text: Securities Law - Justia Case Law Summaries http://law.justia.com/summaryfeed/securities-law/ 2017-02-19T13:01:27-08:00 Justia Inc http://www.justia.com/ Justia Law https://justatic.com/v/20170214172127/shared/images/social-media/law.png Copyright 2014 Justia Inc http://law.justia.com/cases/california/court-of-appeal/2017/h043360.html People v. Black 2017-02-16T10:30:56-08:00 2017-02-16T11:18:56-08:00 Black called Knarr to suggest a real estate investment. Knarr gave Black $124,456, documented by a May 2006 promissory note. Knarr testified that he would not have invested without a promised 10 percent return if sale or development of the property failed. The parties modified the note in May 2007 to reflect Knarr's additional investment of $155,474 and extended the maturity date of the note several times, through mid-January 2012. Knarr obtained information inconsistent with what Black had told him and asked Black for his money. Receiving no response, Knarr initiated an investigation. In 2013, Black was charged with five counts (there were other investors) of using false statements in the offer or sale of a security (Corp. Code, 25401, 25540(b)). The trial court set aside two counts, finding that the note was not a security. The court of appeals affirmed, holding that the promissory notes offered for Knarr's investment in the real estate development scheme were not securities within the meaning of the Corporate Securities Law. The evidence of other investors was insufficient to meet the public offering prong of the risk-capital test and there was insufficient evidence that Knarr was "led to expect profits solely from the efforts of the promoter." View "People v. Black" on Justia Law 2017-02-16 state California California Court of Appeal Eugene M. Premo H043360 http://law.justia.com/cases/federal/appellate-courts/ca9/13-73199/13-73199-2017-02-02.html Sharemaster v. SEC 2017-02-01T14:31:02-08:00 2017-02-01T20:21:03-08:00 Sharemaster filed an application for Commission review of FINRA's final disciplinary sanction. The Commission dismissed Sharemaster's application for review, finding that it lacked jurisdiction over the matter under Section 19(d) of the Securities and Exchange Act, 15 U.S.C. 78s(d)(2), because there was no longer a live sanction for it to act upon after FINRA lifted the suspension. The court held that the Commission's interpretation of Section 19(d)(2) as limiting its review authority to final disciplinary sanctions that remain live is entitled to Chevron deference. However, the court held that the Commission unreasonably decided that the monetary penalty that FINRA imposed on Sharemaster was not a sanction and thus not a live disciplinary sanction. Accordingly, the court granted the petition for review. The court remanded to the Commission to determine whether, if Sharemaster prevails on the merits of its argument regarding the applicability of a registered-accountant requirement, the Commission may direct FINRA to reinstate Sharemaster nunc pro tunc. View "Sharemaster v. SEC" on Justia Law 2017-02-02 federal U.S. Court of Appeals for the Ninth Circuit Consuelo Maria Callahan 13-73199 http://law.justia.com/cases/federal/appellate-courts/ca1/16-1122/16-1122-2017-01-20.html Ortiz-Espinosa v. BBVA Securities of Puerto Rico, Inc. 2017-01-23T12:30:03-08:00 2017-01-24T14:01:51-08:00 Appellants sought arbitration with BBVA Securities of Puerto Rico, Inc. and one of its securities brokers, asserting several claims under both federal and Puerto Rico law. An arbitration panel issued an award denying Appellants' claims. Appellants then filed a complaint in the Puerto Rico Court of First Instance requesting that the court vacate or modify the arbitration award, seeking relief under the Puerto Rico Arbitration Act. Defendants removed the case to the U.S. District Court of the District of Puerto Rico, arguing that the district court had federal question jurisdiction and also had supplemental jurisdiction over the state law claims. Appellants moved to remand the case to Puerto Rico state court for lack of jurisdiction. The district court denied the motion after applying the look-through approach and determining that the underlying statement of claim alleged federal claims. The district court subsequently confirmed the award. The First Circuit affirmed, holding (1) the look-through approach was the correct test in this case; (2) federal jurisdiction existed; and (3) the district court did not err in refusing to vacate the award and in confirming it. View "Ortiz-Espinosa v. BBVA Securities of Puerto Rico, Inc." on Justia Law 2017-01-20 federal U.S. Court of Appeals for the First Circuit Dyk 16-1122 http://law.justia.com/cases/federal/appellate-courts/ca7/13-2609/13-2609-2017-01-23.html Holtz v. J.P. Morgan Chase Bank, N.A. 2017-01-23T08:30:43-08:00 2017-01-23T10:59:44-08:00 JPMorgan offers to manage clients' securities portfolios. Its affiliates sponsor mutual funds in which the funds can be placed. Plaintiffs in a putative class action under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2), alleged that customers invested in these mutual funds believing that, when recommending them as suitable vehicles, JPMorgan acts in clients' best interests (as its website proclaims), while JPMorgan actually gives employees incentives to place clients' money in its own mutual funds, even when those funds have higher fees or lower returns than third-party funds. The Seventh Circuit affirmed dismissal under the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which requires the district court to dismiss any "covered class action" in which the plaintiff alleges "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." Under SLUSA, securities claims that depend on the nondisclosure of material facts must proceed under the federal securities laws exclusively. The claims were framed entirely under state contract and fiduciary principles, but necessarily rest on the "omission of a material fact," the assertion that JPMorgan concealed the incentives it gave its employees. View "Holtz v. J.P. Morgan Chase Bank, N.A." on Justia Law 2017-01-23 federal U.S. Court of Appeals for the Seventh Circuit Frank Hoover Easterbrook 13-2609 http://law.justia.com/cases/federal/appellate-courts/ca7/11-2989/11-2989-2017-01-23.html Goldberg v. Bank of America, N.A. 2017-01-23T08:30:41-08:00 2017-01-23T10:36:36-08:00 If a LaSalle Bank custodial account had a cash balance at the end of a day, the cash would be invested in (swept into) a mutual fund chosen by the client. The Trust had a custodial account with a sweeps feature. After LaSalle was acquired by Bank of America, clients were notified that a particular fee was being eliminated. The trustee, who had not known about the fee, brought a putative class action in state court, claiming breach of the contract (which did not mention this fee) and violation of fiduciary duties. The bank removed the suit to federal court, relying on the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which authorizes removal of any "covered class action" in which the plaintiff alleges "a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." The statute requires that such state‑law claims be dismissed. The district court held that the suit fit the standards for removal and dismissal. The Seventh Circuit affirmed. The complaint alleged a material omission in connection with sweeps to mutual funds that are covered securities; no more is needed. The Trust may have had a good claim under federal securities law, but chose not to pursue it; the Act prohibits use of a state-law theory. View "Goldberg v. Bank of America, N.A." on Justia Law 2017-01-23 federal U.S. Court of Appeals for the Seventh Circuit Per Curiam 11-2989 http://law.justia.com/cases/federal/appellate-courts/ca9/14-16433/14-16433-2017-01-19.html Retail Wholesale Union v. Hewlett-Packard Co. 2017-01-19T10:02:06-08:00 2017-01-19T18:32:00-08:00 HP shareholders filed a putative class action alleging violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. At issue is whether shareholders may bring a claim for securities fraud when a CEO and Chairman violates the corporate code of ethics after publicly touting the business's high standards for ethics and compliance. The court held that Retail Wholesale, lead plaintiff in the putative class action, has failed to state a claim under the Act. The court explained that Retail Wholesale's fraud allegations must satisfy the particularity standard of Federal Rule of Civil Procedure 9(b), as well as the heightened pleading standard for securities fraud created by the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u–4. In this case, the court concluded that there were no material misrepresentations or actionable material omissions. Further, even if the complaint adequately alleged the existence of a misrepresentation or a misleading omission, it would not have been actionable, as it was immaterial. Accordingly, the court affirmed the district court's dismissal of the action. View "Retail Wholesale Union v. Hewlett-Packard Co." on Justia Law 2017-01-19 federal U.S. Court of Appeals for the Ninth Circuit Christensen 14-16433 http://law.justia.com/cases/federal/appellate-courts/cadc/14-1070/14-1070-2017-01-17.html Bartko v. SEC 2017-01-17T07:31:22-08:00 2017-01-17T17:45:12-08:00 After petitioner was convicted of conspiracy, selling unregistered securities, and mail fraud, the SEC barred petitioner from associating with six classes of securities market participants. The court agreed with petitioner's argument that the Commissioner's imposition of Dodd-Frank's collateral ban constitutes an impermissibly retroactive penalty because it is premised on pre-Dodd-Frank misconduct. See Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111–203, 124 Stat. 1376 (2010). Therefore, the Commission abused its discretion in barring petitioner from associating with the investment adviser, municipal securities dealer and transfer agent classes because those bars are impermissibly retroactive, and the court granted that portion of the petition. The court rejected petitioner's "unclean hands" argument and denied the remainder of the petition. View "Bartko v. SEC" on Justia Law 2017-01-17 federal U.S. Court of Appeals for the District of Columbia Circuit Henderson 14-1070 http://law.justia.com/cases/federal/appellate-courts/ca2/15-2124/15-2124-2017-01-17.html Marblegate Asset Management v. Education Management Finance Corp. 2017-01-17T07:30:04-08:00 2017-01-17T18:17:04-08:00 EDMC challenges the district court's holding that a series of transactions meant to restructure EDMC's debt over the objections of certain noteholders violated Section 316(b) of the Trust Indenture Act of 1939, 15 U.S.C. 77ppp(b). The district court ordered EDMC to continue to guarantee Marblegate's notes and pay them in full. The court agreed with EDMC that EDMC complied with Section 316(b) because the transactions did not formally amend the payment terms of the indenture that governed the notes. The court concluded that Section 316(b) prohibits only non‐consensual amendments to an indenture's core payment terms. Accordingly, the court vacated the district court's judgment and remanded for further proceedings. View "Marblegate Asset Management v. Education Management Finance Corp." on Justia Law 2017-01-17 federal U.S. Court of Appeals for the Second Circuit Raymond Joseph Lohier, Jr. 15-2124 http://law.justia.com/cases/federal/appellate-courts/ca1/15-1544/15-1544-2017-01-09.html Ganem v. InVivo Therapeutics Holdings Corp. 2017-01-09T12:30:08-08:00 2017-01-09T21:19:54-08:00 After the share price of a corporation's common stock dropped, investors filed suit against the corporation and its former CEO, alleging securities fraud. The lead plaintiff, on behalf of himself and a putative class of shareholders, alleged that Defendants inflated the value of the corporation's common stock by issuing false or materially misleading press releases concerning the approval of human clinical trials for a new medical device the company was developing. The district court granted Defendants' motion to dismiss the complaint. The First Circuit affirmed, holding that Plaintiff failed to allege false or misleading statements sufficient to state a claim and that Plaintiff's control person claim against the CEO was also properly dismissed. View "Ganem v. InVivo Therapeutics Holdings Corp." on Justia Law 2017-01-09 federal U.S. Court of Appeals for the First Circuit Kermit Victor Lipez 15-1544 http://law.justia.com/cases/federal/appellate-courts/ca8/15-3468/15-3468-2016-12-28.html West Virginia Pipe Trades v. Medtronic, Inc. 2016-12-28T08:30:52-08:00 2016-12-28T18:24:26-08:00 Appellants, retirement and investments funds, challenge the district court's grant of summary judgment to Medtronic on their securities fraud class action. Appellants alleged a number of securities laws violations related to Medtronic's INFUSE product, including making false statements and employing a scheme to defraud the market. Section 10b of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), makes illegal the use of a manipulative or deceptive device in connection with the sale or purchase of a security by any instrumentality of interstate commerce. 17 C.F.R. 240.10b-5. Scheme liability concerns the use of "any device, scheme, or artifice to defraud" and "any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security." 17 C.F.R. 240.10b-5(a), (c). In this case, because Appellants could not have discovered with reasonable diligence sufficient information to plead scienter with the particularity necessary to survive a motion to dismiss prior to June 27, 2011, Appellants brought their complaint within the two-year statute of limitations. The court rejected Medtronic's argument that Appellants' scheme liability claim is barred as a matter of law by Janus Capital Group, Inc., and Stoneridge Investment Partners, LLC. Accordingly, the court affirmed the judgment. View "West Virginia Pipe Trades v. Medtronic, Inc." on Justia Law 2016-12-28 federal U.S. Court of Appeals for the Eighth Circuit Raymond W. Gruender 15-3468 http://law.justia.com/cases/federal/appellate-courts/ca9/14-17106/14-17106-2016-12-21.html Rainero v. Archon Corp. 2016-12-21T10:06:46-08:00 2016-12-21T20:02:10-08:00 Plaintiff filed suit against Archon, alleging breach of contract stemming from Archon's issuance of a Notice of Redemption to holders of outstanding shares of preferred stock. The court concluded that the district court properly held that it lacked federal question subject matter jurisdiction under 28 U.S.C. 1331 because plaintiff did not assert a federal claim, and the Securities Litigation Uniform Standards Act, 15 U.S.C. 77p(d)(1)(A), does not provide an independent basis for federal question jurisdiction over plaintiff's state-law claim. The court also concluded that it lacked diversity jurisdiction over the class action suit under section 1332(d)(2) because of the exception provided in section 1332(d)(9)(C). Finally, the court concluded that the district court properly held that it lacked diversity jurisdiction over plaintiff's individual claim under section 1332(a) and therefore could not exercise section 1367 supplemental jurisdiction over the class members' claims. Accordingly, the court affirmed the district court's dismissal of the complaint. View "Rainero v. Archon Corp." on Justia Law 2016-12-21 federal U.S. Court of Appeals for the Ninth Circuit Sidney Runyan Thomas 14-17106 http://law.justia.com/cases/federal/appellate-courts/ca4/16-1497/16-1497-2016-12-20.html Scottsdale Capital Advisors v. FINRA 2016-12-20T12:31:59-08:00 2016-12-20T15:59:26-08:00 Scottsdale are respondents in an ongoing disciplinary proceeding before FINRA for allegedly selling unregistered securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e, and FINRA Rule 2010. Scottsdale sought an injunction in federal district court before FINRA completed its proceedings, claiming the FINRA proceeding is unauthorized because FINRA may only discipline members for violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The district court dismissed for lack of subject-matter jurisdiction. Because Scottsdale can obtain meaningful judicial review of its claim in this court following the appeal process outlined in the Exchange Act, the court held that its challenge to FINRA's authority is the type of claim Congress intended to be reviewed within the statutory scheme. Therefore, the court concluded that the district court properly dismissed for lack of subject-matter jurisdiction and affirmed the judgment. View "Scottsdale Capital Advisors v. FINRA" on Justia Law 2016-12-20 federal U.S. Court of Appeals for the Fourth Circuit Allyson Kay Duncan 16-1497 http://law.justia.com/cases/federal/appellate-courts/ca4/15-2584/15-2584-2016-12-16.html Bennett v. U.S. Securities & Exchange Commission 2016-12-16T11:30:44-08:00 2016-12-17T14:20:53-08:00 In 2015, the Securities and Exchange Commission instituted an administrative proceeding against Dawn Bennett and her law firm (collectively, Bennett) to determine whether Bennett had violated the anti-fraud provisions of the federal securities laws. The Commission assigned the initial stages of the proceeding to an ALJ, and the