R. 240.10b-5. Plaintiff alleged that SLI withheld material information about preliminary merger negotiations that it was obliged to disclose. The jury returned a verdict in favor of plaintiff and SLI subsequently renewed a motion for judgment as a matter of law and, alternatively, a motion for a new trial. The district court denied the motions. The court concluded that there was sufficient evidence of actionable omissions where SLI's August 2007 statements that it "will continue to be privately held, and that the Stiefel family will retain and continue to hold a majority-share ownership of the company" gave rise to a duty to update when SLI considered itself to be a serious acquisition target; there was sufficient evidence that the omitted information was material; the district court did not err by refusing to give SLI's proposed jury instruction where SLI has demonstrated no prejudice from the district court's refusal to give the instruction; and the court rejected SLI's remaining arguments. Accordingly, the court affirmed the judgment of the district court.View "Finnerty v. Stiefel Laboratories, Inc., et al." on Justia Law 2014-06-30 federal U.S. Court of Appeals for the Eleventh Circuit Anderson 12-13947 12-15060 12-15642 http://law.justia.com/cases/new-york/court-of-appeals/2014/112-0.html Quadrant Structured Prods. Co., Ltd. v. Vertin 2014-06-10T08:13:37-08:00 2014-10-01T15:57:02-08:00 Plaintiff sued several defendants in the Delaware Court of Chancery for alleged wrongdoing related to notes purchased by Plaintiff and issued by one of the defendants. Defendants moved to dismiss, claiming that Plaintiff's claims were barred by a no-action clause contained in the indenture agreement governing Plaintiff's notes. The Delaware Supreme Court remanded the case for the Court of Chancery for consideration of the issues under New York law. On remand, the Court of Chancery concluded that the majority of Plaintiff's claims were not barred under the no-action clause and that dismissal and partial dismissal were warranted with respect to the remaining claims because only those claims arose under the indenture. In response to certified questions from the Delaware Supreme Court, the Court of Appeals concluded (1) a trust indenture's no-action clause that specifically precludes enforcement of contractual claims arising under the indenture, but omits reference to "the Securities," does not bar a securityholder's independent common law or statutory claims; and (2) the Court of Chancery correctly found that the no-action clause in this case, which referred only to "this Indenture," precluded enforcement only of contractual claims arising under the Indenture.View "Quadrant Structured Prods. Co., Ltd. v. Vertin" on Justia Law 2014-06-10 state New York New York Court of Appeals Jenny Rivera 112 http://law.justia.com/cases/federal/appellate-courts/ca3/13-2314/13-2314-2014-06-06.html City of Edinburgh Council v. Pfizer Inc. 2014-06-06T09:30:09-08:00 2014-10-01T15:55:52-08:00 Institutional investors brought a private securities fraud class action under the Private Securities Litigation Reform Act of 1995 (PSLRA), claiming that Wyeth, a pharmaceutical company and its executives made materially false and misleading statements in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission (SEC) Rule 10b-5, regarding interim clinical trial data related to the development of an experimental Alzheimer's drug. The district court dismissed for failure to state a claim. The Third Circuit affirmed, concluding that, in context, the defendants' statements were not false or misleading. The court noted that this is not the first case in which the federal courts have adjudicated securities fraud allegations arising out the development of the drug bapineuzumab and concluding that the plaintiffs failed to adequately allege defendants did not honestly believe their interpretation of the interim results or that it lacked a reasonable basis. View "City of Edinburgh Council v. Pfizer Inc." on Justia Law 2014-06-06 federal U.S. Court of Appeals for the Third Circuit Scirica 13-2314 http://law.justia.com/cases/federal/appellate-courts/ca1/13-1085/13-1085-2014-06-05.html Deka Int'l S.A. Luxembourg v. Genzyme Corp. 2014-06-05T14:00:06-08:00 2014-10-01T15:55:33-08:00 Plaintiffs, a class of investors, brought a securities fraud action against Genzyme Corporation, an international pharmaceutical company, and several of Genzyme's executives, alleging that Defendants violated the Securities Exchange Act by making false or misleading statements to investors. The district court dismissed the complaint for failure to state a claim upon which relief could be granted and subsequently denied Plaintiffs' post-judgment motion to amend the complaint. The First Circuit affirmed, holding (1) the district court did not err in concluding that the complaint failed to meet the formidable pleading standard for securities fraud claims; and (2) the district court did not abuse its discretion in denying Plaintiffs' post-judgment motion to amend the complaint. View "Deka Int'l S.A. Luxembourg v. Genzyme Corp." on Justia Law 2014-06-05 federal U.S. Court of Appeals for the First Circuit Torruella 13-1085 http://law.justia.com/cases/federal/appellate-courts/ca11/11-14287/11-14287-2014-05-22.html United States v. Isaacson 2014-05-22T12:01:33-08:00 2014-10-01T15:51:52-08:00 Defendant challenged his conviction and sentence for conspiracy to commit securities fraud in violation of 18 U.S.C. 371. This case arose out of a complex scheme designed to defraud investors through a group of hedge funds called the Lancer Fund. The court affirmed defendant's conviction; affirmed the denial of defendant's motion for a new trial; but vacated defendant's sentence because the district court erred when it enhanced defendant's sentence and ordered restitution based on the losses from Morgan Stanley's investment. The court remanded for resentencing.View "United States v. Isaacson" on Justia Law 2014-05-22 federal U.S. Court of Appeals for the Eleventh Circuit Martin 11-14287 12-14703 http://law.justia.com/cases/federal/appellate-courts/cadc/12-7088/12-7088-2014-05-20.html Wu, et al. v. Stomber, et al. 2014-05-20T07:32:03-08:00 2014-10-01T15:51:07-08:00 Plaintiffs, former Carlyle Capital investors, filed suit alleging that Carlyle Capital made material misstatements and omissions in its June 2007 sale of securities and thereby violated the federal securities laws. Plaintiffs also alleged violations of Dutch law. The court concluded that, given the accurate disclosure in the initial June 19 Offering Memorandum and the additional accurate disclosure in the June 29 Supplemental Memorandum, plaintiffs have not sufficiently alleged any material misstatements or omission. Carlyle Capital had no duty under federal securities laws to make further disclosures in the Offering Memorandum or to the press release accompanying the Supplemental Memorandum. Therefore, the district court properly dismissed plaintiffs' federal claims. Applying the choice-of-law rules for the District of Columbia, not Dutch law, the court concluded that plaintiffs failed to sufficiently allege common-law fraud or misrepresentation.View "Wu, et al. v. Stomber, et al." on Justia Law 2014-05-20 federal U.S. Court of Appeals for the District of Columbia Circuit Brett M. Kavanaugh 12-7088 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1116/13-1116-2014-05-19.html SEC v. O'Meally 2014-05-19T08:00:09-08:00 2014-10-01T15:50:48-08:00 The SEC filed a civil enforcement action against defendant, alleging that defendant failed to follow directives issued by the mutual funds and his employer to cease his market timing, and that he used different "financial advisor numbers" when mutual funds blocked trading from the ones he customarily used. The jury found that defendant engaged in no intentional misconduct but that he violated Section 17 of the Securities Act of 1933, 15 U.S.C. 77q, which has no scienter element, with respect to six out of sixty mutual funds. The court concluded that the evidence established without contradiction that the funds were inconsistent in their proscriptions on market timing and that the employer supported defendant's practices - and the jury could not find negligence in these circumstances without evidence as to an appropriate standard of care. Accordingly, the court reversed and remanded for the district court to dismiss the complaint against defendant.View "SEC v. O'Meally" on Justia Law 2014-05-19 federal U.S. Court of Appeals for the Second Circuit Dennis G. Jacobs 13-1116 http://law.justia.com/cases/maine/supreme-court/2014/2014-me-67.html N. Atlantic Secs., LLC v. Office of Secs. 2014-05-15T08:11:58-08:00 2014-10-01T15:50:09-08:00 The Securities Administrator of the Office of Securities revoked the securities licenses of North Atlantic Securities, LLC, a licensed broker-dealer, Michael J. Dell'Olio & Associates, a licensed investment adviser, and Michael Dell'Olio. Dell'Olio was an investment advisor representative of Michael J. Dell'Olio, an agent of North Atlantic, and an owner exercising control in both firms. The revocations resulted from transactions through which Dell'Olio, his son, and the two entities under Dell'Olio's control received over $200,000 in loans from Dell'Olio's mother-in-law, most of which were not repaid. The business and consumer docket affirmed the revocation of Appellants' securities licenses. The Supreme Court affirmed, holding (1) the charges arising from transactions that occurred in 2006 were not time-barred; (2) the administrative record supported the Administrator's factual findings; (3) the Administrator's decision was not affected by structural or actual bias; and (4) despite the severity of the penalty imposed, the Administrator did not abuse her discretion in revoking the licenses. View "N. Atlantic Secs., LLC v. Office of Secs." on Justia Law 2014-05-15 state Maine Maine Supreme Judicial Court Donald G. Alexander http://law.justia.com/cases/federal/appellate-courts/ca1/12-1750/12-1750-2014-05-14.html Bricklayers & Trowel Trades Int'l Pension Fund v. Credit Suisse Secs. (USA) LLC 2014-05-14T13:00:07-08:00 2014-10-01T15:49:27-08:00 A pension fund and other America Online (AOL) shareholders brought a class action against Credit Suisse First Boston (CSFB), former CSFB analysts, and other related defendants (collectively, Defendants), alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act and of SEC Rule 10b-5. Specifically, Plaintiffs claimed (1) CSFB made material misstatements and fraudulently withheld relevant information from the market in its reporting on the AOL-Time Warner merger; and (2) the shareholders purchased stock in the new company at artificially inflated prices as a result of the alleged misstatements and omissions. The district court awarded summary judgment to Defendants. The First Circuit Court of Appeals affirmed, holding (1) the district court did not err in excluding the shareholders' expert testimony for lack of reliability; and (2) without the expert's testimony, Plaintiffs were unable to establish loss causation.View "Bricklayers & Trowel Trades Int'l Pension Fund v. Credit Suisse Secs. (USA) LLC" on Justia Law 2014-05-14 federal U.S. Court of Appeals for the First Circuit Jeffrey R. Howard 12-1750 http://law.justia.com/cases/federal/appellate-courts/ca7/12-3330/12-3330-2014-05-14.html Fish v. Greatbanc Trust Co. 2014-05-14T12:01:19-08:00 2014-10-01T15:49:24-08:00 Plaintiffs, employees of Antioch, participated in an employee stock ownership, plan (ESOP). In 2003, Antioch borrowed money to buy back all stock except the stock owned by the ESOP. The buy-out left Antioch bankrupt and ESOP worthless. Plaintiffs filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, claiming breach of fiduciary duties. The district court granted the defendants summary judgments. The presumptive limitation period for violations is six years from the date of the last action constituting part of the breach or violation, but the time is shortened to three years from the time the plaintiff gained "actual knowledge of the breach or violation." Applying the three-year limitations period, section 1113(2), the court reasoned that proxy documents given to plaintiffs at the time of the buy-out and their knowledge of Antioch's financial affairs after the transaction gave them actual knowledge of the alleged ERISA violations. The Seventh Circuit reversed. The claims for breach of fiduciary duty do not depend only on the disclosed substantive terms of the 2003 transaction, but also depend on the processes used to evaluate, negotiate, and approve the transaction. Plaintiffs' knowledge of the substantive terms of the buyout, therefore did not give them "actual knowledge of the breach or violation" alleged in this case. View "Fish v. Greatbanc Trust Co." on Justia Law 2014-05-14 federal U.S. Court of Appeals for the Seventh Circuit HAMILTON 12-3330 http://law.justia.com/cases/federal/appellate-courts/ca2/12-4355/12-4355-2014-05-06.html City of Pontiac v. UBS AG et al. 2014-05-06T09:00:07-08:00 2014-10-01T15:46:34-08:00 Plaintiffs, a group of foreign and domestic institutional investors, filed a putative class action against UBS and others, alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Rule 10b-5, 17 C.F.R. 240.10b-5. The district court dismissed all claims with prejudice. The court concluded that the Supreme Court's decision in Morrison v. National Australia Bank Ltd. precluded claims brought under the Exchange Act by purchasers of shares of a foreign issuer on a foreign exchange, even if those shares were cross-listed on a United States exchange; claims brought under the Securities Act of 1933, 15 U.S.C. 77a et seq., based on disclosures made in connection with a UBS June 13, 2008 registered rights offering were properly dismissed because they were immaterial and/or inactionable "puffery;" and Exchange Act claims arising out of defendants' statements regarding positions in, and valuation of, mortgage-related assets were properly dismissed for failure to adequately plead a material misrepresentation or scienter. Accordingly, the court affirmed the judgment of the district court.View "City of Pontiac v. UBS AG et al." on Justia Law 2014-05-06 federal U.S. Court of Appeals for the Second Circuit Cabranes 12-4355 http://law.justia.com/cases/federal/appellate-courts/ca7/13-2896/13-2896-2014-05-02.html Birkelbach v. Sec. & Exch. Comm'n 2014-05-02T06:30:58-08:00 2014-10-01T15:45:29-08:00 In 1983, Birkelbach founded Birkelbach Investment Securities (BIS) and served as its president. Birkelbach was registered as a general securities representative and principal, a municipal securities representative and principal, an options principal, and a financial and operations principal. Birckelbach supervised Murphy's control of one account held by an unsophisticated investor with assets of $1.7 million, while Murphy generated more than a million dollars in commissions, incurred substantial losses, and engaged in transactions that were not part of the investor-authorized strategy. The investor was unable to understand her statements, many of which included errors that overvalued the account. Lowry similarly mishandled, and Birkelbach supervised, the management of the smaller account of a college student/member of the U.S. military. Birkelbach knew that Murphy had been previously censured, suspended, and fined by the Chicago Board Options Exchange, for trading without authorization and had a history of customer complaints. Birkelbach also had a previous disciplinary history. He had been sanctioned by the Illinois Securities Department and, in 2005, additional supervision of Murphy had been requested by the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization formed under the Securities Exchange Act, 15 