ALJ scheduled a hearing on the merits of Bennett's case. Bennett subsequently filed suit challenging the constitutionality of the administrative enforcement proceeding. Specifically, the Complaint alleged that the SEC's administrative enforcement proceedings violated Article II of the United States Constitution. The district court dismissed the suit on jurisdictional grounds. The Fourth Circuit affirmed, holding that Congress has impliedly divested district-court jurisdiction over the agency action. View "Bennett v. U.S. Securities & Exchange Commission" on Justia Law 2016-12-16 federal U.S. Court of Appeals for the Fourth Circuit Allyson Kay Duncan 15-2584 http://law.justia.com/cases/federal/appellate-courts/ca11/16-10324/16-10324-2016-12-15.html Hotz v. Galectin Therapeutics, Inc. 2016-12-15T13:31:34-08:00 2016-12-15T20:14:54-08:00 In February 2014, appellant-plaintiff Glynn Hotz purchased 16,000 shares of appellee-defendant Galectin Therapeutics, Inc. ("Galectin"), a small biopharmaceutical company headquartered in Norcross, Georgia. The price for Galectin common stock was $17.90 per share. In July 2014, news outlets began to report that Galectin had paid promotional firms to write flattering articles about Galectin and to "tout" Galectin's stock price. Days later, Galectin's stock price crashed, losing over half its value, falling from a price of $15.91 per share to $7.10 per share in one day. After suffering stock losses, Hotz filed a consolidated class action complaint against Galectin in May 2015. Hotz appealed the district court's Rule 12(b)(6) dismissal of his complaint for failure to state a claim. Hotz argued: (1) that Galectin made material misstatements and omissions of fact by not disclosing that it had paid the promotional firms to tout Galectin stock; and (2) that certain Galectin officers and directors were liable for the company's actions in their personal capacity as "controlling persons" of Galectin under section 20(a) of the Exchange Act. After thorough review, and with the benefit of oral argument, the Eleventh Circuit found no reversible error and affirmed. View "Hotz v. Galectin Therapeutics, Inc." on Justia Law 2016-12-15 federal U.S. Court of Appeals for the Eleventh Circuit Hull 16-10324 http://law.justia.com/cases/federal/appellate-courts/ca10/15-1389/15-1389-2016-12-13.html Avenue Capital Management II, v. Schaden 2016-12-13T10:06:19-08:00 2016-12-13T13:26:43-08:00 The complaint and referenced documents show that Quiznos fast-food franchise had borrowed heavily before its business sharply declined. From 2007 to 2011, Quiznos lost roughly 3,000 franchise restaurants and profitability plunged. With this plunge, Quiznos could no longer satisfy its loan covenants. As a result, Avenue Capital Management II, L.P., "Fortress" (a collective of investment entities) and others could foreclose on collateral, call in debt, or accelerate payments. To avoid a calamity, Quiznos restructured its debt. This securities-fraud matter arose out of the attempt to restructure that debt. Multiple investment funds purchased equity in Quiznos, and despite efforts, Avenue and Fortress sued former Quiznos managers and officers, claiming they had fraudulently misrepresented Quiznos' financial condition. The district court dismissed the causes of action based on securities fraud based on a failure to state a valid claim. Finding no reversible error in that dismissal, the Tenth Circuit affirmed the district court's decision. View "Avenue Capital Management II, v. Schaden" on Justia Law 2016-12-13 federal U.S. Court of Appeals for the Tenth Circuit Robert Edwin Bacharach 15-1389 http://law.justia.com/cases/federal/appellate-courts/ca2/15-3124/15-3124-2016-12-08.html Trustees of the Upstate New York Engineers Pension Fund v. Ivy Asset Management 2016-12-08T07:30:13-08:00 2016-12-08T18:21:47-08:00 Plaintiffs, trustees of an Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., pension fund, filed suit against its investment manager and principals alleging that defendants knew by 1998 that investing with Bernard L. Madoff Investment Securities LLC (BLMIS) was imprudent; that these defendants breached their fiduciary duty by failing to warn the fund of this fact; that if warned, the fund would have withdrawn the full sum appearing on its 1998 BLMIS account statements; and that prudent alternative investment of that sum would have earned more than the fund's actual net withdrawals from its BLMIS account between 1999 and 2008. Plaintiffs also filed suit against Bank of New York Mellon Corporation, which acquired the investment manager in 2000, alleging that it knowingly participated as a non‐fiduciary in the fiduciary breach. The district court dismissed the complaint for failure to state a claim under Rule 12(b)(6) and for failure to allege an actual injury sufficient to establish Article III standing under Rule 12(b)(1). The court concluded that plaintiffs failed to allege facts sufficient to show Article III standing where plaintiffs have not plausibly alleged losses in excess of their profits; the increase in pension funds does not constitute a cognizable loss; the court rejected plaintiffs' claim of disgorgement of Simon and Wohl; and the complaint fails to state a claim against BNY Mellon for participation in a breach of fiduciary duty by Ivy, Simon, and Wohl. Accordingly, the court affirmed the judgment. View "Trustees of the Upstate New York Engineers Pension Fund v. Ivy Asset Management" on Justia Law 2016-12-08 federal U.S. Court of Appeals for the Second Circuit Dennis G. Jacobs 15-3124 http://law.justia.com/cases/federal/us/580/15-628/ Salman v. United States 2016-12-06T07:30:23-08:00 2016-12-06T08:09:14-08:00 Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b–5 prohibit undisclosed trading on inside corporate information by persons bound by a duty not to exploit that information for their personal advantage. These persons are also forbidden from tipping inside information to others for trading. The Supreme Court has held (Dirks) that tippee liability hinges on whether the tipper disclosed the information for a personal benefit; personal benefit may be inferred where the tipper receives something of value in exchange for the tip or "makes a gift of confidential information to a trading relative or friend." Salman was convicted for trading on inside information he received from Kara, who had received the information from his brother, Maher, a former investment banker at Citigroup. Maher testified that he expected his brother to trade on the information. Kara testified that Salman knew the information was from Maher. While Salman's appeal was pending, the Second Circuit decided that personal benefit to the tipper may not be inferred from a gift of confidential information to a trading relative or friend, unless there is "proof of a meaningfully close personal relationship … that generates an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similarly valuable nature." The Ninth Circuit declined to follow the Second Circuit. A unanimous Supreme Court affirmed. When an insider gives a trading relative or friend confidential information, the situation resembles trading by the insider himself followed by a gift of the profits to the recipient. Maher breached his duty to Citigroup and its clients—a duty acquired and breached by Salman when he traded on the information, knowing that it had been improperly disclosed. View "Salman v. United States" on Justia Law 2016-12-06 federal U.S. Supreme Court Samuel A. Alito, Jr. 15-628 http://law.justia.com/cases/federal/appellate-courts/ca2/14-2301/14-2301-2016-12-06.html SEC v. Sourlis 2016-12-06T07:30:07-08:00 2016-12-06T20:03:51-08:00 In these consolidated appeals, defendant Virginia K. Sourlis challenges the district court's judgment in an enforcement action brought by the SEC in connection with public offerings of unregistered shares of stock of defendant Greenstone. The district court granted a motion by the SEC for summary judgment on issues of liability, holding Sourlis--an attorney who wrote a January 11, 2006 opinion letter ("Sourlis Letter") relating to one of the offerings--liable for violating section 5 of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. 77e; violating 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5; and aiding and abetting violations of section 10(b) and Rule 10b-5, in violation of section 20(e) of the Exchange Act, 15 U.S.C. 78t(e). The Superseding Final Judgment orders Sourlis to pay a total of $57,284.83 as a civil penalty, disgorgement, and prejudgment interest, and permanently bars her from participating in so-called "penny stock" offerings. The court found no error in the district court's determinations of liability and no abuse of discretion in its remedial order. Accordingly, the court affirmed the judgment in Nos. 14-2301 and 15-3978. The court dismissed as moot the SEC's cross-appeal in No. 14-2937. View "SEC v. Sourlis" on Justia Law 2016-12-06 federal U.S. Court of Appeals for the Second Circuit Amalya Lyle Kearse 14-2301 15-3978 14-2937 http://law.justia.com/cases/federal/appellate-courts/ca2/13-3191/13-3191-2016-12-06.html SEC v. Frohling 2016-12-06T07:30:06-08:00 2016-12-06T20:03:49-08:00 Defendant John B. Frohling appeals the district court's judgment in an enforcement action brought by the SEC in connection with public offerings of unregistered shares of stock of defendant Greenstone. The district court granted a motion by the SEC for summary judgment on issues of liability, holding Frohling--who as Greenstone's securities counsel in 2006-2008 wrote, approved, or concurred in 11 opinion letters relating to all of the relevant offerings--liable for violating section 17(a) of the Securities Act of 1933 ("Securities Act"), 15 U.S.C. 77q(a); section 5 of the Securities Act, 15 U.S.C. 77e; and section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5. The Superseding Final Judgment orders Frohling to pay a total of $204,161.86 as a civil penalty, disgorgement, and prejudgment interest, and permanently bars him from participating in so-called "penny stock" offerings. The court found no basis for reversal and affirmed the judgment. View "SEC v. Frohling" on Justia Law 2016-12-06 federal U.S. Court of Appeals for the Second Circuit Amalya Lyle Kearse 13-3191 http://law.justia.com/cases/federal/appellate-courts/ca1/15-1491/15-1491-2016-11-28.html Bradley v. ARIAD Pharmaceuticals, Inc. 2016-11-28T13:00:15-08:00 2016-11-28T19:52:16-08:00 Following a drop in the share price of ARIAD Pharmaceuticals, Inc., investors filed suit against the corporation and four corporate officers (collectively, ARIAD). Plaintiffs alleged securities fraud in violation of the Securities Exchange Act and raised claims under sections 11 and 15 of the Securities Act against ARIAD, its directors, and various underwriters involved in the corporation's January 2013 common stock offering. On Defendants' motion, the district court dismissed the complaint in its entirety. The First Circuit (1) affirmed the district court's dismissal of the securities fraud counts except with respect to one particular material misstatement for which the Court found the allegations set forth in the complaint sufficient to state a claim; and (2) affirmed the disposition of Plaintiffs' claims under Sections 11 and 15. Remanded. View "Bradley v. ARIAD Pharmaceuticals, Inc." on Justia Law 2016-11-28 federal U.S. Court of Appeals for the First Circuit Jeffrey R. Howard 15-1491 http://law.justia.com/cases/federal/appellate-courts/ca1/15-1945/15-1945-2016-11-21.html Tutor Perini Corp. v. Banc of America Securities LLC 2016-11-21T13:00:06-08:00 2016-11-21T20:32:00-08:00 Tutor Perini Corporation, a giant construction company, sued Banc of America Securities LLC (BAS) and Bank of America, N.A. (BANA), alleging that BAS, acting as its broker-dealer and with BANA's knowledge and acquiescence, sold Tutor Perini auction-rate securities (ARS) without disclosing that the ARS market was heading for a crash. Tutor Perini filed suit in Massachusetts's federal district court, alleging securities fraud under state and federal law and several other state-law claims. BAS and BANA moved for summary judgment on all claims, claiming that BAS actually disclosed the risks that later materialized. The district court granted BAS and BANA's motion. The First Circuit (1) vacated the summary judgment for BAS on the state securities-fraud claim, the federal securities-fraud claim, the state negligent-misrepresentation claim, and the state unfair-business-practices claim, holding that genuine issues of material fact existed as to these claims; and (2) affirmed in all other respects. Remanded. View "Tutor Perini Corp. v. Banc of America Securities LLC" on Justia Law 2016-11-21 federal U.S. Court of Appeals for the First Circuit Ojetta Rogeriee Thompson 15-1945 http://law.justia.com/cases/federal/appellate-courts/ca2/14-3800/14-3800-2016-11-03.html Lowinger v. Morgan Stanley 2016-11-03T06:00:05-08:00 2016-11-03T12:32:35-08:00 Plaintiff filed suit alleging claims under the Securities Exchange Act of 1934, 15 U.S.C. 78p(b), against, inter alia, Lead Underwriters. Plaintiff sought to hold Lead Underwriters liable under Section 16(b) for disgorgement of short-swing profits received in connection with their sales and purchases of shares in the course of Facebook, Inc.'s initial public offering (IPO). The district court dismissed the complaint on the grounds that the lock-up agreements alone did not render the Lead Underwriters beneficial owners of the aggregated shares held by the Shareholders under Section 13(d). The court agreed that this standard form lock-up agreement is insufficient, on its own, to establish a group under Section 13(d). Accordingly, the court affirmed the judgment. View "Lowinger v. Morgan Stanley" on Justia Law 2016-11-03 federal U.S. Court of Appeals for the Second Circuit Ralph K. Winter, Jr. 14-3800 http://law.justia.com/cases/new-york/court-of-appeals/2016/155.html Justinian Capital SPC v. WestLB AG 2016-10-27T06:02:56-08:00 2016-10-27T10:39:59-08:00 New York's champerty law prohibits the purchase of notes, securities, or other instruments or claims with the intent and for the primary purpose of bringing a lawsuit. Appellant brought this action against Respondents alleging that Respondents' fraud and malfeasance in managing two investment vehicles caused a significant decline in the value of notes purchased by a nonparty, from whom Plaintiff acquired the notes days before it commenced this action. Respondents raised the affirmative defense of champerty, arguing that Plaintiff's acquisition of the Notes was champertous under Judiciary Law 489. Supreme Court dismissed the complaint, concluding that Plaintiff's acquisition of the notes from the nonparty was champertous and that Plaintiff was not entitled to the protection of the champerty safe harbor of Judiciary Law 489(2). The Court of Appeals affirmed, holding (1) Plaintiff's acquisition of the notes was champertous; and (2) Plaintiff was not entitled to the proaction of the safe harbor provision. View "Justinian Capital SPC v. WestLB AG" on Justia Law 2016-10-27 state New York New York Court of Appeals DiFiore 155 http://law.justia.com/cases/federal/appellate-courts/ca9/14-55633/14-55633-2016-10-26.html Schwartz v. Arena Pharmaceuticals, Inc. 2016-10-26T09:05:35-08:00 2016-10-26T16:25:18-08:00 Plaintiff filed a putative securities class action against defendants in connection with public statements made about Arena's weight-loss drug, lorcaserin. When Arena filed its application with the FDA, the FDA's advisory panel published a briefing document that disclosed, for the first time, that Arena had been in a "highly unusual" back-and-forth with the FDA regarding the results of cancer studies on rats (the "Rat Study"). Plaintiff filed suit after news of the Rat Study broke. The district court dismissed the First, Second, and Proposed Third Amended Complaints. The court agreed that once defendants touted the safety and likely approval of the drug based on animal studies, defendants were obligated to disclose the Rat Study's existence to the market. The court concluded that plaintiff has alleged scienter with sufficient particularity to survive a motion to dismiss. In this case, there is no question that plaintiff has alleged that defendants knew that the Rat Study existed, that defendants knew that the FDA's request for bi-monthly reports and follow-up studies was highly unusual and out-of-process, and defendants went ahead and told investors about their confidence in lorcaserin's approval based on preclinical animal studies. Therefore, the court concluded that plaintiff has properly pleaded scienter under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4. The court reversed and remanded. View "Schwartz v. Arena Pharmaceuticals, Inc." on Justia Law 2016-10-26 federal U.S. Court of Appeals for the Ninth Circuit Jay S. Bybee 14-55633 http://law.justia.com/cases/federal/appellate-courts/ca1/15-2250/15-2250-2016-10-03.html Local No. 8 IBEW Retirement Plan & Trust v. Vertex Pharm., Inc. 2016-10-03T12:30:03-08:00 2016-10-03T19:54:46-08:00 Following an announcement that overstated the positive interim results from clinical trials for an experimental drug combination intended to treat a fatal lung disease, Vertex Pharmaceuticals, Inc.'s stock price rose from $37.41 per share to $64.85 three weeks later. After Vertex corrected the initial release's overstatement, the stock price dropped to $57.80. Local No. 8 IBEW Retirement Plan & Trust filed a class action complaint against Vertex and six past and current Vertex employees on behalf of those who acquired Vertex stock during the period in which the overstatement stood uncorrected, charging Defendants with securities fraud under the Securities Exchange Act of 1934. Defendants moved to dismiss for failure to state a claim. The district court dismissed the complaint, concluding that it failed to create a strong inference that Defendants acted with the mental state required to render them liable under the Act. The First Circuit affirmed, holding that the allegations in the complaint that Defendants acted with scienter fell short of what Congress demands in the securities fraud context. View "Local No. 8 IBEW Retirement Plan & Trust v. Vertex Pharm., Inc." on Justia Law 2016-10-03 federal U.S. Court of Appeals for the First Circuit William Joseph Kayatta, Jr. 15-2250 http://law.justia.com/cases/federal/appellate-courts/ca2/15-180/15-180-2016-09-27.html In re Vivendi, S.A. Secs. Litig. 