U.S.C. 78o-3. Birkelbach did not do so. After FINRA investigated BIS and recommended sanctions, the Securities and Exchange Commission barred Birkelbach from participation in the securities industry for life. The Seventh Circuit denied a petition for review, rejecting arguments that the original disciplinary complaint was untimely and the lifetime bar was an excessive punishment. View "Birkelbach v. Sec. & Exch. Comm'n" on Justia Law 2014-05-02 federal U.S. Court of Appeals for the Seventh Circuit Kapala 13-2896 http://law.justia.com/cases/federal/appellate-courts/ca2/13-2678/13-2678-2014-04-25.html Carpenters Pension Trust v. Barclays PLC, et al. 2014-04-25T07:03:09-08:00 2014-10-01T15:43:29-08:00 Plaintiffs filed suit against defendants, alleging, inter alia, that Barclays knowingly misrepresented its cost of borrowing funds by submitting false information for the purpose of calculating the London Interbank Offered Rate (LIBOR), in violation of section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The court held that the district court erred in concluding, prior to any discovery, that plaintiffs failed to plead loss causation where plaintiffs' allegations that the June 28, 2012 decline in Barclay's stock price resulted from the revelation of Barclay's misrepresentations of its 2007-2008 LIBOR rates and defendant Diamond's conference call misrepresentation of Barclays's borrowing costs presented a plausible claim. The court also held that the district court correctly concluded that Barclays's statements in its SEC filings relating to the company's internal control requirements were not materially false. Accordingly, the court vacated in part, affirmed in part, and remanded.View "Carpenters Pension Trust v. Barclays PLC, et al." on Justia Law 2014-04-25 federal U.S. Court of Appeals for the Second Circuit Berman 13-2678 http://law.justia.com/cases/federal/appellate-courts/ca11/13-10993/13-10993-2014-04-15.html U.S. Commodity Futures v. Martin, Jr., et al. 2014-04-15T09:01:50-08:00 2014-10-01T15:40:17-08:00 Amendments to the Commodity Exchange Act, Pub. L. No. 111-203, 124 Stat. 1376, made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 purported to expand the enforcement authority of the Commodity Futures Trading Commission. The Dodd-Frank amendments authorize the Commission to regulate retail commodity transactions offered "on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the officer or counterparty on a similar basis." In light of the district court's factual findings and legal conclusions with which the court agreed, the court held that the Commission has enforcement authority over these transactions, and no exception applied. The court affirmed the district court's grant of the preliminary injunction because the Commission had pleaded a prima facie case of a violation of the Act.View "U.S. Commodity Futures v. Martin, Jr., et al." on Justia Law 2014-04-15 federal U.S. Court of Appeals for the Eleventh Circuit Dubina 13-10993 http://law.justia.com/cases/federal/appellate-courts/ca11/12-15061/12-15061-2014-04-14.html Lamm v. State Street Bank and Trust 2014-04-14T12:01:54-08:00 2014-10-01T15:39:52-08:00 Plaintiff (the customer) filed suit against State Street (the custodian bank), alleging in essence that it had a duty to notify him that the securities in his account were worthless. The district court granted State Street's motion to dismiss the contract claims on the ground that State Street had a merely administrative role in managing plaintiff's accounts and thus owed him no duty to guard against his investment advisor's misconduct. The district court concluded that plaintiff's negligence claims were barred by Florida's economic loss rule and plaintiff had not sufficiently alleged knowledge on the part of State Street in regards to the aiding and abetting claims. The court affirmed, holding that, under these facts, the custodian bank breached no duty, contractual or otherwise, by accepting on behalf of its customer securities that later turn out to be fraudulent and listing those securities on monthly account statements issued to the customer. Plaintiff's allegations failed to state claims for breach of contract; plaintiff failed to establish that State Street owed him an independent duty to monitor the investments in his account, verify their market value, or ensure they were in valid form; therefore, he failed to state valid negligence claims; plaintiff's allegations were insufficient to state a claim for aiding and abetting; and plaintiff's claims for breach of fiduciary duty and negligent misrepresentation also failed. View "Lamm v. State Street Bank and Trust" on Justia Law 2014-04-14 federal U.S. Court of Appeals for the Eleventh Circuit Jordan 12-15061 http://law.justia.com/cases/federal/appellate-courts/cadc/13-5252/13-5252-2014-04-14.html Nat'l Assoc. of Manufacturers, et al. v. SEC, et al. 2014-04-14T08:31:44-08:00 2014-10-01T15:40:01-08:00 In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission's final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have "not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings.View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law 2014-04-14 federal U.S. Court of Appeals for the District of Columbia Circuit Arthur Raymond Randolph 13-5252 http://law.justia.com/cases/federal/appellate-courts/ca6/13-5602/13-5602-2014-03-28.html Kuyat v. BioMimetic Therapeutics, Inc. 2014-03-28T09:01:01-08:00 2014-10-01T15:34:41-08:00 Investors filed a securities fraud action, claiming that BioMimetic misled them about Augment Bone Graft's prospects for FDA approval. The product is designed to encourage bone growth in patients that undergo foot and ankle surgeries without the need to harvest and transplant tissue. They claim that the FDA privately communicated to BioMimetic that the FDA expected the device's clinical trials to prove that Augment was effective based on an analysis of all study participants. The clinical trials did not achieve those results. But if BioMimetic removed from the analysis study participants that did not actually receive treatment, the data did indicate that the device was effective. Based on these two analyses, BioMimetic expressed optimism about Augment's chances for approval to investors. The investors claim that those statements were misleading because BioMimetic did not tell them everything it knew about the FDA's expectations, particularly the FDA's desire for the trials to show that the device was effective based on an analysis of the entire study population. The district court dismissed, The Sixth Circuit affirmed. The complaint did not plead a strong enough inference of scienter. BioMimetic could legitimately have believed that the statistically significant results it achieved based on an analysis of the population would be sufficient to obtain approval.View "Kuyat v. BioMimetic Therapeutics, Inc." on Justia Law 2014-03-28 federal U.S. Court of Appeals for the Sixth Circuit John M. Rogers 13-5602 http://law.justia.com/cases/federal/appellate-courts/ca1/12-2128/12-2128-2014-03-26.html Calderon-Serra v. Banco Santander P.R. 2014-03-26T14:00:10-08:00 2014-10-01T15:33:59-08:00 Plaintiffs filed a complaint against their bank and others, asserting a cause of action under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), among other claims, asserting that Defendants engaged in an unlawful scheme to lend Plaintiffs money in violation of federal margin requirements limiting the extent to which securities can be used as collateral for funds loaned to purchase the securities. The district court (1) dismissed the complaint as to two defendants for failure of service, and (2) dismissed the remainder of the suit for failure to state a claim upon which relief could be granted, finding that the alleged misconduct was not actionable under RICO, which does not encompass private claims that would have been actionable as securities fraud. The First Circuit Court of Appeals affirmed, holding that the district court (1) correctly concluded that Plaintiffs failed to state a claim for relief under RICO; and (2) did not abuse its discretion in dismissing the complaint as to two defendants for failure of service.View "Calderon-Serra v. Banco Santander P.R." on Justia Law 2014-03-26 federal U.S. Court of Appeals for the First Circuit William Joseph Kayatta, Jr. 12-2128 http://law.justia.com/cases/federal/appellate-courts/ca7/13-1278/13-1278-2014-03-19.html Grede v. FCStone LLC 2014-03-19T07:30:59-08:00 2014-10-01T15:31:10-08:00 Sentinel specialized in short-term cash management, promising to invest customers' cash in safe securities for good returns with high liquidity. Customers did not acquire rights to specific securities, but received a pro rata share of the value of securities in an investment pool (Segment) based on the type of customer and regulations that applied to that customer. Segment 1 was protected by the Commodity Exchange Act; Segment 3 customers by the Investment Advisors Act and SEC regulations. Despite those laws, Sentinel lumped cash together, used it to purchase risky securities, and issued misleading statements. Some securities were collateral for a loan (BONY). In 2007 customers began demanding cash and BONY pressured Sentinel for payment. Sentinel moved $166 million in corporate securities out of a Segment 1 trust to a lienable account as collateral for BONY and sold Segment 1 and 3 securities to pay BONY. Sentinel filed for bankruptcy after returning $264 million to Segment 1 from a lienable account and moving $290 million from the Segment 3 trust to the lienable account. After informing customers that it would not honor redemption requests, Sentinel distributed the full cash value of their accounts to some Segment 1 groups. After filing for bankruptcy Sentinel obtained bankruptcy court permission to have BONY distribute $300 million from Sentinel accounts to favored customers. The trustee obtained district court approval to avoid the transfers, 11 U.S.C. 547; 11 U.S.C. 549. The Seventh Circuit, noting the unique conflict between the rights of two groups of wronged customers, reversed. Sentinel's pre-petition transfer fell within the securities exception in 11 U.S.C. 546(e); the post-petition transfer was authorized by the bankruptcy court, 11 U.S.C. 549. Neither can be avoided. View "Grede v. FCStone LLC" on Justia Law 2014-03-19 federal U.S. Court of Appeals for the Seventh Circuit HAMILTON 13-1278 http://law.justia.com/cases/federal/appellate-courts/ca4/12-2496/12-2496-2014-03-07.html Yates v. Municipal Mortgage & Equity 2014-03-07T12:00:51-08:00 2014-10-01T15:27:26-08:00 Plaintiffs filed suit against MuniMae defendants, alleging that they committed securities fraud by falsely representing that the Company was in full compliance with a new accounting standard enacted in 2003; and concealing the substantial cost of correcting the accounting error. The court affirmed the district court's dismissal of plaintiffs' claims under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5, 17 C.F.R. 240.10b-5, for failing to adequately plead scienter; affirmed the district court's dismissal of plaintiffs' claim under sections 11 of the Securities Act of 1933, 15 U.S.C. 77k(a), as time-barred under section 13's statute of repose; affirmed the district court's dismissal of plaintiffs' claim under section 12(a)(2) of the Securities Act, 15 U.S.C. 77(a)(2), for lack of standing; and affirmed the district court's dismissal of the section 15 claim because plaintiffs failed to adequately plead a primary violation of the Securities Act. View "Yates v. Municipal Mortgage & Equity" on Justia Law 2014-03-07 federal U.S. Court of Appeals for the Fourth Circuit Albert Diaz 12-2496 http://law.justia.com/cases/texas/supreme-court/2014/12-0163.html In re Fisher 2014-02-28T08:08:13-08:00 2014-10-01T15:25:40-08:00 Mike Richey sold his interest in Richey Oilfield Construction, Inc. to Nighthawk Oilfield Services, Ltd. Richey remained employed as president of Richey Oil and became a limited partner in Nighthawk. The primary agreements regarding the transaction were a stock purchase agreement, an agreement for the purchase of Richey Oil's goodwill, and a promissory note. Each of the acquisition agreements contained a forum selection clause naming Tarrant County as the venue for state court actions. When the business did not go as well as the parties had hoped, Richey filed suit in Wise County, where Richey resided, against two Nighthawk executives (together, Relators) for, among other claims, breach of fiduciary duty, common law fraud, statutory fraud, and violations of the Texas Securities Act. Relators responded by unsuccessfully moving the trial court to transfer venue to Tarrant County or dismiss the suit pursuant to the mandatory venue selection clauses in the acquisition agreements. Relators subsequently sought mandamus relief. The Supreme Court conditionally granted relief, holding that the trial court abused its discretion by failing to enforce the forum selection clauses in the acquisition agreements. View "In re Fisher" on Justia Law 2014-02-28 state Texas Supreme Court of Texas Phil Johnson 12-0163 http://law.justia.com/cases/federal/appellate-courts/ca10/12-1438/12-1438-2014-02-24.html SEC v. Shields, et al 2014-02-24T09:31:23-08:00 2014-10-01T15:23:43-08:00 The Securities and Exchange Commission (SEC) brought a civil enforcement action against Defendant-Appellees GeoDynamics, Inc., its managing director Jeffory Shields, and several other business entities affiliated with Shields, alleging securities fraud in connection with four oil and gas exploration and drilling ventures Shields marketed to thousands of investors as Joint Venture Agreements (JVAs). The district court granted defendants' 12(b)(6) motion to dismiss. The SEC appealed, contending that despite their labels as JVAs, the investment agreements were actually "investment contracts" and thus "securities" subject to federal securities regulations. Because it could not be said as a matter of law that the investments at issue were not "investment contracts," the Tenth Circuit reversed. View "SEC v. Shields, et al" on Justia Law 2014-02-24 federal U.S. Court of Appeals for the Tenth Circuit Stephanie Kulp Seymour 12-1438 http://law.justia.com/cases/federal/appellate-courts/ca2/12-1723/12-1723-2014-02-18.html SEC v. Contorinis 2014-02-18T07:30:04-08:00 2014-10-01T15:21:13-08:00 Defendant executed several illegal insider trades involving the stock of the supermarket chain Albertson's using material nonpublic information received from an employee of UBS. On appeal, defendant challenged the district court's judgment ordering him to disgorge profits from illegal insider trading, enjoining him from further violating the securities laws, and ordering him to pay prejudgment interest on the entire disgorgement amount. The court concluded that the district court did not abuse its discretion in ordering disgorgement because the court's cases have established that tippers can be required to disgorge profits realized by their tippees' illegal insider trading. This case was distinguishable only insofar as defendant himself executed the fraudulent trades rather than leave that task to a tippee. The court found no abuse of discretion in the district court's imposition of an injunction on defendant or in its order that he pay prejudgment interest. Accordingly, the court affirmed the judgment of the district court.View "SEC v. Contorinis" on Justia Law 2014-02-18 federal U.S. Court of Appeals for the Second Circuit Lynch 12-1723 http://law.justia.com/cases/federal/appellate-courts/ca9/12-35260/12-35260-2014-02-13.html Reese v. Malone 2014-02-13T10:31:08-08:00 2014-10-01T15:20:22-08:00 BP shareholders filed a class action alleging that the company knowingly, or with deliberate recklessness, made false