2016-09-27T06:30:07-08:00 2016-09-27T11:58:30-08:00 Plaintiffs, investors in Vivendi's stock during the relevant time period, filed a class action suit against Vivendi, alleging that Vivendi's persistently optimistic representations during the relevant period constituted securities fraud under section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78j(b), as well as the Securities Exchange Commission's (SEC) Rule 10b–5 (Rule 10b–5) promulgated thereunder, 17 C.F.R. 240.10b–5. The court affirmed as to Vivendi's claims on appeal, concluding that: (1) plaintiffs relied on specifically identified false or misleading statements at trial and thus, contrary to Vivendi's argument on appeal, did not fail to present an actionable claim of securities fraud; (2) Vivendi's claim that certain statements constituted non‐actionable statements of opinion is not preserved for appellate review; (3) Vivendi's claims that certain statements constituted non‐actionable puffery and that others fall under the Private Securities Law Reform Act's safe harbor provision for "forward‐looking statements," see 15 U.S.C. 78u‐5(c), is without merit; (4) the evidence was sufficient to support the jury's determination that the fifty‐six statements at issue here were materially false or misleading with respect to Vivendi's liquidity risk; (5) the district court did not abuse its discretion in admitting the testimony of plaintiffs' expert, Dr. Blaine Nye; and (6) the evidence was sufficient to support the jury's finding as to loss causation. As to plaintiffs' cross-appeal, the court affirmed and concluded that the district court did not abuse its discretion in excluding certain foreign shareholders from the class at the class certification stage; and did not err in dismissing claims by American purchasers of ordinary shares under Morrison v. Nat'l Austl. Bank Ltd. View "In re Vivendi, S.A. Secs. Litig." on Justia Law 2016-09-27 federal U.S. Court of Appeals for the Second Circuit Debra Ann Livingston 15-180 http://law.justia.com/cases/federal/appellate-courts/ca2/13-1194/13-1194-2016-09-27.html GAMCO v. Vivendi 2016-09-27T06:30:06-08:00 2016-09-27T11:58:28-08:00 This appeal stems from the same set of underlying facts as those in In re Vivendi S.A. Securities Litigation, Nos. 15‐180‐cv(L), 15‐208‐cv(XAP), in which the court today issued a separate opinion. GAMCO, so-called "value investors," filed a securities fraud action against Vivendi under section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78j(b), as well as the Securities Exchange Commission's (SEC) Rule 10b–5 (Rule 10b–5) promulgated thereunder, 17 C.F.R. 240.10b–5. The district court subsequently entered judgment for Vivendi. The court concluded that the record supports the district court's conclusion that, if GAMCO had known of the liquidity problems and their concealment, GAMCO would still have believed Vivendi's PMV to be "materially higher" than the public market price. The court also concluded that it was also not clearly erroneous for the district court to conclude that knowledge of Vivendi's liquidity problems would not have changed GAMCO's belief that a catalyst was likely — i.e., its belief that the market price would rise towards the PMV, if not immediately, then over the course of the next several years. In this case, the record at the trial simply does not establish that it was clearly erroneous for the district court to find that GAMCO, had it known of the liquidity problems at Vivendi, would have made the choice to buy the same securities it purchased. Accordingly, the court affirmed the judgment. View "GAMCO v. Vivendi" on Justia Law 2016-09-27 federal U.S. Court of Appeals for the Second Circuit Per Curiam 13-1194 http://law.justia.com/cases/federal/appellate-courts/ca2/15-1683/15-1683-2016-09-23.html Lanier v. Bats Exchange, Inc. 2016-09-23T09:30:24-08:00 2016-09-23T18:32:50-08:00 Plaintiff subscribes to data feeds through which the Exchanges provide information about securities traded on the Exchanges to an exclusive securities information processor pursuant to a plan approved by the SEC. The Processor consolidates the data and makes it available to subscribers. Plaintiff filed three materially identical suits alleging that the Exchanges had breached their contracts with him by providing preferentially fast access to the so‐called "Preferred Customers," who purchase data and receive it from an Exchange directly via its proprietary feed. The court concluded that the district court erred in holding that it lacked subject matter jurisdiction to consider plaintiff's breach of contract claims, but affirmed the dismissal of the complaints for failure to state a claim. In this case, plaintiff has not plausibly alleged that the Exchanges violated any contractual obligation by simultaneously sending data to both the Processor and the Preferred Customers that is received earlier by the Preferred Customers; to the extent that plaintiff alleges that such a contractual obligation arises from the incorporation of SEC regulations into the contracts, his claims are preempted because his interpretation conflicts with the SEC's interpretation and stands as an obstacle to the accomplishment of congressional purposes; to the extent that plaintiff alleges that the Exchanges undertook self‐imposed contractual obligations, distinct from their regulatory obligations, to ensure that market data is not received by any customer before it is received by the Processor, that claim fails because it has no basis in the text of the contracts; and to the extent that plaintiff argues that the SEC has interpreted the Exchanges' obligations under the Exchange Act or SEC regulations incorrectly, any such argument must first be administratively exhausted before the SEC before it can be considered by this Court. View "Lanier v. Bats Exchange, Inc." on Justia Law 2016-09-23 federal U.S. Court of Appeals for the Second Circuit Gerard E. Lynch 15-1683 http://law.justia.com/cases/federal/appellate-courts/ca2/14-4067/14-4067-2016-09-20.html In re AIG Securities Litig. 2016-09-20T07:00:07-08:00 2016-09-20T11:54:20-08:00 This case concerns employee benefits plans sponsored by AIG or its affiliates under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. At issue is whether the Plans are "affiliates" of AIG for the purposes of a class action settlement agreement. The district court held that appellants are "affiliates" of AIG and thus ineligible for their own portion of a class settlement agreement with AIG. The court held that appellants have standing to appeal the district court's denial of the motion to direct and dismissed appellants' appeal as to the denial of their motion to intervene as moot. On the merits, the court held that because ERISA imposes important statutory limits on an employer's control over the management and policies of an employee benefit plan, those plans do not fall within the ordinary meaning of "affiliate." Therefore, the court concluded that appellants are entitled to their own portion of the settlement and appellees will have a somewhat smaller portion. The court vacated the denial of the Plans' motion to direct. View "In re AIG Securities Litig." on Justia Law 2016-09-20 federal U.S. Court of Appeals for the Second Circuit pooler 14-4067 http://law.justia.com/cases/federal/appellate-courts/ca9/14-55221/14-55221-2016-08-31.html SEC v. Jensen 2016-08-31T09:05:39-08:00 2016-08-31T18:26:10-08:00 The SEC filed suit against Peter Jensen and Thomas Tekulve, the former Chief Executive Officer and Chief Financial Officer of the now-defunct Basin Water, Inc., alleging that they had participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized. On appeal, the SEC challenged the district court's judgment in favor of defendants. The court reversed the district court's rulings interpreting Rule 13a–14 of the Securities Exchange Act (Exchange Act), 17 C.F.R. 240.13a-14, and Section 304 of the Sarbanes-Oxley Act (SOX 304),15 U.S.C. 7201 et seq. The court concluded that Rule 13a–14 provides the SEC with a cause of action not only against CEOs and CFOs who do not file the required certifications, but also against CEOs and CFOs who certify false or misleading statements. The court also concluded that the disgorgement remedy authorized under SOX 304 applies regardless of whether a restatement was caused by the personal misconduct of an issuer's CEO and CFO or by other issuer misconduct. The court reversed the district court's bench trial order, vacated the judgment, and remanded for a jury trial, concluding that the SEC was entitled to a jury trial and did not consent to Jensen and Tekulve's withdrawal of their jury demand. Nor did the SEC waive its right to a jury trial when it objected consistently and repeatedly before trial to the district court's decision to hold a bench trial. The court approved the district court's grant of defendants' motion in limine to exclude evidence about the injunction against Basin's Director of Finance. Accordingly, the court vacated and remanded. View "SEC v. Jensen" on Justia Law 2016-08-31 federal U.S. Court of Appeals for the Ninth Circuit Richard R. Clifton 14-55221 http://law.justia.com/cases/federal/appellate-courts/ca10/15-2087/15-2087-2016-08-23.html SEC v. Kokesh 2016-08-23T08:00:59-08:00 2016-08-23T13:11:33-08:00 The Securities and Exchange Commission (SEC) brought an enforcement action against Defendant Charles Kokesh for misappropriating funds from four SEC-registered business development companies (BDCs) in violation of federal securities laws. After a jury returned a verdict in favor of the SEC, the district court entered a final judgment permanently enjoining Defendant from violating certain provisions of federal securities laws, ordering disgorgement of $34.9 million plus prejudgment interest of $18.1 million, and imposing a civil penalty of $2.4 million. Defendant appealed, arguing that the court's imposition of the disgorgement and permanent injunction was barred by 28 U.S.C. 2462, which set a five-year limitations period for suits "for the enforcement of any civil fine, penalty, or forfeiture." He also argued that the district court erred by precluding him from presenting evidence of attorney and accountant participation to show his lack of knowledge of the misconduct. After review, the Tenth Circuit held that both the permanent injunction and the disgorgement order were remedial and not subject to section 2462. The Court rejected the evidentiary claim. View "SEC v. Kokesh" on Justia Law 2016-08-23 federal U.S. Court of Appeals for the Tenth Circuit Harris L. Hartz 15-2087 http://law.justia.com/cases/federal/appellate-courts/ca3/15-2345/15-2345-2016-08-22.html Goldman v. Citigroup Global Mkts., Inc 2016-08-22T09:00:06-08:00 2016-08-22T09:39:49-08:00 The Goldmans, proceeding before an arbitration panel operating under the auspices of the Financial Industry Regulatory Authority (FINRA), alleged that their financial advisor and Citigroup had violated federal securities law in their management of the Goldmans' brokerage accounts. The district court dismissed their motion to vacate an adverse award for lack of subject-matter jurisdiction, stating the Goldmans' motion failed to raise a substantial federal question. The Third Circuit affirmed. Nothing about the Goldmans' case is likely to affect the securities markets broadly. That the allegedly-misbehaving arbitration panel happened to be affiliated with a self-regulatory organization does not meaningfully distinguish this case from any other suit alleging arbitrator partiality in a securities dispute. The court noted "the flood of cases that would enter federal courts if the involvement of a self-regulatory organization were itself sufficient to support jurisdiction." View "Goldman v. Citigroup Global Mkts., Inc" on Justia Law 2016-08-22 federal U.S. Court of Appeals for the Third Circuit Jordan 15-2345 http://law.justia.com/cases/federal/appellate-courts/ca3/15-2664/15-2664-2016-08-22.html OFI Asset Mgmt. v. Cooper Tire & Rubber 2016-08-22T09:00:05-08:00 2016-08-22T09:27:13-08:00 After a failed merger between Cooper Tire and Apollo Tyres, OFI Asset Management, purporting to act for similarly situated investors, filed a class action against Cooper and its officers. OFI claims that, during merger negotiations, the defendants made material misrepresentations in statements to investors, in violation of federal securities laws, 15 U.S.C. 78j(b), 78n(a), and 78t(a). The Third Circuit affirmed the district court's dismissal of the case, rejecting arguments that that court improperly managed the presentation of arguments. The court upheld a finding that OFI failed to allege sufficient facts to support its claims. The court had ordered OFI to submit a letter "identifying and verbatim quoting" the five most compelling examples it could muster of false or fraudulent statements by Cooper, with three factual allegations demonstrating the falsity of each statement and three factual allegations supporting a finding of scienter as to the making of the statements. The court had subsequently determined that the statements identified as problematic by OFI were either not false or misleading, were "forward-looking" statements protected by the safe harbor established by the Private Securities Litigation Reform Act of 1995, lacked a sufficient showing of scienter, or suffered from some combination of those infirmities. View "OFI Asset Mgmt. v. Cooper Tire & Rubber" on Justia Law 2016-08-22 federal U.S. Court of Appeals for the Third Circuit Jordan 15-2664 http://law.justia.com/cases/federal/appellate-courts/ca9/13-56620/13-56620-2016-08-15.html NCU Admin. Bd. v. Nomura Home Equity Loan 2016-08-15T09:02:24-08:00 2016-08-15T18:55:39-08:00 The NCUA filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., against Wachovia and Nomura for making false and misleading statements in their offerings of residential mortgage-backed securities (RMBS) purchased by Wescorp. The district court dismissed the claims, ruling that 12 U.S.C. 1787(b)(14) (the Extender Statute) did not supplant the statute of repose contained within 15 U.S.C. 77m, and therefore that the NCUA's claims were time-barred. The court concluded that the district court erred in holding that the Extender Statute does not supplant the 1933 Act's statute of repose. The court held that the Extender Statute replaces all preexisting time limitations - whether styled as a statute of limitations or a statute of repose - in any action by the NCUA as conservator or liquidating agent. The court further held that the Extender Statute's scope - "any action brought by the [NCUA]" - includes actions such as this one, in which the NCUA asserts statutory claims rather than common law tort or contract claims. Because the court concluded that NCUA claims were timely filed, the court vacated and remanded the district court's dismissal of the claims as time-barred. View "NCU Admin. Bd. v. Nomura Home Equity Loan" on Justia Law 2016-08-15 federal U.S. Court of Appeals for the Ninth Circuit Dorothy Wright Nelson 13-56620 http://law.justia.com/cases/federal/appellate-courts/ca3/15-2577/15-2577-2016-08-12.html United States v. Miller 2016-08-12T09:00:06-08:00 2016-08-12T09:54:22-08:00 With little formal education (a high school GED) Miller passed several securities industry examinations and "maintained a public persona of a very successful entrepreneur." Miller sold investors over $41 million in phony "promissory notes," which were securities under the Securities Act of 1933 and the Securities Exchange Act of 1934, 15 U.S.C. 77b(a)(1), 78c(a)(10), and not exempt from federal or state registration requirements. Miller did not register the notes; he squandered the money, operating a Ponzi scheme. Miller pled guilty to one count of securities fraud, 15 U.S.C. 78j(b), and one count of tax evasion, 26 U.S.C. 7201. He was sentenced to 120 months' imprisonment. The Third Circuit affirmed, rejecting an argument