and misleading statements about the condition of the Alaskan pipelines and BP's pipeline maintenance and leak detection practices prior to and in the wake of the first oil spill. On appeal, plaintiffs challenged the district court's partial dismissal of their complaint under federal securities laws. The court concluded that plaintiffs have adequately pled falsity and materiality, as well as scienter for statements regarding the corrosion rate; plaintiffs have adequately pled falsity and materiality, as well as scienter for statements distinguishing the WOA and EOA lines; plaintiffs did not sufficiently allege scienter for statements regarding BP's "World Class" leak detection system and corrosion monitoring program; plaintiffs adequately pled falsity and scienter for an annual report statement regarding compliance with environmental laws and regulations; and when the court considered the allegations holistically and accepted them to be true, the inference that BP was, at the very least, deliberately reckless as to the false or misleading nature of their public statements was at least as compelling as any opposing inference. Accordingly, the court reversed in part and affirmed in part.View "Reese v. Malone" on Justia Law 2014-02-13 federal U.S. Court of Appeals for the Ninth Circuit Dearie 12-35260 http://law.justia.com/cases/federal/appellate-courts/ca3/12-1168/12-1168-2014-02-10.html Sec. & Exch. Comm'n v. Teo 2014-02-10T10:00:06-08:00 2014-10-01T15:18:58-08:00 During his time as an investor and owner of the MAAA Trust, which he established in 1992, Teo filed three false Schedule 13D disclosures and failed to file several required 13Ds. After they made a $154,932,011 gross profit on a stock sale, the SEC filed a civil enforcement action asserting violations of the Securities Exchange Act, 15 U.S.C. 78m (d) and 78j(b) and SEC rules and regulations. The district court granted summary judgment on several rule-violation claims that Teo did not challenge. A jury concluded that Teo violated Section 10(b) and Rule 10b-5, and that Teo and the Trust violated Section 13(d), Rule 12b-20, Rule 13d-1, and Rule 13d-2. The court held that the Trust violated Section 16(a) and Rule 16a-3. 7. The court ordered disgorgement of more than $17 million, plus prejudgment interest of more than $14 million. The Third Circuit affirmed, rejecting claims: of errors relating to admission of Teo's guilty plea allocution and an exhibit; that there was insufficient evidence to prove a "plans and proposals" theory of liability; that the general verdict slip created ambiguity on the theory of liability grounding the jury's verdict; and to the disgorgement order.View "Sec. & Exch. Comm'n v. Teo" on Justia Law 2014-02-10 federal U.S. Court of Appeals for the Third Circuit Richard Lowell Nygaard 12-1168 http://law.justia.com/cases/new-jersey/supreme-court/2014/a-31-11.html Bhagat v. Bhagat 2014-01-30T10:12:30-08:00 2014-10-01T15:16:11-08:00 The issue before the Supreme Court in this case centered on whether a father presented sufficient evidence to rebut the presumption that his transfer of stock to his son was a gift. Upon review, the Supreme Court held that a person seeking to rebut the presumption that a transfer of property from a parent to a child is a gift must show clear and convincing evidence of a contrary intent. That person is limited to evidence antecedent to, contemporaneous with, or immediately following the transfer, and may also adduce proof of statements by the parties concerning the purpose and effect of the transfer. View "Bhagat v. Bhagat" on Justia Law 2014-01-30 state New Jersey Supreme Court of New Jersey Mary Catherine Cuff a-31-11 http://law.justia.com/cases/federal/appellate-courts/ca2/12-2509/12-2509-2014-01-29.html Roth v. The Goldman Sachs Group, Inc., et al. 2014-01-29T07:30:07-08:00 2014-10-01T15:15:40-08:00 Plaintiff, on behalf of Leap, filed suit against Goldman, seeking to hold Goldman liable under Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78p(b), and Rule 16b-6(d), 17 C.F.R. 240.16b-6(d), for Goldman's failure to disgorge "short-swing profits" derived from writing call options on Leap stock. The court concluded that for the purposes of Section 16(b), the expiration of a call option within six months of its writing was to be deemed a "purchase" by the option writer to be matched against the "sale" deemed to occur when that option was written. The court also concluded that Section 16(b) required statutory insider status at the time of both purchase and sale, and so Goldman was not required to disgorge profits where it was a statutory insider only when the options were written, but not when they expired. Accordingly, the court affirmed the district court's dismissal of the action for failure to state a claim.View "Roth v. The Goldman Sachs Group, Inc., et al." on Justia Law 2014-01-29 federal U.S. Court of Appeals for the Second Circuit Ralph K. Winter, Jr. 12-2509 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1327/13-1327-2014-01-27.html Steginsky v. Xcelera Inc. 2014-01-27T08:00:19-08:00 2014-10-01T15:14:46-08:00 Plaintiff, a former minority shareholder of Xcelera, filed securities fraud claims alleging that Xcelera insiders purchased Xcelera stock by making a tender offer through a shell corporation without disclosing any information about Xcelera's financial state. The district court dismissed plaintiff's claims and she appealed. The court held that the duty of corporate insiders to either disclose material nonpublic information or abstain from trading was defined by federal common law and applied to unregistered securities. Accordingly, the district court erred in dismissing plaintiff's insider trading claims under sections 10(b), 20(a), and 20A(a) of the Securities Exchange Act, 15 U.S.C. 78a et seq. The court vacated the dismissal of those claims and remanded for further proceedings. The court affirmed as to the dismissal of plaintiff's market manipulation claims and her section 14(e) insider trading claims.View "Steginsky v. Xcelera Inc." on Justia Law 2014-01-27 federal U.S. Court of Appeals for the Second Circuit Walker, Jr. 13-1327 http://law.justia.com/cases/federal/appellate-courts/ca9/12-70681/12-70681-2014-01-16.html WTFC v. SEC 2014-01-16T10:03:16-08:00 2014-10-01T15:11:59-08:00 World Trade petitioned for review of the Commission's Order Sustaining Disciplinary Action Taken by FINRA, which upheld a variety of fines and sanctions against petitioners for their violations of Sections 5(a) and 5(c) of the Securities Act of 1933, 15 U.S.C. 77e(a), 77(e)(a), 77e(c), which prohibited the sale or offer of sale of a security without filing a registration statement. The court concluded that substantial evidence supported the Commission's finding that World Trade violated Sections 5(a) and 5(c) of the Act, and the court held that World Trade did not meet their duty of inquiry necessary to claim the Section 4(4) broker's exemption; and the court deferred to the Commission's discretionary determination as to the appropriate fines and sanctions because they were within FINRA's guidelines and were supported by evidence in the record. Accordingly, the court denied the petition for review. View "WTFC v. SEC" on Justia Law 2014-01-16 federal U.S. Court of Appeals for the Ninth Circuit Ronald Murray Gould 12-70681 http://law.justia.com/cases/utah/supreme-court/2013/20120142.html Legacy Res., Inc. v. Liberty Pioneer Energy Source, Inc. 2013-12-20T14:47:43-08:00 2014-10-01T15:06:38-08:00 Legacy Resources, Inc. brought several claims against Liberty Pioneer Energy Source, Inc. The district court dismissed Legacy's breach of contract and trade secret claims on summary judgment, determining (1) Legacy violated the securities laws by acting as an unlicensed broker in recruiting investors on behalf of Liberty; and (2) Legacy's securities violations rendered its contract unenforceable under Utah Code 61-1-22(8). The Supreme Court affirmed in part and reversed in part, holding (1) the undisputed facts sustained the conclusion that Legacy acted as an unlicensed broker, which violation foreclosed the enforcement of one of its contracts; but (2) another of Legacy's contracts was not implicated by the securities violation, and thus the district court erred by granting summary judgment on Legacy's claim under that contract, along with its trade secret claim.View "Legacy Res., Inc. v. Liberty Pioneer Energy Source, Inc." on Justia Law 2013-12-20 state Utah Utah Supreme Court Thomas R. Lee 20120142 http://law.justia.com/cases/federal/appellate-courts/ca1/12-2208/12-2208-2013-12-11.html W. Reserve Life Assurance Co. of Ohio v. ADM Assocs., LLC 2013-12-11T14:00:07-08:00 2014-10-01T15:02:39-08:00 To shield himself from the adverse effects of losses while speculating in high-risk securities, Joseph Caramdare exploited a perceived loophole in certain annuities issued by Appellant. Charles Buckman accepted a cash payment to identify himself as the annuitant on an application for one of these annuities, and Appellee, a Caramadre nominee and a stranger to Buckman, was designated as the prospective owner and beneficiary of the annuity. Appellant approved the application and issued an annuity (the Policy). Appellant later learned of Caramdre's scheme and sued Appellee in federal court, asserting certain tort claims and seeking rescission of the Policy and a declaration that the Policy was either void ab initio or had been properly rescinded. The court dismissed the claims. On appeal, the First Circuit Court certified to the Rhode Island Supreme Court the following questions of state law: (1) whether an annuity with a death benefit is infirm for want of an insurable interest if the owner and beneficiary of the annuity is a stranger to the annuitant; and (2) whether a clause in an annuity that purports to make the annuity incontestable from the date of its issuance precludes the maintenance of an action based on the lack of an insurable interest.View "W. Reserve Life Assurance Co. of Ohio v. ADM Assocs., LLC" on Justia Law 2013-12-11 federal U.S. Court of Appeals for the First Circuit Selya 12-2208 http://law.justia.com/cases/tennessee/supreme-court/2013/m2012-00344-sc-r11-cv.html Cooper v. Glasser 2013-11-26T14:10:26-08:00 2014-10-01T14:59:32-08:00 Plaintiff filed suit against Defendants in California state court for business-related torts. Plaintiff then voluntarily dismissed his complaint and re-filed his action in the federal district court, alleging several federal securities law violations. The federal court exercised supplemental jurisdiction over Plaintiff's state-law claims. Thereafter, Plaintiff voluntarily dismissed his complaint and filed the present action in a Tennessee state court, pleading three of the state-law claims that formed the basis for his two previously dismissed lawsuits. The trial court granted summary judgment for Defendants, concluding that Plaintiff's claims were barred by Plaintiff's second voluntary dismissal in federal court. The court of appeals affirmed. The Supreme Court reversed, holding that a plaintiff's second voluntary dismissal of supplemental state-law claims filed in federal court does not preclude the plaintiff from later re-filing an action based on the same claims in Tennessee state court. Remanded.View "Cooper v. Glasser" on Justia Law 2013-11-26 state Tennessee Tennessee Supreme Court Holder M2012-00344-SC-R11-CV http://law.justia.com/cases/maryland/court-of-appeals/2013/51-12.html Mathews v. Cassidy Turley Md., Inc. 2013-11-26T09:08:33-08:00 2014-10-01T14:59:31-08:00 After Petitioner sold certain properties, he used the proceeds to purchase fractional interests in commercial office buildings. The fractional interests were called Tenants in Common Interests (TICs), and each of the TICs was promoted by a company called DBSI, Inc. DBSI later filed a petition for bankruptcy, and the properties underlying Petitioner's TICs became the subject of foreclosure proceedings. The bankruptcy court determined that many of DBSI's transactions were fraudulent. Petitioner filed a complaint against Cassidy Turley Maryland (Defendant), under whose advice Petitioner acted in purchasing the TICs, alleging that Defendant failed to disclose material facts regarding the investment. The circuit court granted summary judgment for Defendant. The Court of Appeals affirmed in part and reversed in part, holding (1) Petitioner's investment in this case was a "security" for purposes of the Maryland Securities Act; (2) the circuit court erred in determining that Petitioner's claims under the Act relating to fraud and misrepresentation by Defendant were barred by limitations; (3) the court erred in concluding that Petitioner's common law tort claims were time-barred as a matter of law; and (4) the court did not err in deciding to reserve judgment on the admissibility of a bankruptcy examiner's report until it had further information.View "Mathews v. Cassidy Turley Md., Inc." on Justia Law 2013-11-26 state Maryland Maryland Court of Appeals Robert N. McDonald 51/12 http://law.justia.com/cases/federal/appellate-courts/cadc/12-1241/12-1241-2013-11-26.html Collins v. SEC 2013-11-26T08:02:45-08:00 2014-10-01T14:59:38-08:00 Petitioner sought review of the SEC's imposition of a civil penalty after the Commission found that petitioner failed to supervise a subordinate who violated securities laws. The court upheld the Commission's decision, concluding that the Commission did not abuse its discretion or act arbitrarily or capriciously in imposing the penalty. The court rejected petitioner's claim that the penalty violated the Excessive Fines Clause of the Eighth Amendment.View "Collins v. SEC" on Justia Law 2013-11-26 federal U.S. Court of Appeals for the District of Columbia Circuit Stephen Fain Williams 12-1241 http://law.justia.com/cases/mississippi/supreme-court/2013/2012-ca-00826-sct.html Harrington v. Ofc. of Mississippi Sec'y of State 2013-11-21T12:12:45-08:00 2014-10-01T14:58:22-08:00 The Securities and Charities Division of the Mississippi Secretary of State Office brought charges against Marshall Wolfe and Jack Harrington for securities violations pertaining to their operation of SteadiVest, LLC. The Secretary of State found that Wolfe and Harrington had violated Mississippi securities laws, and fines were levied against them. Wolfe and Harrington appealed, and the Chancery Court affirmed. Wolfe and Harrington then appealed to the Supreme Court. After review of the Circuit and Chancery Court records, the Supreme Court found that the chancellor did not err in affirming the Secretary of State's finding that Wolfe and Harrington had violated Mississippi Code Section 75-71-501. The Secretary of State's decision was supported by substantial evidence, was not arbitrary or capricious, did not go beyond the Secretary of State's power, and did not violate Wolfe's or Harrington's statutory or constitutional rights. However, the Court found the method used to assess penalties against Wolfe and Harrington was improper, and reversed on that issue. View "Harrington v. Ofc. of Mississippi Sec'y of State" on Justia Law 2013-11-21 state Mississippi Supreme Court of Mississippi Josiah D. Coleman 2012-CA-00826-SCT http://law.justia.com/cases/delaware/supreme-court/2013/497-2013-0.html Activision Blizzard, Inc., et al. v. Hayes, et al. 2013-11-18T06:00:58-08:00 2014-10-01T14:56:29-08:00 The issue before the Supreme Court in this case was an interlocutory appeal by the Court of Chancery of a preliminary injunction halting consummation of a stock purchase agreement under which Vivendi, S.A. would have divested itself of its controlling interest in Appellee Activision Blizzard, Inc., and an Activision stockholder. Appellees convinced the trial court that the company's charter required that a majority of the public stockholders vote in favor of the