that the court improperly applied the Sentencing Guidelines investment adviser enhancement, U.S.S.G. 2B1.1(b)(19)(A)(iii). The court interpreted the Investment Advisers Act of 1940, 15 U.S.C. 80b-2(a)(11) to apply broadly, with exceptions that do not apply to Miller. The court also rejected arguments that the government breached Miller's plea agreement and that his sentence was substantively unreasonable. View "United States v. Miller" on Justia Law 2016-08-12 federal U.S. Court of Appeals for the Third Circuit Restrepo 15-2577 http://law.justia.com/cases/federal/appellate-courts/ca7/15-3535/15-3535-2016-08-10.html Witter v. Commodity Futures Trading Comm'n 2016-08-10T14:00:50-08:00 2016-08-10T15:55:48-08:00 Witter contends that in August 2007 he telephoned Skelton, an employee of his broker, TransAct, with instructions to cancel several standing orders. Skelton did not do so, and Witter lost $23,000 on the resulting market position. Skelton claims that Witter never told him to cancel all seven of the working orders at issue. Witter filed a complaint with the Commodity Futures Trading Commission, 7 U.S.C. 18(a), which found no violation. The judgment officer refused to draw an adverse inference based on TransAct's failure to produce a recording of the "one crucial conversation" because TransAct was not required to record the call; he found that Skelton's version was more plausible and Witter had a "propensity to confuse trading terms" like "position" and "order." The Seventh Circuit affirmed, finding the Commission's decision was supported by the evidence. Federal regulations require that, before buying or selling a commodity, a merchant must receive either "specific authorization" or "authorization in writing," 17 C.F.R. 166.2. No regulation requires the merchant to record phone calls to cancel previously authorized orders to buy or sell. View "Witter v. Commodity Futures Trading Comm'n" on Justia Law 2016-08-10 federal U.S. Court of Appeals for the Seventh Circuit Diane Pamela Wood 15-3535 http://law.justia.com/cases/federal/appellate-courts/ca11/15-14463/15-14463-2016-08-10.html Dusek v. JPMorgan Chase & Co. 2016-08-10T10:31:10-08:00 2016-08-10T11:18:43-08:00 In the aftermath of Bernard Madoff's arrrest, the district court appointed a trustee for the liquidation of BLMIS, Madoff's investment advisory business. Several class actions were filed against JPMorgan by customers who directly had capital invested with BLMIS. JPMorgan entered a global resolution on January 6, 2014, involving three settlements. This putative class action seeks to hold liable JPMorgan and two JPMorgan employees: John Hogan, who served as Chief Risk Officer and later Chairman of Risk for JPMorgan, and Richard Cassa, who served as Client Relationship Manager for one of Madoff's accounts. The district court granted defendants' motion to dismiss the Second Amended Complaint. The court affirmed the judgment, finding that appellants' Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78t(a), claim was untimely and that appellants' federal Racketeer Influenced and Corrupt Organization Act (RICO), 18 U.S.C. 1961, claim was barred by the Private Securities Litigation Reform Act (PSLRA), 18 U.S.C. 1964(c). View "Dusek v. JPMorgan Chase & Co." on Justia Law 2016-08-10 federal U.S. Court of Appeals for the Eleventh Circuit Titus 15-14463 http://law.justia.com/cases/federal/appellate-courts/cadc/15-1345/15-1345-2016-08-09.html Raymond J. Lucia Co. v. SEC 2016-08-09T06:31:33-08:00 2016-08-09T16:06:43-08:00 Petitioners seek review of the Commission's decision imposing sanctions for violations of the Investment Advisers Act of 1940, 15 U.S.C. 80b-21, and the rule against misleading advertising. Here, the Commission instituted an administrative enforcement action against petitioners for alleged violations of anti-fraud provisions of the Investment Advisers Act based on how they presented their "Buckets of Money" retirement wealth-management strategy to prospective clients. The court rejected petitioners' contention that the Commission's decision and order under review should be vacated because the ALJ rendering the initial decision was a constitutional Officer who was not appointed pursuant to the Appointments Clause. The court also concluded that there is substantial evidence to support the Commission's finding that petitioners' "Buckets-of-Money" presentation promised to provide an historical-data-only backtest where the analysis would account for "rebucketizing." Paying deference to the Commission's choice of sanctions, the court upheld the district court's imposition of the lifetime industry bar on Raymond J. Lucia. The court rejected petitioners' remaining contentions and denied the petition for review. View "Raymond J. Lucia Co. v. SEC" on Justia Law 2016-08-09 federal U.S. Court of Appeals for the District of Columbia Circuit Judith Ann Wilson Rogers 15-1345 http://law.justia.com/cases/federal/appellate-courts/ca7/15-2130/15-2130-2016-07-29.html Stevens v. Interactive Fin. Advisors, Inc. 2016-07-29T12:30:48-08:00 2016-07-29T12:52:50-08:00 Stevens, an insurance salesman, wanted to sell investment products. Because he was not registered with the SEC, Stevens needed to associate himself with a registered investment advisor, 15 U.S.C. 80b-3(a). In 2003, he associated with IFA, a loosely confederated investment advisory firm. In exchange for sharing clientele and fees with IFA, Stevens had access to IFA's market resources and proprietary information, including access to a cloud-based data system. Stevens uploaded sensitive nonpublic information, concerning both investment clients and insurance clients (who were not IFA clients). IFA did not know that Stevens had entered the non-IFA client information into the database. IFA learned that Stevens was involved in a Ponzi scheme, severed its association with Stevens, and blocked Stevens from accessing the database. Stevens sued, alleging conversion, violation of the Illinois Trade Secrets Act, and tortious interference with business expectancy. The Seventh Circuit affirmed summary judgment for IFA on claims relating to securities clients. Federal law prevents a financial institution from disclosing nonpublic information of its clients to a nonaffiliated third party like Stevens. The court also affirmed a verdict in favor of IFA concerning insurance clients, upholding the trial court's response to a question sent by the jury during deliberations, "Can we consider [filing] the lawsuit a demand for property?" The court stated that filing did not constitute a demand for the purposes of an Illinois law conversion claim. View "Stevens v. Interactive Fin. Advisors, Inc." on Justia Law 2016-07-29 federal U.S. Court of Appeals for the Seventh Circuit William Joseph Bauer 15-2130 http://law.justia.com/cases/federal/appellate-courts/ca1/15-2106/15-2106-2016-07-26.html United States v. McPhail 2016-07-26T10:30:08-08:00 2016-07-26T12:38:27-08:00 Defendant, a tile salesman, received material, nonpublic information from a corporate inside and then passed that information along to friends, who used it to obtain substantial trading gains. After a jury trial, Defendant was convicted of committing securities fraud and conspiring to commit securities fraud. Defendant appealed, arguing that there was insufficient evidence in the record to support his conviction, where he was neither a corporate insider nor a trader of securities. The First Circuit affirmed, holding (1) the evidence was sufficient to show that Defendant knowingly breached a duty of confidence; (2) the district court's instructions did not improperly shift the burden of proof or misstate the state of mind element of the securities fraud offense; and (3) the evidence was sufficient to show that Defendant anticipated receiving a benefit as a result of his disclosure. View "United States v. McPhail" on Justia Law 2016-07-26 federal U.S. Court of Appeals for the First Circuit William Joseph Kayatta, Jr. 15-2106 http://law.justia.com/cases/federal/appellate-courts/ca7/15-3740/15-3740-2016-07-21.html Chesemore v. Fenkell 2016-07-21T09:01:39-08:00 2016-07-21T09:33:54-08:00 Trachte, a Wisconsin manufacturer, established an employee stock ownership plan (ESOP) in the mid-1980s. In the late 1990s, Fenkell and his company, Alliance, began buying ESOP-owned, closely-held companies with limited marketability. Typically, Fenkell would merge the acquired company's ESOP into Alliance's ESOP, hold the company for a few years with its management in place, and then spin it off at a profit. Alliance acquired Trachte in 2002 for $24 million and folded its ESOP into Alliance's ESOP. Trachte's profits, however, were flat and its growth stalled, so Fenkell arranged a complicated leveraged buyout involving creation of a new Trachte ESOP managed by trustees beholden to Fenkell. The accounts in the Alliance ESOP were spun off to the new Trachte ESOP, which used the employees' accounts as collateral to purchase Trachte's equity back from Alliance, Trachte and its new ESOP paid $45 million for Trachte's stock and incurred $36 million in debt. The purchase price was inflated; the debt load was unsustainable. By the end of 2008, Trachte's stock was worthless. The employee participants in the new ESOP sued Alliance, Fenkell, and trustees, alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act. The district court found the defendants liable, crafted a remedial order to make the class whole, awarded attorney's fees, and approved settlements among some of the parties. Fenkell conceded liability. The Seventh Circuit affirmed the order requiring him to indemnify his cofiduciaries. View "Chesemore v. Fenkell" on Justia Law 2016-07-21 federal U.S. Court of Appeals for the Seventh Circuit Diane S. Sykes 15-3740 14-3181 14-3215 http://law.justia.com/cases/federal/appellate-courts/ca6/14-4189/14-4189-2016-07-20.html Oh. Pub. Employees Ret. Sys. v. Fed. Home Loan Mortgage Corp. 2016-07-20T08:30:35-08:00 2016-07-20T08:57:16-08:00 Ohio Public Employees Retirement System (OPERS) filed a class action suit alleging securities fraud against Federal Home Loan Mortgage Corporation (Freddie Mac), a government sponsored entity chartered by Congress that operates in the secondary mortgage market. OPERS alleged that Freddie Mac concealed its overextension in the nontraditional mortgage market (subprime mortgages or low credit and high-risk instruments) and its materially deficient underwriting, risk management, and fraud detection practices through misstatements and omissions to investors. OPERS claimed that the fund suffered foreseeable losses triggered when the risk that had been concealed materialized. The district court dismissed, concluding that OPERS failed to show loss causation. The Sixth Circuit reversed. Considering "the relationship between the risks allegedly concealed and the risks that subsequently materialized," as well as the close correlation between the alleged revelation or materialization of the risk and the immediate fall in stock price, the court concluded that OPERS had alleged sufficient facts to support a plausible claim. View "Oh. Pub. Employees Ret. Sys. v. Fed. Home Loan Mortgage Corp." on Justia Law 2016-07-20 federal U.S. Court of Appeals for the Sixth Circuit Jane Branstetter Stranch 14-4189 http://law.justia.com/cases/federal/appellate-courts/ca2/14-507/14-507-2016-07-14.html SRM Global Master Fund v. Bear Stearns 2016-07-14T07:00:09-08:00 2016-07-14T18:45:59-08:00 SRM, a registered private investment fund, filed suit against Bear Stearns, its officers, and its auditor, Deloitte, after the collapse of the Bear Stearns companies. The district court dismissed SRM's claims. The court held that the class action tolling rule set forth in American Pipe & Construction Co. v. Utah does not apply to 28 U.S.C. 1658(b)(2), the five‐year statute of repose that limits the time in which plaintiffs may bring claims under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC 15 Rule 10b‐5, 17 C.F.R. 240.10b‐5. The court also concluded that SRM failed adequately to allege that it relied on any misrepresentations in making investment decisions, an element of its common law fraud claims. Accordingly, the court affirmed the district court's dismissal of the claims. View "SRM Global Master Fund v. Bear Stearns" on Justia Law 2016-07-14 federal U.S. Court of Appeals for the Second Circuit Raymond Joseph Lohier, Jr. 14-507 http://law.justia.com/cases/federal/appellate-courts/ca9/13-56684/13-56684-2016-07-11.html ESG Capital Partners v. Venable LLP 2016-07-11T09:01:46-08:00 2016-07-11T18:41:28-08:00 ESG was a group of investors formed to purchase pre-Initial Public Offering (pre-IPO) Facebook shares. ESG's managing agent negotiated the purchase with a man he believed to be "Ken Davis." "Ken Davis" was an alias for Troy Stratos, an alleged con artist. Venable represented "Dennis" in the Facebook deal, which is the subject of this securities fraud suit. After learning that ESG had been defrauded, managing agent Burns panicked and hid the news from ESG. ESG claims it did not learn of the alleged fraud and that their money had been stolen until November 2012. ESG filed suit against Stratos and Venable and attorney Meyer on March 6, 2013, alleging eight causes of action. The district court dismissed ESG's complaint, and subsequently the first amended complaint (FAC), with prejudice. The court held that ESG's federal securities fraud claim is sufficiently pled under FRCP 9(b) and the Private Securities Litigation Reform Act, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b–5; ESG's state law fraud claim, which parallels the federal securities fraud claim, is sufficiently pled under FRCP 9(b); ESG's nonfraud state law claims for conversion, unjust enrichment, unfair competition, aiding and abetting fraud, and conspiracy to commit fraud are sufficiently pled under FRCP 8(a)(2); and ESG's breach of fiduciary duty claim is barred by Cal. Civ. Proc. Code 340.6's one-year statute of limitations. Finally, the court concluded that neither the aiding and abetting fraud claim nor the conspiracy to commit fraud claim is barred by Cal. Civ. Code 1714.10's Agent's Immunity Rule. Accordingly, the court affirmed in part, reversed in part, and remanded. View "ESG Capital Partners v. Venable LLP" on Justia Law 2016-07-11 federal U.S. Court of Appeals for the Ninth Circuit Pregerson 13-56684 http://law.justia.com/cases/federal/appellate-courts/ca10/15-3142/15-3142-2016-07-05.html Anderson v. Spirit AeroSystems Holdings 2016-07-05T09:03:34-08:00 2016-07-05T12:20:01-08:00 Spirit AeroSystems, Inc. agreed to supply parts for three types of aircraft manufactured by Gulfstream Aerospace Corporation and The Boeing Company. For these aircraft, Spirit managed production of the parts through three projects. Each project encountered production delays and cost overruns, and Spirit periodically reported to the public about the projects' progress. In these reports, Spirit acknowledged risks but expressed confidence about its ability to meet production deadlines and ultimately break even on the projects. Eventually, however, Spirit announced that it expected to lose hundreds of millions of dollars on the three projects. Spirit's stock price fell roughly 30 percent following the announcement. The plaintiffs brought this action on behalf of a class of individuals and organizations that had owned or obtained Spirit stock between November 3, 2011, and October 24, 2012. The named defendants were Spirit and four of its executives, whom plaintiffs alleged misrepresented and failed to disclose the projects' cost overruns and production delays, violated section 10(b) of the Securities Exchange Act of 1934, and the Securities and Exchange Commission's Rule 10b-5. The trial court granted defendants' motion to dismiss, concluding in part that plaintiffs failed to allege facts showing scienter. Finding no reversible error in the trial court's order, the Tenth Circuit affirmed. View "Anderson v. Spirit AeroSystems Holdings" on Justia Law 2016-07-05 federal U.S. Court of Appeals for the Tenth Circuit Robert Edwin Bacharach 15-3142 http://law.justia.com/cases/federal/appellate-courts/ca10/15-4001/15-4001-2016-06-20.html Pikk v. Pedersen 2016-06-20T11:01:02-08:00 2016-06-20T14:02:41-08:00 Plaintiffs, shareholders of ZAGG Inc., a publicly held Nevada corporation, filed a shareholder-derivative action seeking damages, restitution, and other relief for ZAGG. They alleged that past and present officers and directors of ZAGG violated section 14(a) of the Securities Exchange Act of 1934, breached their fiduciary duties to ZAGG, wasted corporate assets, and were unjustly enriched. The district court dismissed the suit on two alternative grounds: (1) Plaintiffs filed suit before presenting the ZAGG Board of Directors (the Board) with a demand to bring suit and they failed to adequately allege that such demand would have been futile; and (2) the complaint failed to state a claim. Plaintiffs appealed the dismissal on both of the district court's alternative grounds. Because the Tenth Circuit denied the challenge to the first ground, it did not address the second. View "Pikk v. Pedersen" on Justia Law 2016-06-20 federal U.S. Court of Appeals for the Tenth Circuit