transaction. The relevant provision applied to "any merger, business combination, or similar transaction" involving Vivendi and Activision. The trial court held that Activision's purchase of its own stock would be a business combination because significant value would be transferred to Vivendi in exchange for Activision's acquisition of a newly-formed Vivendi subsidiary that held Vivendi's Activision stock. In October 2013, the Supreme Court reversed, and this opinion set forth the basis for its decision.View "Activision Blizzard, Inc., et al. v. Hayes, et al." on Justia Law 2013-11-15 state Delaware Delaware Supreme Court Carolyn Berger 497, 2013 http://law.justia.com/cases/federal/appellate-courts/ca3/12-4257/12-4257-2013-11-15.html Rahman v. Kid Brands, Inc. 2013-11-15T10:00:19-08:00 2014-10-01T14:56:03-08:00 Rahman filed a securities class action against KB, an importer of infant furniture and products, and individuals, alleging violation of Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 and (2) and Section 20(a) of the Exchange Act. The complaint alleged that defendants misled investors by artificially inflating KB's stock price by issuing deceptive public financial reports and press releases dealing with compliance with customs laws and overall financial performance. A second amended complaint specified failure to disclose product recalls, safety violations, and illegal staffing practices. The district court dismissed for failure to satisfy the heightened scienter pleading standard required by the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b)(2). The Third Circuit affirmed.View "Rahman v. Kid Brands, Inc." on Justia Law 2013-11-15 federal U.S. Court of Appeals for the Third Circuit Morton Ira Greenberg 12-4257 http://law.justia.com/cases/federal/appellate-courts/ca2/11-4904/11-4904-2013-11-08.html CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP 2013-11-08T07:30:10-08:00 2014-10-01T14:54:22-08:00 This appeal stemmed from the collapse of the hedge fund Lipper Convertibles. On appeal, plaintiffs challenged the district court's grant of summary judgment on their federal claims against Lipper Convertibles' auditor, PwC, under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., as well as their state law claims of fraud and negligent misrepresentation. The court concluded that there was a genuine dispute as to whether plaintiffs suffered a direct injury at the time of investment by purchasing their shares in Lipper Convertibles funds at fraudulently inflated prices. Accordingly, the court vacated the district court's grant of summary judgment on the Section 10(b) claims and remanded to the district court to consider in the first instance PwC's scienter argument and for further proceedings. The court affirmed the state law claims.View "CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP" on Justia Law 2013-11-08 federal U.S. Court of Appeals for the Second Circuit Raymond Joseph Lohier, Jr. 11-4904 http://law.justia.com/cases/federal/appellate-courts/ca7/12-3159/12-3159-2013-10-30.html United States v. Pilon 2013-10-30T12:32:30-08:00 2014-10-01T14:50:42-08:00 Through their companies, Pilon and her husband falsely represented that one investment program would generate significant returns that Pilon would use to pay off the investors' mortgages within two years, and make a bonus cash payment to investors. Many investors refinanced mortgages to invest. With respect to another investment program, Pilon falsely represented that money would be invested in a high-yield fund and that investors would receive 100 percent on their investments within about 90 days. Pilon hinted at religious and humanitarian purposes. Pilon paid early investors' mortgages with later investors' money (a Ponzi scheme). About 40 people invested $4,000 to $110,000, losing a total of $967,702. The Illinois Department of Securities ordered Pilon to cease offering investments; she ignored the order. When the scheme unraveled and investors lost their homes, Pilon was indicted for wire fraud. Pilon, a member of a sovereign citizen movement, unsuccessfully moved to dismiss for lack of jurisdiction. Immediately before jury selection, Pilon stated her intent to plead guilty; when the government proffered the facts, Pilon denied everything. After testimony by eight government witnesses, Pilon admitted to the scheme and pleaded guilty. In calculating Pilon's guideline range, the court applied an enhancement for abuse of a position of trust, declined to credit Pilon for acceptance of responsibility, and sentenced Pilon to 78 months' incarceration, in the middle of the range, and imposed $967,702 in restitution. The Seventh Circuit affirmed.View "United States v. Pilon" on Justia Law 2013-10-30 federal U.S. Court of Appeals for the Seventh Circuit Daniel Anthony Manion 12-3159 http://law.justia.com/cases/federal/appellate-courts/ca2/11-3011/11-3011-2013-10-30.html Martin v. U.S. S.E.C. 2013-10-30T07:30:06-08:00 2014-10-01T14:50:40-08:00 The SEC settled an enforcement action against firms that executed trading orders on the New York Stock Exchange and placed the money obtained as a result of the enforcement actions into funds for distribution to injured customers. The SEC ordered the remaining funds to be disbursed to the United States Treasury. On appeal, petitioner, who had filed class actions against the firms, challenged the SEC's disbursement order seeking to invoke the court's statutory jurisdiction under 15 U.S.C. 78y. The court concluded that petitioner failed to plead an injury in fact sufficient to afford it Article III standing. For every Covered Transaction in which petitioner was identified as the injured customer, petitioner had already received a distribution from the Fair Funds that fully compensated it for that Covered Transaction. Accordingly, the court dismissed the petition for lack of subject matter jurisdiction.View "Martin v. U.S. S.E.C." on Justia Law 2013-10-30 federal U.S. Court of Appeals for the Second Circuit 11-3011 http://law.justia.com/cases/maine/supreme-court/2013/2013-me-86.html State v. Philbrook 2013-10-24T08:11:08-08:00 2014-10-01T14:49:30-08:00 After a jury trial, Defendant was convicted of theft by misapplication of property and securities fraud. Defendant appealed, contending that the court's jury instructions impermissibly shifted the burden of proof onto him to prove his innocence. The Supreme Court affirmed, holding that the burden of proof was not improperly shifted onto Defendant to prove his innocence where (1) there was no obvious error in the instructions the trial court gave because, as a whole, the instructions correctly stated the law; and (2) the court correctly stated the State's burden of proof and Defendant's presumption of innocence several times during the jury selection, at the beginning of the trial, in its final instructions, and in its written instructions sent to the jury room. View "State v. Philbrook" on Justia Law 2013-10-24 state Maine Maine Supreme Judicial Court Andrew M. Mead http://law.justia.com/cases/new-york/court-of-appeals/2013/149.html Belzberg v. Verus Invs. Holdings Inc. 2013-10-17T07:05:48-08:00 2014-10-01T14:47:05-08:00 Petitioner and Ajmal Khan, principal of Verus Investment Holdings, purchased securities in a company to arbitrage a merger between that company and another company (the trade). Petitioner and Khal used Verus' account at Jefferies & Co. and Winton Capital Holding to complete the purchase. After the merger, Jefferies wired to Verus the original investment and profits attributable to the Winton funds. Verus wired the investment money to Winton and the profits to Doris Lindbergh, a friend of Petitioner. Tax authorities later informed Jefferies it owed withholding tax on the trade. Pursuant to an arbitration clause in an agreement between Jefferies and Verus, Jefferies commenced an arbitration against Verus for the unpaid taxes. Verus, in