Harris L. Hartz 15-4001 http://law.justia.com/cases/federal/appellate-courts/ca8/14-3698/14-3698-2016-06-20.html Automated Matching Sys. v. SEC 2016-06-20T07:31:08-08:00 2016-06-20T09:16:28-08:00 AMSE appealed the Commission's final order denying AMSE's application for a limited volume exemption from registration as a national securities exchange under section 5 of the Securities Exchange Act of 1934, 15 U.S.C. 78a et. seq., and the district court's dismissal of AMSE's complaint for lack of jurisdiction. The court found that the Commission's determination that it did not have discretion to grant a low-volume exemption to AMSE because it proposed to act as a self-regulatory organization (SRO) was reasonable; the Commission reasonably concluded that an exempt exchange could not be an SRO and that permitting an exchange to wield the broad powers of an SRO when the Commission is not statutorily required to exercise oversight would contradict the careful balance prescribed by Congress to protect the public interest and investors; and, therefore, the Commission's conclusion is well-reasoned and does not constitute an abuse of discretion. The court also concluded that AMSE has failed to establish circumstances permitting for district court review. Accordingly, the court denied the petition for review and affirmed the district court's judgment. View "Automated Matching Sys. v. SEC" on Justia Law 2016-06-20 federal U.S. Court of Appeals for the Eighth Circuit Bobby E. Shepherd 14-3698 15-2448 http://law.justia.com/cases/colorado/supreme-court/2016/14sc469.html Lewis v. Taylor 2016-06-20T07:30:53-08:00 2016-06-20T11:52:15-08:00 Respondent Steve Taylor invested $3 million in several investment companies operated by Sean Mueller. Unbeknownst to Taylor, the companies were part of a multi-million dollar Ponzi scheme. The "Mueller Funds" received approximately $150 million in investments, and paid out a little less than $90 million to investors before collapsing. Taylor happened to receive approximately $3.4 million (a return of his invested principal plus net profit) prior to the collapse. Other investors were not as fortunate, losing a sum total of approximately $72 million. In 2010, Mueller ultimately pled guilty to securities fraud, and was sentenced to a total of 40 years in prison. In addition, he was ordered to pay over $64 million in restitution. Petitioner C. Randel Lewis was appointed as Receiver for the Mueller Funds, tasked with collecting Mueller's assets to his creditors and defrauded investors. The Receiver and Taylor signed a tolling agreement that extended the time period within which the Receiver could bring suit against Taylor in an attempt to recover assets. The eventual complaint sought to recover the net profit Taylor received. Taylor received his last payout in April 2007, and moved for summary judgment claiming the Receiver's claim was time barred due to the applicable statute of limitations. The trial court considered the tolling agreement and ruled in the Receiver's favor. Taylor appealed, and the court of appeals reversed, interpreting the term "extinguished," as used in 38-8-110(1), C.R.S. (2015), imposed a jurisdictional time limit on filing a claim, and that the parties could not toll that limit by agreement. The Supreme Court concluded that 38-8-110(1)'s time limitation could indeed be tolled by express agreement. The Court reversed the appellate court and remanded the case for further proceedings. View "Lewis v. Taylor" on Justia Law 2016-06-20 state Colorado Colorado Supreme Court William W. Hood, III 14SC469 http://law.justia.com/cases/federal/appellate-courts/ca11/15-12831/15-12831-2016-06-17.html Hill, Jr. v. SEC 2016-06-17T06:31:18-08:00 2016-06-17T11:46:21-08:00 Congress set forth a detailed process for exclusive judicial review of final Commission orders in the federal courts of appeals. An SEC administrative enforcement action culminates in a final order of the Commission, which in turn is reviewable exclusively by the appropriate federal court of appeals under 15 U.S.C. 78y. At issue in this consolidated appeal is whether respondents in an SEC administrative enforcement action can bypass the Securities Exchange Act's, 15 U.S.C. 78u(d), 78u-1, 78u-2, 78u-3, review scheme by filing a collateral lawsuit in federal district court challenging the administrative proceeding on constitutional grounds. From the text of the statute, the court could fairly discern Congress's general intent to channel all objections to a final Commission order - including challenges to the constitutionality of the SEC ALJs or the administrative process itself - into the administrative forum and to preclude parallel federal district court litigation. The court found no indication that respondents' constitutional challenges are outside the type of claims that Congress intended to be reviewed within this statutory scheme. Accordingly, the district court erred in exercising jurisdiction and the court vacated the district court's preliminary injunction orders and remanded with instructions to dismiss each case for lack of jurisdiction. View "Hill, Jr. v. SEC" on Justia Law 2016-06-17 federal U.S. Court of Appeals for the Eleventh Circuit Jill Pryor 15-12831 15-13738 http://law.justia.com/cases/federal/appellate-courts/cadc/15-1149/15-1149-2016-06-14.html Lindeen v. SEC 2016-06-14T07:02:24-08:00 2016-06-14T23:01:22-08:00 The SEC created a new class of securities offerings freed from federal-registration requirements so long as the issuers of these securities comply with certain investor safeguards (Regulation A-Plus). Petitioners, the chief securities regulators for Massachusetts and Montana, seek review of Regulation A-Plus. The court concluded that, because Regulation A-Plus does not conflict with Congress's unambiguous intent, it does not falter at Chevron Step 1. Furthermore, because the Commission's qualified-purchaser definition is not "arbitrary, capricious, or manifestly contrary to the statute," it does not fail Chevron Step 2. By providing a reasoned analysis of how its qualified-purchaser definition strikes the "appropriate balance between mitigating cost and time demands on issuers and providing investor protections," the court concluded that the Commission has complied with its statutory obligation under the Administrative Procedure Act, 5 U.S.C. 702. Accordingly, the court denied the consolidated petitions for review. View "Lindeen v. SEC" on Justia Law 2016-06-14 federal U.S. Court of Appeals for the District of Columbia Circuit Henderson 15-1149 http://law.justia.com/cases/federal/appellate-courts/cafc/15-5114/15-5114-2016-06-10.html Nacchio v. United States 2016-06-10T07:01:15-08:00 2016-06-10T08:15:28-08:00 From 1997-2001, Nacchio served as Qwest's CEO. Based on 2001 stock trades, Nacchio reported a net gain of $44,632,464.38 on his return and paid $17,974,832 in taxes. In 2007, Nacchio was convicted of 19 counts of insider trading, 15 U.S.C. 78j, 78ff. Following a remand, the court resentenced Nacchio to serve 70 months in prison, pay a 19 million dollar fine, and forfeit the net proceeds, $44,632,464.38. Nacchio settled a concurrent SEC action, agreeing to disgorge $44,632,464. Nacchio's criminal forfeiture satisfied his disgorgement obligation. The Justice Department notified participants in private securities class action litigation or SEC civil litigation concerning Qwest stock that they were eligible to receive a remission from Nacchio's forfeiture. Nacchio sought an income tax credit of $17,974,832 for taxes paid on his trading profits. The IRS argued that his forfeiture was a nondeductible penalty or fine and that he was estopped from seeking tax relief because of his conviction. The Claims Court held that Nacchio could deduct his forfeiture payment under Internal Revenue Code 165, but not under I.R.C. 162 and was not collaterally estopped from pursuing special relief under I.R.C. 1341. The Federal Circuit reversed as to section 165;Nacchio failed to establish that his forfeiture was not a "fine or similar penalty." Because establishing deductibility under another section of the code is a prerequisite to pursuing relief under section 1341, Nacchio cannot pursue a deduction under that section. View "Nacchio v. United States" on Justia Law 2016-06-10 federal U.S. Court of Appeals for the Federal Circuit O'Malley 15-5114 http://law.justia.com/cases/south-carolina/supreme-court/2016/27640.html Maybank v. BB&T 2016-06-07T12:25:55-08:00 2016-06-07T12:56:03-08:00 This appeal arose out of a $17 million verdict rendered in favor of Francis Maybank for claims sounding in contract, tort, and the South Carolina Unfair Trade Practices Act (UTPA). Maybank brought this action alleging he received faulty investment advice from Branch Banking and Trust (BB&T - the Bank) through BB&T Wealth Management (Wealth Management) and BB&T Asset Management (Asset Management), all operating under the corporate umbrella of BB&T Corporation (collectively, Appellants). Appellants appealed on numerous grounds, and Maybank appealed the trial court's denial of prejudgment interest. After review, the Supreme Court reversed as to an award of punitive damages based on a limitation of liability clause. The Court affirmed on all other grounds. View "Maybank v. BB&T" on Justia Law 2016-06-03 state South Carolina South Carolina Supreme Court Kaye Gorenflo Hearn 27640 http://law.justia.com/cases/federal/appellate-courts/ca7/15-1467/15-1467-2016-06-01.html Commodities Futures Trading Comm'n v. Monex Deposit Co. 2016-06-01T12:30:59-08:00 2016-06-01T14:13:52-08:00 The Commodity Futures Trading Commission regulates contracts concerning commodities for future delivery when offered on margin or another form of leverage, 7 U.S.C. 2(c)(2)(D), with an exception for contracts that "results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved". The CFTC began investigating whether Monex's precious-metals business was within this exception. Monex refused to comply with a subpoena, arguing that since 1987, when it adopted its current business model, the CFTC has deemed its business to be in compliance with all federal rules and that, because it satisfies the exception, the Commission lacked authority even to investigate. The district court enforced the subpoena. Monex turned over the documents. Monex appealed, seeking their return and an injunction to prevent the CFTC from using them in any enforcement proceeding. The Seventh Circuit affirmed, stating that Monex was impermissibly using its opposition to the subpoena to get a judicial decision on the merits of its statutory argument, before the CFTC makes a substantive decision. The propriety of an agency's action is reviewed after the final administrative decision. Contesting the agency's jurisdiction does not change the rules for determining when a subpoena must be enforced. View "Commodities Futures Trading Comm'n v. Monex Deposit Co." on Justia Law 2016-06-01 federal U.S. Court of Appeals for the Seventh Circuit Frank Hoover Easterbrook 15-1467 http://law.justia.com/cases/federal/appellate-courts/ca2/15-2103/15-2103-2016-06-01.html Tilton v. SEC 2016-06-01T06:30:05-08:00 2016-06-01T11:46:25-08:00 After the SEC commenced an administrative proceeding conducted by an ALJ against appellants, appellants contend that the SEC's administrative proceeding is unconstitutional because the presiding ALJ's appointment violated Article II's Appointments Clause. Appellants filed suit in district court asserting their Appointments Clause claim and seeking an injunction against the ALJ's adjudication based on its alleged unconstitutionality. The district court dismissed the suit for lack of subject matter jurisdiction, concluding that appellants' Appointments Clause challenge fell within the exclusive scope of the SEC's administrative review scheme and could reach a federal court only on petition for review of a final decision by the Commission. The court agreed and concluded that, by enacting the SEC's comprehensive scheme of administrative and judicial review, Congress implicitly precluded federal district court jurisdiction over appellants' constitutional challenge. Accordingly, the court affirmed the judgment. View "Tilton v. SEC" on Justia Law 2016-06-01 federal U.S. Court of Appeals for the Second Circuit Robert David Sack 15-2103 http://law.justia.com/cases/nebraska/supreme-court/2016/s-15-757.html Lindsay v. Fitl 2016-05-27T05:32:21-08:00 2016-05-27T06:59:24-08:00 The Lindsays were minority shareholders of the 304 Corporation; its principal asset was Mid City Bank. In 2010, the Nebraska Department of Banking and Finance and the FDIC began an examination of the bank. In 2011, the Department appointed the FDIC as the bank's receiver, stating that "'large commercial real estate loan and poor management practices . . . led to a deterioration of the bank's capital'" so that there was "'no option but to declare the insolvent institution receivership.'" The bank reopened and regained good standing. In 2014, the FDIC filed suit, alleging that Fitl "was grossly negligent and breached his fiduciary duties," 12 U.S.C. 1821(d)(2)(A)(i). The Lindsays also filed suit, alleging breach of fiduciary duties. The court dismissed. The Nebraska Supreme Court affirmed. The Lindsays' claims are similar to all other shareholders' claims and did not arise from a special duty, since the injury was not "separate and distinct." The district court correctly concluded that the Lindsays' claims were derivative in nature and that as a result of the FDIC lawsuit, the Lindsays had no standing to bring a derivative action on behalf of the corporation. View "Lindsay v. Fitl" on Justia Law 2016-05-27 state Nebraska Nebraska Supreme Court Kelch S-15-757 http://law.justia.com/cases/federal/appellate-courts/ca1/15-1994/15-1994-2016-05-26.html United States v. Parigian 2016-05-26T13:00:06-08:00 2016-05-26T13:13:36-08:00 Acting on "obviously nonpublic information" that a golfing buddy, McPhail, received from a corporate insider, Parigian made more than $200,000 trading in securities. A federal criminal securities fraud indictment alleged a "misappropriation theory" against Parigian, arguing that Parigian knew or should have known that, by providing the inside information to Parigian, McPhail breached a duty of trust and confidence and personally benefited by doing so. He pled guilty to the charges conditionally. The First Circuit rejected Parigian's preserved challenges to the indictment, following the circuit's controlling precedent: allegations of a friendship between McPhail and Parigian plus an expectation that the tippees would treat McPhail to a golf outing and assorted luxury entertainment is enough to allege a benefit if a benefit is required. The court rejected an argument that the government was obligated to allege that the insider was also expecting a benefit when passing along confidential information to McPhail in the first instance. View "United States v. Parigian" on Justia Law 2016-05-26 federal U.S. Court of Appeals for the First Circuit William Joseph Kayatta, Jr. 15-1994 http://law.justia.com/cases/federal/appellate-courts/ca11/14-13562/14-13562-2016-05-26.html SEC v. Graham 2016-05-26T10:31:05-08:00 2016-05-26T12:53:42-08:00 The SEC waited more than five years to commence an action for declaratory relief, injunctive relief, and disgorgement against defendants, who allegedly violated federal securities law by selling unregistered securities. Defendants raised the five-year statute of limitations as an affirmative defense in their motions for summary judgment. The district court dismissed the case based on the statute of limitations set out in 28 U.S.C. 2462. Section 2462, with few exceptions, bars the government from bringing suit to enforce "any civil fine, penalty, or forfeiture" after five years from when the claim first accrued. The court concluded that the SEC is time-barred from proceeding with its claims for declaratory relief and disgorgement because, under the plain meaning of section 2462, these remedies are a penalty and a forfeiture, respectively. But, because an injunction is not a penalty under section 2462, the court remanded for further proceedings on that remedy. Accordingly, the court affirmed in part, reversed in part, and remanded. View "SEC v. Graham" on Justia Law 2016-05-26 federal U.S. Court of Appeals for the Eleventh Circuit William Holcombe Pryor, Jr. 14-13562 http://law.justia.com/cases/federal/appellate-courts/ca9/13-73294/13-73294-2016-05-25.html Chenli Chu v. US Commodity Futures Trading Comm'n 2016-05-25T09:03:18-08:00 2016-05-25T13:04:12-08:00 Plaintiff, a retiree with significant trading experience, received $500,000 following her husband's death. After consulting with Jennifer Huang, her long-time commodity trading advisor, and James Kelly, an account executive at her futures commission merchant (FCM), Peregrine, plaintiff decided to place the funds in a new account with Peregrine. Plaintiff subsequently filed suit claiming that Kelly and Peregrine disregarded her account instructions and permitted Huang to conduct unauthorized trades in the account, in violation of 7 U.S.C. 6b(a) and 17 C.F.R. 166.2–166.3. The ALJ ruled in favor of plaintiff, but the CFTC reversed. Applying a substantial evidence standard, the court concluded that substantial evidence supports the CFTC's decision that Kelly made no material misrepresentation or omission, that there was no unauthorized trading, and that the record does not support a finding of fraud. Accordingly, the court denied the petition for review. View "Chenli Chu v. US Commodity Futures Trading Comm'n" on Justia Law 2016-05-25 federal U.S. Court of Appeals for the Ninth Circuit M. Margaret McKeown 13-73294 http://law.justia.com/cases/delaware/supreme-court/2016/641-2015.html Citigroup Inc., et al. v. AHW Investment Partnership, MFS, Inc., et al. 2016-05-24T10:30:32-08:00 2016-05-24T12:10:53-08:00 The plaintiffs were all affiliates of Arthur and Angela Williams, who owned stock in Citigroup. The defendants were Citigroup and eight of its officers and directors. In 1998, Citicorp and Travelers Group, Inc. merged, forming Citigroup. At that point, Arthur Williams's shares in Travelers Group were converted into 17.6 million shares of Citigroup common stock, which were valued at the time of the merger at $35 per share. In 2007, the Williamses had these shares transferred into AHW Investment Partnership, MFS Inc., and seven grantor-retained annuity trusts, all of which the Williamses controlled. In 2007, the Williamses sold one million shares at $55 per share. But, the Williamses halted their plan to sell all of their Citigroup stock because, based on Citigroup's filings and financial statements, they concluded that there was little downside to retaining their remaining 16.6 million shares. The Williamses allegedly held those shares for the next twenty-two months, finally selling them in March 2009 for $3.09 per share. After selling their 16.6 million shares, the Williamses sued Citigroup in the U.S. District Court for the Southern District of New York, arguing that their decision not to sell all of their shares in May 2007, and their similar decisions to hold on at least three later dates, were due to Citigroup's failure to disclose accurate information about its true financial condition from 2007 to 2009. The Second Circuit certified a question of Delaware law to the Delaware Supreme Court arising from an appeal of a New York District Court decision. The Second Circuit asked whether the claims of a plaintiff against a corporate defendant alleging damages based on the plaintiff's continuing to hold the corporation's stock in reliance on the defendant's misstatements as the stock diminished in value properly brought as direct or derivative claims. The Delaware Court answered: the holder claims in this action were direct. "This is because under the laws governing those claims [(]those of either New York or Florida[)] the claims belong to the stockholder who allegedly relied on the corporation's misstatements to her detriment. Under those state laws, the holder claims are not derivative because they are personal to the stockholder and do not belong to the corporation itself." View "Citigroup Inc., et al. v. AHW Investment Partnership, MFS, Inc., et al." on Justia Law 2016-05-24 state Delaware Delaware Supreme Court Leo Strine 641, 2015 http://law.justia.com/cases/federal/appellate-courts/ca6/15-5621/15-5621-2016-05-24.html Doshi v. General Cable Corp. 2016-05-24T07:30:50-08:00 2016-05-24T11:57:44-08:00 In October 2012, and again a year later, General Cable announced that it would reissue several public financial statements because they included material accounting errors. Soon after, City of Livonia Employees' Retirement System initiated a class-action suit against General Cable, under the 1934 Securities Exchange Act, 15 U.S.C. 78j(b), 78t(a), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. Livonia asserted that defendants acted at least recklessly in issuing or approving materially false public financial statements. The defendants countered that the misstatements resulted from accounting errors and a theft scheme in its Brazilian operations of which the defendants were unaware and that they promptly sought to remediate upon discovering them. The district court dismissed Livonia's complaint with prejudice because it failed to plead scienter adequately. The Sixth Circuit affirmed. Seven factors favored rejecting a scienter inference. Livonia cited no facts with sufficient particularity implicating suspicious insider trading or failure to disclose impending stock sales. View "Doshi v. General Cable Corp." on Justia Law 2016-05-24 federal U.S. Court of Appeals for the Sixth Circuit Deborah L. Cook 15-5621 http://law.justia.com/cases/federal/appellate-courts/ca6/15-5903/15-5903-2016-05-19.html Stein v. Regions Morgan Keegan Select High Income Fund, Inc. 2016-05-19T09:32:39-08:00 2016-05-19T11:23:37-08:00 When the five investment funds at issue lost nearly 90 percent of their value in 2007-2008, investors lost large sums. Various plaintiffs (investors) initially filed claims with the Financial Industry Regulatory Authority, participated in arbitration, or filed state suits. In 2013, they filed suit under the Securities Act of 1933, 15 U.S.C. 77k, 77l, and 77o, the Securities Exchange Act of 1934, 15 U.S.C. 78j(b) and 78t(a), and SEC Rule 10b-5. They alleged that the funds were overvalued and concentrated in risky securities and that investors relied on misrepresentations in purchasing the funds. The district court initially granted class certification, but dismissed the claims as barred by the statutes of limitations. The Sixth Circuit affirmed, holding that the suits were barred by the applicable statutes of repose. The court declined to "toll" those statutes View "Stein v. Regions Morgan Keegan Select High Income Fund, Inc." on Justia Law 2016-05-19 federal U.S. Court of Appeals for the Sixth Circuit Eric L. Clay 15-5903 15-5905 http://law.justia.com/cases/federal/appellate-courts/ca2/14-3648/14-3648-2016-05-19.html FDIC v. First Horizon Asset Securities, Inc. 2016-05-19T06:30:06-08:00 2016-05-19T16:56:59-08:00 The FDIC filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., as receiver for Colonial. The complaint was timely under the terms of the FDIC Extender Statute, 12 U.S.C. 1821(d)(14)(A), because it was filed less than three years after the FDIC was appointed receiver. However, because the complaint was filed more than three years after the securities at issue were offered to the public, it would be untimely under the terms of the Securities Act's statute of repose, 15 U.S.C. 77m. In Federal Housing Finance Agency v. UBS Americas Inc., the court held that a materially identical extender statute for actions brought by the FHFA did displace the Securities Act's statute of repose. The court concluded that UBS remains good law and that, under UBS, the FDIC's complaint was timely. Therefore, the court vacated the district court's judgment and remanded for further proceedings. View "FDIC v. First Horizon Asset Securities, Inc." on Justia Law 2016-05-19 federal U.S. Court of Appeals for the Second Circuit Gerard E. Lynch 14-3648 http://law.justia.com/cases/federal/appellate-courts/ca5/15-30413/15-30413-2016-05-18.html Meadaa v. Karsan 2016-05-18T15:30:35-08:00 2016-05-18T16:40:16-08:00 Plaintiffs, investors, filed suit contending that defendants sold securities representing shares in SaiNaith L.L.C. based on false statements that a hotel was owned by that company. The court focused on one of plaintiffs' theories under Louisiana Revised Statutes 51:712(A)(2) and 51:714, which allows purchasers of securities to recover their investment from the seller of the securities, who made the sale based on false representations. The court agreed with the district court that the summary judgment evidence establishes that SaiNaith never owned the hotel and the investors received interests in a shell company and defendants violated Louisiana law by representing otherwise. Accordingly, the court affirmed the judgment in favor of plaintiffs against defendants personally under the Louisiana statutes. View "Meadaa v. Karsan" on Justia Law 2016-05-18 federal U.S. Court of Appeals for the Fifth Circuit W. Eugene Davis 15-30413 http://law.justia.com/cases/federal/us/578/14-1132/ Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning 2016-05-16T06:30:26-08:00 2016-05-16T06:59:14-08:00 Manning held 2,000,000 shares of Escala stock. He claims that he lost most of his investment when its price plummeted after Merrill Lynch devalued Escala through "naked short sales." Unlike a typical short sale, where a person borrows stock from a broker, sells it to a buyer on the open market, and later purchases the same number of shares to return to the broker, the seller in a "naked" short sale does not borrow the stock he puts on the market, and never delivers the promised shares to the buyer. Securities and Exchange Commission's Regulation SHO prohibits short-sellers from intentionally failing to deliver securities. Manning claimed violation of New Jersey law, but referred explicitly to Regulation SHO, citing past accusations against Merrill Lynch and suggesting that the transactions at issue had again violated the regulation. Merrill Lynch removed the case, invoking general federal-question jurisdiction, 28 U. S. C. 1331, and the Securities Exchange Act of 1934, 15 U.S.C. 78aa(a). The Third Circuit ordered remand, holding that Manning's claims did not necessarily raise any federal issues and that the Exchange Act covers only cases that would satisfy the "arising under" test for general federal jurisdiction. The Supreme Court affirmed. The jurisdictional test established by Section 27 is the same as Section 1331's test for deciding if a case "arises under" a federal law. Section 27 confers federal jurisdiction over suits brought under the Exchange Act and the rare suit in which a state-law claim rises and falls on the plaintiff's ability to prove the violation of a federal duty. View "Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning" on Justia Law 2016-05-16 federal U.S. Supreme Court Elena Kagan 14-1132 http://law.justia.com/cases/federal/appellate-courts/ca8/14-3178/14-3178-2016-04-12.html IBEW Local 98 Pension Fund v. Best Buy Co., Inc. 2016-04-12T07:01:27-08:00 2016-04-12T17:25:55-08:00 Plaintiffs filed suit against Best Buy and three of its executives, alleging violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. Plaintiffs alleged that defendants made fraudulent or recklessly misleading public statements in a press release and conference call, which artificially inflated and maintained Best Buy's publicly traded stock price until the misstatements were disclosed. In this interlocutory appeal, defendants challenged the district court's certification of the class. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), the Supreme Court concluded that loss causation has no logical connection to the facts necessary to establish the efficient market predicate to Basic, Inc. v. Levinson's fraud-on-the-market theory. The court agreed with the district court that, when plaintiffs presented a prima facie case that the Basic presumption applies to their claims, defendants had the burden to come forward with evidence showing a lack of price impact. However, what the district court ignored is that defendants did present strong evidence on this issue. Defendants rebutted the Basic presumption by submitting direct evidence (the opinions of both parties' experts) that severed any link between the alleged conference call misrepresentations and the stock price at which plaintiffs purchased. Because plaintiffs presented no contrary evidence of price impact, they failed to satisfy the predominance requirement of Rule 23(b)(3). Therefore, the district court abused its discretion in certifying the class, and the court reversed and remanded. View "IBEW Local 98 Pension Fund v. Best Buy Co., Inc." on Justia Law 2016-04-12 federal U.S. Court of Appeals for the Eighth Circuit James B. Loken 14-3178 http://law.justia.com/cases/federal/appellate-courts/ca2/14-2853/14-2853-2016-04-12.html In re Pfizer Inc. Securities Litigation 2016-04-12T07:00:05-08:00 2016-04-12T20:11:13-08:00 Plaintiffs filed suit against Pfizer and others, alleging violations of federal securities laws because Pfizer made fraudulent misrepresentations and fraudulently omitted to disclose information regarding the safety of two of its drugs, Celebrex (celecoxib) and Bextra (valdecoxib). On appeal, plaintiffs argued that the district court abused its discretion in excluding the testimony of plaintiffs' expert regarding loss causation and damages. The court concluded that the district court abused its discretion by excluding the expert's testimony in its entirety; the district court erred in concluding that the expert needed to disaggregate the effects of Pfizer's allegedly fraudulent conduct from Searle's or Pharmacia's, regardless of whether Pfizer is ultimately found liable for the latters' statements; the testimony could have been helpful to the jury even without such disaggregation; as to the expert's adjustment to the price increases, the district court did not abuse its discretion in concluding that this change was not sufficiently reliable to be presented to a jury; the expert's error did not render the remainder of his testimony unreliable and the district court should have prevented him from testifying about the adjustment, but otherwise allowed him to present his findings on loss causation and damages; the district court erred in concluding, as a matter of law, that Pfizer had insufficient authority over certain Searle and Pharmacia statements as to have "made" them; but, however, the court's finding that the district court abused its discretion in excluding the expert's testimony does not turn on the question of Pfizer's ultimate liability for these statements. Accordingly, the court vacated the district court's grant of summary judgment for Pfizer and remanded. View "In re Pfizer Inc. Securities Litigation" on Justia Law 2016-04-12 federal U.S. Court of Appeals for the Second Circuit Debra Ann Livingston 14-2853 http://law.justia.com/cases/texas/supreme-court/2016/15-0489.html Janvey v. Golf Channel, Inc. 2016-04-01T06:03:57-08:00 2016-04-03T16:45:53-08:00 The Golf Channel, Inc. entered into an agreement with Stanford International Bank Limited (Stanford) under which Golf Channel received $5.9 million in exchange for media-advertising services. It was later discovered that Stanford used a classic Ponzi-scheme artifice. At issue in this case was whether Golf Channel must return all remuneration paid for services rendered absent proof the transaction benefited Stanford's creditors. The Fifth Circuit initially ordered Golf Channel to relinquish its compensation, concluding that media-advertising services have "no value" to a Ponzi scheme's creditors despite the same services being potentially "quite valuable" to the creditors of a legitimate business. On rehearing, the Circuit vacated its opinion and certified a question to the Supreme Court regarding the Texas Uniform Fraudulent Transfer Act (TUFTA), under which an asset transferred with intent to defraud a creditor may be reclaimed for the benefit of the transferor's creditors unless the transferee took the asset in good faith and for "reasonably equivalent value." The Supreme Court held that TUFTA does not contain separate standards for assessing "value" and "reasonably equivalent value" based on whether the debtor was operating a Ponzi scheme and that value must be determined objectively at the time of the transfer and in relation to the individual exchange at hand. View "Janvey v. Golf Channel, Inc." on Justia Law 2016-04-01 state Texas Supreme Court of Texas Eva Guzman 15-0489 http://law.justia.com/cases/federal/appellate-courts/ca2/14-4140/14-4140-2016-03-29.html Indiana. Pub. Ret. Sys. v. SAIC, Inc. 2016-03-29T06:30:11-08:00 2016-03-29T06:40:07-08:00 Plaintiffs filed suit against defendants, alleging securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), Section 20(a) of the Exchange Act, 15 U.S.C. 78t(a), and Securities and Exchange Commission Rule 10b‐5, 17 C.F.R. 240.10b‐5. Plaintiffs alleged material misstatements and omissions in SAIC's public filings regarding its exposure to liability for employee fraud in connection with SAIC's contract work for New York City's CityTime project. On appeal, plaintiffs challenged the district court's denial of their motion to vacate the judgment and to amend the complaint. The court disagreed with the district court's conclusion that amending the complaint to include the Financial Accounting Standard No. 5 (FAS 5) and Item 303 of the SEC Regulation S-K claims based on the March 2011 10‐K would be futile. Because the district court improperly denied plaintiffs' postjudgment motion to amend their FAS 5 and Item 303 claims, the court vacated the district court's order as to those claims and remanded for further proceedings. The court affirmed as to the remaining claims. View "Indiana. Pub. Ret. Sys. v. SAIC, Inc." on Justia Law 2016-03-29 federal U.S. Court of Appeals for the Second Circuit Raymond Joseph Lohier, Jr. 14-4140 http://law.justia.com/cases/federal/appellate-courts/ca8/14-3707/14-3707-2016-03-22.html SEC v. Quan 2016-03-22T07:30:57-08:00 2016-03-22T07:43:44-08:00 Defendant and the entities he controls appeal a judgment entered on jury verdicts finding securities fraud. The SEC alleged that defendant and his companies violated Section 17(a) of the Securities Act, 15 U.S.C. 77q(a); Section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5; and Section 206(4) of the Investment Advisers Act, 15 U.S.C. 