turn, asserted thirty-party arbitration claims against Petitioner, Lindbergh, and others for their share of the taxes. After a hearing, Supreme Court determined that nonsignatories Petitioner and Lindbergh could not be compelled to arbitrate. The Appellate Division reversed, concluding that Petitioner should be estopped from avoiding arbitration because he knowingly exploited and received direct benefits from the agreement between Jefferies and Verus. The Court of Appeals reversed, holding that Petitioner did not receive a direct benefit from the arbitration agreement and could not be compelled to arbitrate.View "Belzberg v. Verus Invs. Holdings Inc." on Justia Law 2013-10-17 state New York New York Court of Appeals Jenny Rivera 149 http://law.justia.com/cases/federal/appellate-courts/ca10/11-4182/11-4182-2013-10-04.html SEC v. Thompson 2013-10-04T12:02:01-08:00 2014-10-01T14:44:00-08:00 The issue before the Tenth Circuit in this case stemmed from a civil-enforcement action brought by the Securities and Exchange Commission ("SEC") against Defendant-Appellant Ralph Thompson, Jr., in connection with an alleged Ponzi scheme Thompson ran through his company, Novus Technologies, L.L.C. ("Novus"). The district court granted summary judgment in favor of the SEC on several issues, including the issue of whether the instruments Novus sold investors were "securities." Thompson's single issue on appeal was that the district court ignored genuine disputes of material fact on the issue of whether the Novus instruments were securities, and that he was entitled to have a jury make that determination. After careful consideration, the Tenth Circuit concluded that under the test articulated by the U.S. Supreme Court in "Reves v. Ernst & Young" (494 U.S. 56 (1990)), the district court correctly found that the instruments Thompson sold were securities as a matter of law. View "SEC v. Thompson" on Justia Law 2013-10-04 federal U.S. Court of Appeals for the Tenth Circuit David M. Ebel 11-4182 http://law.justia.com/cases/federal/appellate-courts/ca9/11-17391/11-17391-2013-09-19.html Nuveen Municipal v. City of Alameda 2013-09-19T10:01:09-08:00 2014-10-01T14:39:16-08:00 This appeal stemmed from the City's offering of municipal bonds to finance the development of a cable and Internet system. Nuveen subsequently brought federal and state securities claims against the City, alleging that the City misrepresented the risks to investors. The court concluded that Nuveen has not shown a triable issue of fact on the issue of loss calculation in regards to its federal claims under Section 10b-5 and Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4); the City enjoys statutory immunity from suit on Nuveen's state claims where California courts have applied section 818.8 of California's Government Claims Act to immunize public entities from liability for misrepresentations sanctioned by those entities; and, although the City was entitled to summary judgment, Nuveen had reasonable cause to bring suit and the evidence suffices to establish its good faith. Accordingly, the court affirmed the district court's denial of the City's motion for defense costs, as well as the district court's grant of summary judgment in favor of the City.View "Nuveen Municipal v. City of Alameda" on Justia Law 2013-09-19 federal U.S. Court of Appeals for the Ninth Circuit M. Margaret McKeown 11-17391 11-17496 http://law.justia.com/cases/federal/appellate-courts/ca6/12-6285/12-6285-2013-09-19.html Lukas v. McPeak 2013-09-19T07:01:02-08:00 2014-10-01T14:38:53-08:00 Lukas owns stock in Miller, a publicly owned corporation engaged in production of oil and natural gas. In 2009, Miller announced that it had acquired the "Alaska assets," worth $325 million for only $2.25 million. Miller announced several increases in the value of the Alaska assets over the following months, causing increases in its stock price. In 2010, Miller amended its employment agreement with its CEO (Boruff), substantially increasing his compensation and giving him stock options. The Compensation Committee (McPeak, Stivers, and Gettelfinger) recommended the amendment and the Board, composed of those four and five others, approved it. In 2011 a website published a report claiming that the Alaska assets were worth only $25 to $30 million and offset by $40 million in liabilities. In SEC filings, Miller acknowledged "errors in . . . financial statements" and "computational errors." The stock price decreased., Lukas filed suit against Miller and its Board members, alleging: breach of fiduciary duty and disseminating materially false and misleading information; breach of fiduciary duties for failing to properly manage the company; unjust enrichment; abuse of control; gross mismanagement; and waste of corporate assets. The district court dismissed. The Sixth Circuit affirmed. Lukas brought suit without first making a demand on the Miller Board of Directors to pursue this action, as required by Tennessee law, and did not establish futility.View "Lukas v. McPeak" on Justia Law 2013-09-19 federal U.S. Court of Appeals for the Sixth Circuit R[ansey] Guy Cole, Jr. 12-6285 http://law.justia.com/cases/federal/appellate-courts/ca3/12-3454/12-3454-2013-09-17.html Pension Trust Fund for Operating Eng'rs v. Mortg. Asset Securitization Transactions, Inc. 2013-09-17T09:30:13-08:00 2014-10-01T14:38:19-08:00 Mortgage-backed securities, known as the MASTR Pass-Through Certificates, Series 2007-3, were offered to the public in 2007. UBS, the sponsor of the Certificates, purchased the underlying loans from originators, including Countrywide Home Loans and IndyMac Bank, then sold the loans to MASTR, which placed the loans into the MASTR Adjustable Rate Mortgages Trust, the issuer of the Certificates. UBS Securities, the underwriter, sold the Certificates to investors. The Certificates were issued pursuant to a Securities and Exchange Commission (SEC) Form S-3 Registration Statement filed in 2005 and an SEC Form 424B5 Prospectus Supplement filed in 2007. Those documents assured investors that the underlying loans were originated pursuant to particular underwriting policies and in compliance with federal and state laws and regulations. The district court dismissed a purported class action by investors, alleging violations of the Securities Act of 1933, 15 U.S.C. 77, for failure to plead compliance with the one-year statute of limitations and dismissed an amended complaint as untimely under an inquiry notice standard. The Third Circuit affirmed, holding that a Securities Act plaintiff need not plead compliance with Section 13 and that Section 13 establishes a discovery standard for evaluating the timeliness of Securities Act claims, but the claims were, nonetheless, untimely. View "Pension Trust Fund for Operating Eng'rs v. Mortg. Asset Securitization Transactions, Inc." on Justia Law 2013-09-17 federal U.S. Court of Appeals for the Third Circuit D. Michael Fisher 12-3454 http://law.justia.com/cases/federal/appellate-courts/ca2/12-156/12-156-2013-09-16.html Trezziova v. Kohn 2013-09-16T07:30:07-08:00 2014-10-01T14:38:07-08:00 Plaintiffs alleged that various foreign investment vehicles secretly funneled investors' assets to Madoff Securities. The district court granted defendants' motion to dismiss plaintiffs' claims against JPMorgan and BNY on the ground that the claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 78bb(f), and, alternatively, by New York's Martin Act, N.Y. Gen. Bus. Law 352 et seq. In this instance, the allegations were more than sufficient to satisfy SLUSA's requirement that the complaint alleged a "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." Accordingly, the court affirmed the judgment, concluding that plaintiffs' claims against JPMorgan and BNY were properly dismissed as precluded by SLUSA.View "Trezziova v. Kohn" on Justia Law 2013-09-16 federal U.S. Court of Appeals for the Second Circuit Rakoff 12-156