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. 275.206(4)-8. The SEC also alleged that defendant personally violated Section 20(a) of the Securities Exchange Act, 15 U.S.C. 78t(a), and aided and abetted SCAF's violations of Section 10(b) and Rule 10b-5 and SIA's violations of Section 206(4) and Rule 206(4)-8, 15 U.S.C. 78t(e) (aiding-and-abetting liability). The jury found liability on every count except the alleged violations of Section 17(a)(1) and the allegation that defendant personally aided and abetted SCAF's violations of Section 10(b) and Rule 10b-5. Because the verdicts in this case are not actually inconsistent, the court assumed without deciding that defendant preserved his argument and proceeded to the merits. The jury's finding that defendant did not violate Section 17(a)(1), but did violate Rule 10b-5 was not inconsistent because the bar for finding liability was higher under Section 17(a)(1) than under Rule 10b-5(b); the jury could have found liability under Section 17(a)(3), requiring only negligence, without finding the intent or severe recklessness necessary for liability under Section 17(a)(1); there is no inconsistency in the jury finding that defendant personally violated Rule 10b-5, but did not aid and abet SCAF in violating the same rule; the court agreed with the district court that the jury need not agree on a particular false statement or misleading omission for liability under Section 17(a)(2) or Rule 10b-5(b); and the disgorgement award the district court ordered here was a permissible equitable remedy. Accordingly, the court affirmed the judgment. View "SEC v. Quan" on Justia Law 2016-03-22 federal U.S. Court of Appeals for the Eighth Circuit William Jay Riley 14-3707 http://law.justia.com/cases/federal/appellate-courts/cadc/14-1240/14-1240-2016-03-18.html The Loan Syndications Assoc. v. SEC 2016-03-18T06:30:59-08:00 2016-03-18T17:45:21-08:00 Petitioner challenges a joint regulation implementing a section of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78o-11. Congress added that particular section to the Exchange Act in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), Pub. L. No. 111-203, 941, 124 Stat. 1376. The court concluded that the Exchange Act provides a limited grant of jurisdiction, and only rules implementing specific, enumerated sections of the Act are entitled to direct review. Because Congress knew how to add sections to that list, but chose not to do so here, the court lacked jurisdiction over the appeal. Accordingly, the court transferred the petitions "in the interest of justice" to the United States District Court for the District of Columbia. View "The Loan Syndications Assoc. v. SEC" on Justia Law 2016-03-18 federal U.S. Court of Appeals for the District of Columbia Circuit Janice Rogers Brown 14-1240 http://law.justia.com/cases/federal/appellate-courts/ca2/15-2229/15-2229-2016-03-18.html Rinehart v. Lehman Brothers Holdings 2016-03-18T06:00:04-08:00 2016-03-18T20:07:45-08:00 Plaintiffs filed suit on behalf of a putative class of former participants in an employee stock ownership plan (ESOP) invested exclusively in Lehman's common stock, alleging that the Plan Committee Defendants, who were fiduciaries of the ESOP, breached their duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. Specifically, plaintiffs alleged that the Plan Committee Defendants breached ERISA by continuing to permit investment in Lehman stock in the face of circumstances arguably foreshadowing its eventual bankruptcy. Plaintiffs also filed claims against Lehman's former directors, including Richard S. Fuld. The district court dismissed plaintiff's consolidated amended complaint (CAC) and second consolidated amended complaint (SAC) for failure to state a claim. The court affirmed. The Supreme Court subsequently held in Fifth Third Bancorp v. Dudenhoeffer that ESOP fiduciaries are not entitled to any special presumption of prudence. After remand, the district court dismissed plaintiffs' third amended complaint (TAC). The court agreed with the district court that, even without the presumption of prudence rejected in Fifth Third, plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman's collapse. The court concluded as it had before, that plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees' retirement savings. Accordingly, the court affirmed the judgment. View "Rinehart v. Lehman Brothers Holdings" on Justia Law 2016-03-18 federal U.S. Court of Appeals for the Second Circuit Per Curiam 15-2229 http://law.justia.com/cases/federal/appellate-courts/ca7/15-1846/15-1846-2016-03-17.html Magruder v. Fidelity Brokerage Servs., LLC 2016-03-17T13:30:55-08:00 2016-03-17T13:58:01-08:00 Magruder bought 940,000 shares of Bancorp through his Fidelity account, paying $9,298. Years later he asked Fidelity for a certificate showing his ownership. When Fidelity did not comply, Magruder initiated arbitration through the Financial Industry Regulatory Authority. Magruder and Fidelity chose simplified arbitration, in which the arbitrator cannot award more than $50,000 in damages or order specific performance that would cost more than $50,000. Magruder had demanded $28,000 (actual plus punitive damages). The arbitrator directed Fidelity to deliver a stock certificate or explain why it could not do so. Fidelity explained that in 2005 the Depository Trust & Clearing Corporation, responsible for issuing Bancorp paper certificates, had placed a "global lock" on that activity as a result of Bancorp reporting that fraudulent shares bearing identification number 106 were flooding the market. In 2012 Bancorp offered to swap series 106 shares for new series 205 shares, but by then Bancorp had been delisted from stock exchanges and FINRA blocked the swaps. The arbitrator accepted this explanation. Magruder then filed suit. The district judge sided with Fidelity. The Seventh Circuit vacated for lack of jurisdiction. Even assuming that the parties are of diverse citizenship, the stakes cannot exceed $50,000, and the minimum under 28 U.S.C. 1332(a) is $75,000. View "Magruder v. Fidelity Brokerage Servs., LLC" on Justia Law 2016-03-17 federal U.S. Court of Appeals for the Seventh Circuit Frank Hoover Easterbrook 15-1846 http://law.justia.com/cases/federal/appellate-courts/ca2/14-0894/14-0894-2016-03-17.html DeKalb Cty. Pension Fund v. Transocean Ltd. 2016-03-17T06:00:04-08:00 2016-03-17T20:24:23-08:00 DeKalb filed suit against defendants, alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(a), 78t(a), and SEC Rule 14a‐9, 17 C.F.R. 240.14a‐9. The court held that Sections 9(f) and 18(a) provide "private right[s] of action that involve[ ] a claim of fraud, deceit, manipulation, or contrivance," to which a five‐year statute of repose now applies under section 1658(b), but Section 14(a) does not provide such a private right of action; the same three‐year statutes of repose that applied to Sections 9(f) and 18(a) before the passage of the Sarbanes‐Oxley Act of 2002 (SOX), Pub. L., No. 107‐204, 116 Stat. 745, which the court borrowed and applied to Section 14 in Ceres Partners v. GEL Associates, still apply to Section 14(a) today; the statutes of repose applicable to Section 14(a) begin to run on the date of the defendant's last culpable act or omission; DeKalb's lead‐plaintiff motion does not "relate back" under Rule 17(a)(3) to Bricklayers' filing of the original class‐action complaint; the Private Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. No. 104‐67, 109 Stat. 737, does not toll the statutes of repose applicable to Section 14(a); and the tolling rule in American Pipe & Construction Co. v. Utah does not extend to the statutes of repose applicable to Section 14(a). Accordingly, the court affirmed the district court's dismissal of DeKalb's s Section 14(a) claim as time‐barred by the applicable three‐year statutes of repose and its Section 20 claim for failure to state a claim upon which relief can be granted. View "DeKalb Cty. Pension Fund v. Transocean Ltd." on Justia Law 2016-03-17 federal U.S. Court of Appeals for the Second Circuit Jose A. Cabranes 14-0894 http://law.justia.com/cases/federal/appellate-courts/ca5/15-10435/15-10435-2016-03-16.html Janvey v. Romero 2016-03-16T15:30:31-08:00 2016-03-16T18:11:05-08:00 The Court Appointed Receiver for the Stanford International Bank Ltd. filed a fraudulent transfer claim against defendant, a former international advisor to the Stanford entities. The court concluded that there was a legally sufficient evidentiary basis for the jury's finding that the Receiver did not discover and could not reasonably have discovered the transfers to defendant and their fraudulent nature until after February 15, 2010, and that, therefore, the Receiver's fraudulent transfer claim was timely under the Texas Uniform Fraudulent Transfer Act's, Tex. Bus. & Com. Code 24.010 statute of repose. Therefore, the district court did not err in denying defendant's post-verdict motion for judgment as a matter of law as to the fraudulent transfer. The court did not reach the alternative issues raised by defendant. Finally, the court denied defendant's request to abate this appeal where defendant did not object during trial to this specific language in the jury instruction and he did not request a jury finding on market value even though the parties presented conflicting evidence of market value at trial. Further, defendant failed to brief this issue on the merits. Accordingly, the court affirmed the judgment. View "Janvey v. Romero" on Justia Law 2016-03-16 federal U.S. Court of Appeals for the Fifth Circuit Fortunato P. Benavides 15-10435 http://law.justia.com/cases/federal/appellate-courts/ca8/15-1072/15-1072-2016-03-15.html Securities and Exchange Comm. v. Duckson 2016-03-15T07:30:55-08:00 2016-03-15T11:45:04-08:00 The SEC filed a civil law enforcement action against Todd Duckson, the Fund, and related individuals and entities. A jury found Duckson liable for violating the antifraud provisions of the federal securities laws and for aiding and abetting the Fund's violations.The court held that the district court did not abuse its discretion by declining to admit the complete versions of the appraisals at issue under Federal Rule of Evidence 104 and 403. Further, Duckson cannot show that he was prejudiced by the district court's rulings. The court also concluded that the district court did not abuse its discretion by rejecting Duckson's proposal to set forth separately in the verdict form each alleged misstatement or omission where Duckson has not shown how the district court's factual findings conflict with the jury's findings; the jury was instructed on the relevant time period at issue; and the district court's verdict form did not deprive Duckson of a meaningful right to appellate review of the remedies determination or the liability finding. Accordingly, the court affirmed the judgment. View "Securities and Exchange Comm. v. Duckson" on Justia Law 2016-03-15 federal U.S. Court of Appeals for the Eighth Circuit Lavenski R. Smith 15-1072 http://law.justia.com/cases/federal/appellate-courts/ca5/15-10500/15-10500-2016-03-10.html Troice v. Proskauer Rose, L.L.P. 2016-03-10T10:31:28-08:00 2016-03-10T13:14:07-08:00 Plaintiffs filed a putative class action against Allen Standford's lawyers, Thomas Sjoblom, and the law firms where he worked, arguing that they aided and abetted Stanford's fraud and conspired to thwart the SEC's investigation of Stanford's Ponzi scheme. The district court subsequently denied defendants' motion to dismiss the complaint as barred by the attorney immunity under Texas law. The court held that, under Texas law, attorney immunity is a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine. The court reversed the district court's order denying defendants' motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no "fraud exception" to attorney immunity. Accordingly, the court rendered judgment that the case is dismissed with prejudice. View "Troice v. Proskauer Rose, L.L.P." on Justia Law 2016-03-10 federal U.S. Court of Appeals for the Fifth Circuit Edith Brown Clement 15-10500 http://law.justia.com/cases/federal/appellate-courts/ca2/15-588/15-588-2016-03-04.html In re Sanofi Sec. Litig. 2016-03-04T07:30:05-08:00 2016-03-04T20:41:45-08:00 Plaintiffs filed suit under federal securities laws and state blue sky laws, alleging that Sanofi made materially false or misleading statements regarding its breakthrough drug, Lemtrada, designed to treat multiple sclerosis. The district court granted defendants' motion to dismiss for failure to state a claim. The court agreed with the district court's reasoning and holding. The court writes principally to examine the impact of the Supreme Court's decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, decided after the district court rendered its decision. Given the sophistication of the investors here, the FDA's public preference for double‐blind studies, and the absence of a conflict between defendants' statements and the FDA's comments, the court concluded that no reasonable investor would have been misled by defendants' optimistic statements regarding the approval and launch of Lemtrada. Issuers must be forthright with their investors, but securities law does not impose on them an obligation to disclose every piece of information in their possession. As Omnicare instructs, issuers need not disclose a piece of information merely because it cuts against their projections. Accordingly, the court affirmed the judgment. View "In re Sanofi Sec. Litig." on Justia Law 2016-03-04 federal U.S. Court of Appeals for the Second Circuit Barrington D. Parker 15-588 15-623 http://law.justia.com/cases/federal/appellate-courts/ca11/14-14790/14-14790-2016-03-01.html Fried v. Stiefel Labs., Inc. 2016-03-01T10:03:01-08:00 2016-03-01T21:12:58-08:00 Plaintiff filed suit against Stiefel Labs and its president, Charles Stiefel, on several grounds, including a violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5. Plaintiff requested that the jury instructions, in order to prevail on a claim under Rule 10b-5(b), require plaintiff to prove only that defendants failed to disclose material information. The district court refused to include the jury instruction. The court concluded that plaintiff's jury instruction misstated the law because Rule 10b-5(b) does not prohibit a mere failure to disclose material information. Accordingly, the court affirmed the judgment. View "Fried v. Stiefel Labs., Inc." on Justia Law 2016-03-01 federal U.S. Court of Appeals for the Eleventh Circuit William Holcombe Pryor, Jr. 14-14790 http://law.justia.com/cases/delaware/court-of-chancery/2016/ca-9706-cb.html FdG Logistics LLC v. A&R Logistics Holdings, Inc. 2016-02-23T10:01:01-08:00 2016-02-23T11:17:17-08:00 In 2012, a private equity firm purchased a trucking company now owned by Buyer through a merger transaction. Plaintiff initiated this action as the representative of the selling securityholders (Securityholders) to recover a preclosing tax refund. Buyer, in response, asserted several counterclaims. Securityholders sought to dismiss Buyer's counterclaims. The Court of Chancery (1) denied Securityholders' motion to dismiss Buyer's common law fraud claim insofar as that claim asserted fraud based on extra-contractual statements made to Buyer before it entered the merger agreement, as Buyer was not prevented from asserting a claim for fraud based on representations outside the four corners of the merger agreement; (2) granted Securityholders' motion to dismiss Buyer's claim under the Delaware Securities Act and Buyer's claim of unilateral mistake, as these claims failed to state a claim for relief; and (3) granted Plaintiff's motion for summary judgment concerning the tax refund claim, as Buyer had no defense to Plaintiff's motion. View "FdG Logistics LLC v. A&R Logistics Holdings, Inc." on Justia Law 2016-02-23 state Delaware Delaware Court of Chancery Bouchard CA 9706-CB http://law.justia.com/cases/federal/appellate-courts/ca8/15-1838/15-1838-2016-02-10.html Rand-Heart of New York, Inc. v. Dolan 2016-02-10T08:04:24-08:00 2016-02-10T09:16:57-08:00 Rand-Heart filed a putative class action on behalf of purchasers of Dolan Company's securities under Sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. 78j(b), 78t(a). The district court dismissed the complaint for failure to state a claim. The court concluded that the district court erred in dismissing the section 10(b) and Rule 10b-5 claim and thus erred in dismissing the secondary liability claim under section 20(a). In this case, taking the allegations as true, DiscoverReady's financial instability caused by the decline in Bank of America was, at the least, so obvious that defendant must have been aware of it. Further, defendant's statements about "double-digit" growth and "lumpiness" are not protected by the Act's safe-harbor provision where these statements are not meaningfully cautionary and they are not company-specific warnings. Finally, the district court did not err in finding no loss-causation for the time period at issue. The court affirmed in part, reversed in part, and remanded for further proceedings. View "Rand-Heart of New York, Inc. v. Dolan" on Justia Law 2016-02-10 federal U.S. Court of Appeals for the Eighth Circuit William Duane Benton 15-1838 http://law.justia.com/cases/federal/appellate-courts/ca9/13-56838/13-56838-2016-02-01.html Jacksonville Pension Fund v. CVB 2016-02-01T10:01:41-08:00 2016-02-01T18:56:28-08:00 Jacksonville filed a putative class action against CVB alleging violations of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5. The district court granted CVB's motion to dismiss. The court concluded that vague optimistic statements by CVB officials are not actionable and the district court correctly dismissed the claims based on these boasts, characterizing them as puffery. Further, CVB's statements describing the Southern California real estate market and Generally Accepted Accounting Principles (GAAP) violations were not misleading. The court concluded, however, that the second amended complaint (SAC) sufficiently alleges falsity and scienter as to the "no serious doubts" statements in the 10-K on March 4, 2010, and the 10-Q on May 10, 2010. The court also concluded that the SAC adequately plead loss causation. The court held that the announcement of an investigation can "form the basis for a viable loss causation theory" if the complaint also alleges a subsequent corrective disclosure by the defendant. Therefore, the court dismissed the second amended complaint with respect to the "no serious doubts" representations made in the 10-K and the 10-Q and remanded for further proceedings. The court otherwise affirmed the judgment. View "Jacksonville Pension Fund v. CVB" on Justia Law 2016-02-01 federal U.S. Court of Appeals for the Ninth Circuit Andrew David Hurwitz 13-56838 http://law.justia.com/cases/federal/appellate-courts/ca1/14-2173/14-2173-2016-01-29.html Commodity Futures Trading Comm'n v. Wilson 2016-01-29T13:30:06-08:00 2016-01-29T18:36:32-08:00 The Commodity Futures Trading Commission (CFTC) filed this commodity trading fraud action against John B. Wilson and JBW Capital LLC, alleging that Defendants were liable under the Commodity Exchange Act for failing to register with the CFTC and for violating two commodity fraud provisions. The CFTC moved for summary judgment requesting a permanent injunction, restitution, and civil monetary penalties. The district court granted the CFTC's request for a finding of liability and imposed injunctive relief and civil penalties but declined to award restitution. Both sides appealed. The First Circuit affirmed the district court's grant of summary judgment and the relief it ordered, holding that the district court did not err in (1) finding that Wilson was liable for failure to register as a commodity pool operator; (2) granting summary judgment on the commodity fraud provisions; and (3) concluding that restitution was unavailable. View "Commodity Futures Trading Comm'n v. Wilson" on Justia Law 2016-01-29 federal U.S. Court of Appeals for the First Circuit Sandra Lea Lynch 14-2173 14-2224 http://law.justia.com/cases/federal/appellate-courts/ca2/15-0345/15-0345-2016-01-28.html Credit Suisse Secs. LLC v. Tracy 2016-01-28T07:30:07-08:00 2016-01-28T20:25:07-08:00 Five former employees of Credit Suisse began arbitration proceedings before FINRA concerning employment-related disputes. The employees had entered into employment agreements with Credit Suisse that included provisions to resolve all employment‐related disputes by arbitration before a private arbitration provider.Credit Suisse sought to compel the employees to dismiss the FINRA arbitration and pursue their claims in a non‐FINRA arbitral forum. The district court granted Credit Suisse's petition and entered judgment ordering the employees to pursue their claims in a non‐FINRA arbitral forum. The court concluded that FINRA Rule 13200 does not prohibit the enforcement of pre‐dispute waivers of a FINRA arbitral forum. Accordingly, the court affirmed the district court's judgment. View "Credit Suisse Secs. LLC v. Tracy" on Justia Law 2016-01-28 federal U.S. Court of Appeals for the Second Circuit Droney 15-0345 http://law.justia.com/cases/federal/appellate-courts/ca10/15-6009/15-6009-2016-01-20.html American Fidelity Assurance v. Bank of New York Mellon 2016-01-20T09:00:58-08:00 2016-01-21T04:58:16-08:00 American Fidelity Assurance Company sued the Bank of New York Mellon ("BNYM") for claims arising from BNYM's conduct as Trustee of a trust holding mortgage-backed securities owned by American Fidelity. BNYM did not assert a personal jurisdiction defense in its first two motions to dismiss or in its answer. In its third motion to dismiss, BNYM argued it was not subject to general jurisdiction in Oklahoma. The district court denied the motion, concluding BNYM had waived the defense by failing to raise it in prior filings. BNYM challenges that decision in an interlocutory appeal. Finding no reversible error, the Tenth Circuit affirmed. View "American Fidelity Assurance v. Bank of New York Mellon" on Justia Law 2016-01-20 federal U.S. Court of Appeals for the Tenth Circuit Scott Milne Matheson, Jr. 15-6009 http://law.justia.com/cases/california/court-of-appeal/2016/b259472.html State of California ex rel. Bartlett v. Miller 2016-01-19T12:00:24-08:00 2016-01-19T17:45:24-08:00 Plaintiff filed a qui tam suit on behalf of himself and the State under the California False Claims Act (CFCA), Gov. Code, 12650 et seq., alleging that ClubCorp had defrauded the State by failing to escheat the unclaimed initiation deposits of ClubCorp's members and former members. The trial court granted the State's motion to dismiss, concluding that plaintiff's qui tam action was based on business practices ClubCorp had previously disclosed in publicly available filings with the SEC and thus precluded by CFCA's public disclosure bar. The court concluded that the trial court erred in dismissing the qui tam complaint as barred by the public disclosure provision in former subdivision (d)(3)(A) where an SEC filing is not one of the disclosures identified in that subdivision as barring a qui tam action. Accordingly, the court reversed and remanded for further proceedings. View "State of California ex rel. Bartlett v. Miller" on Justia Law 2016-01-19 state California California Court of Appeal Dennis M. Perluss B259472 http://law.justia.com/cases/federal/appellate-courts/ca9/13-56903/13-56903-2016-01-15.html McGee v. China Electric Motor, Inc. 2016-01-15T10:02:07-08:00 2016-01-15T18:13:35-08:00 After the parties reached a settlement in a securities class action, the district court approved the settlement and awarded attorneys' fees. Class counsel appealed, contending that the fee award was arbitrary. The court concluded that the district court's choice to apply the lodestar method, rather than the percentage-of-fund method, was well within the district court's discretion. However, the court vacated and remanded for recalculation of the fee, concluding that the district court's near total failure to explain the basis of its award was an abuse of discretion. View "McGee v. China Electric Motor, Inc." on Justia Law 2016-01-15 federal U.S. Court of Appeals for the Ninth Circuit Per Curiam 13-56903 http://law.justia.com/cases/federal/appellate-courts/ca5/14-41141/14-41141-2016-01-13.html Local 731 v. Diodes, Inc. 2016-01-13T16:30:31-08:00 2016-01-14T12:15:32-08:00 Plaintiff, a putative class of purchasers of Diodes common stock, filed suit alleging that Diodes and its officers committed securities law violations. Despite publicly admitting that labor problems existed at its Shanghai production facility, and accurately predicting the impact of the problems on its quarterly financial results, Diodes is alleged to have omitted significant information about the extent and causes of the problems. The district court granted Diodes' motion to dismiss the complaint for failure to state a claim under the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4. The court affirmed the judgment, concluding that plaintiff's amended complaint failed to plead with particularity facts giving rise to a strong inference of scienter on the part of defendants. View "Local 731 v. Diodes, Inc." on Justia Law 2016-01-13 federal U.S. Court of Appeals for the Fifth Circuit Edith Hollan Jones 14-41141 http://law.justia.com/cases/federal/appellate-courts/ca7/15-1039/15-1039-2016-01-08.html Grede v. Bank of New York 2016-01-08T14:30:46-08:00 2016-01-08T14:52:30-08:00 Sentinel, a cash-management firm, invested customers' cash in liquid low-risk securities. It also traded on its own account, using money borrowed from BNYM, pledging customers' securities; 7 U.S.C. 6d(a)(2), 6d(b)), and the customers' contracts required the securities to be held in segregated accounts. Sentinel experienced losses that prevented it from maintaining its collateral with BNYM and meeting customer demands for redemption of their securities. Sentinel used its BNYM line of credit to meet those demands. In 2007 it owed BNYM $573 million; it halted customer redemptions and declared bankruptcy. BNYM notified Sentinel that it planned to liquidate the collateral securing the loan. The bankruptcy trustee refused to classify BNYM as a senior secured creditor, considering the use of customer funds as collateral to be fraudulent transfers, 11 U.S.C. 548(a)(1)(A) and claiming that BNYM was aware of suspicious facts that should have led it to investigate. The district judge dismissed the claim, finding that Sentinel had not been shown to have intended to defraud its customers. The Seventh Circuit reversed, holding that Sentinel made fraudulent transfers. On remand, the judge neither conducted an evidentiary hearing nor made additional findings, but issued a "supplemental opinion" that BNYM was entitled to accept the collateral without investigation. The Seventh Circuit reversed in part. BNYM remains a creditor in the bankruptcy proceeding, but is an unsecured creditor because it was on inquiry notice that the pledged assets had been fraudulently conveyed. View "Grede v. Bank of New York" on Justia Law 2016-01-08 federal U.S. Court of Appeals for the Seventh Circuit Richard Allen Posner 15-1039 http://law.justia.com/cases/federal/appellate-courts/ca6/15-1071/15-1071-2016-01-07.html Wright v. Comm'r of Internal Revenue 2016-01-07T08:00:39-08:00 2016-01-07T08:46:08-08:00 Internal Revenue Code section 1256 provides that an investor who holds certain derivatives at the close of the taxable year must "mark to market" by treating those derivatives as having been sold for fair market value on the last business day of the taxable year. A "foreign currency contract" is a "section 1256 contract" that an investor must mark to market. Contending that a foreign currency option is within the definition of "foreign currency contract," the Wrights claimed a large tax loss by marking to market a euro put option upon their assignment of the option to a charity. The Wrights' assignment of the option was part of a series of transfers of mutually offsetting foreign currency options that they executed over three days. These transactions apparently allowed the Wrights to generate a large tax loss at minimal economic risk or out-of-pocket expense. The Tax Court held that the Wrights could not recognize a loss upon assignment of the euro put option because the option was not a "foreign currency contract" under section 1256. The Sixth Circuit reversed. While disallowance of the claimed tax loss makes sense as tax policy, the statute's plain language clearly provides that a foreign currency option can be a "foreign currency contract." View "Wright v. Comm'r of Internal Revenue" on Justia Law 2016-01-07 federal U.S. Court of Appeals for the Sixth Circuit John M. Rogers 15-1071 http://law.justia.com/cases/federal/appellate-courts/ca2/14-4261/14-4261-2015-12-18.html SEC v. Miller 2015-12-18T07:30:08-08:00 2015-12-18T18:18:53-08:00 The SEC brought a civil enforcement proceeding against defendants and a jury subsequently found defendants liable for multiple claims of securities fraud. At issue is the district court's asset freeze order. The court held that the entry of the asset freeze order did not violate the Bankruptcy Code's automatic stay; the order fell within the "governmental unit" exception to the automatic stay provision, did not constitute impermissible "enforcement of a money judgment," and did not run afoul of SEC v. Brennan; and it was properly supported by a showing of ill‐gotten gains. Because the court is unable to determine whether sufficient evidence supports imposition of the order against the remaining seven Relief Defendants, the cause is remanded to the district court with instructions. View "SEC v. Miller" on Justia Law 2015-12-18 federal U.S. Court of Appeals for the Second Circuit Jose A. Cabranes 14-4261 http://law.justia.com/cases/tennessee/supreme-court/2015/e2012-01422-sc-r11-cv.html First Cmty. Bank, N.A. v. First Tennessee Bank, N.A. 2015-12-14T14:07:02-08:00 2015-12-15T11:46:03-08:00 Plaintiff, a bank, filed suit against multiple defendants for fraud, constructive fraud, civil conspiracy, negligent misrepresentation, unjust enrichment, and violation of the Tennessee Securities Act. Three non-resident defendants (the "Ratings Agencies") moved to dismiss based on lack of personal jurisdiction and failure to state a claim. The trial court granted the motion and dismissed Plaintiff's claims. The Supreme Court (1) affirmed the judgment of the trial court finding that Plaintiff failed to establish a prima facie case of personal jurisdiction under a theory of general jurisdiction or specific jurisdiction; but (2) vacated the dismissal of Plaintiff's action against the Ratings Agencies on the theory of conspiracy jurisdiction, holding that although Plaintiff has failed to establish a prima facie case of conspiracy jurisdiction at this point, the case must be remanded for the trial court to determine if Plaintiff should be allowed to conduct jurisdictional discovery on the conspiracy theory of personal jurisdiction in a manner consistent with the guidelines set forth in this opinion. View "First Cmty. Bank, N.A. v. First Tennessee Bank, N.A." on Justia Law 2015-12-14 state Tennessee Tennessee Supreme Court Bivins E2012-01422-SC-R11-CV http://law.justia.com/cases/federal/appellate-courts/ca2/14-3686/14-3686-2015-12-14.html ANZ Securities v. Giddens 2015-12-14T07:30:04-08:00 2015-12-14T19:02:46-08:00 This appeal concerns the proper application of Section 510(b) of the Bankruptcy Code in the Lehman bankruptcies. LBI, the debtor, was lead underwriter of unsecured notes issued by Lehman Holdings, its affiliates. After the bankruptcy of both the Lehman entity that issued the notes, Lehman Holdings, and the Lehman entity that was lead underwriter on the issuances, LBI, the Junior Underwriters were held to account for the noteholders' losses, and incurred loss for defense and settlements. The Junior Underwriters filed suit asserting claims for contribution or reimbursement against the liquidation estate of Debtor LBI. The bankruptcy court construed the statute to require subordination of the Junior Underwriters' contribution claims. The court, however, adopted the district court's construction of section 510(b), holding that in the affiliate securities context, "the claim or interest represented by such security" means a claim or interest of the same type as the affiliate security. Claims arising from securities of a debtor's affiliate should be subordinated in the debtor's bankruptcy proceeding to all claims or interests senior or equal to claims in the bankruptcy proceeding that are of the same type as the underlying securities. Accordingly, the court affirmed the judgment of the district court. View "ANZ Securities v. Giddens" on Justia Law 2015-12-14 federal U.S. Court of Appeals for the Second Circuit Dennis G. Jacobs 14-3686 http://law.justia.com/cases/federal/appellate-courts/ca7/14-3071/14-3071-2015-12-11.html Citadel Sec., LLC v. Chicago Bd. Options Exch., Inc. 2015-12-11T14:30:54-08:00 2015-12-11T14:49:36-08:00 Defendants are national securities exchanges registered with the U.S. Securities and Exchange Commission (SEC) and operate as self‐regulatory organizations that regulate markets in conformance with securities laws under the Securities Exchange Act of 1934, 15 U.S.C. 78a. Plaintiffs are securities firms and members of the defendant exchanges. They compete for customer order flow by displaying buy and sell quotations for particular stocks. Between at least January 2004 and June 2011, each defendant charged "payment for order flow" (PFOF) fees. Each defendant exchange imposes PFOF fees when a trade is made for a customer; however, these fees are not imposed for proprietary "house trades," where a firm trades on its own behalf. The Seventh Circuit affirmed dismissal of plaintiffs' suit, in which they sought to recover PFOF fees they claim were improperly charged. The district court lacked subject matter jurisdiction based on plaintiffs' failure to exhaust administrative remedies before the SEC. View "Citadel Sec., LLC v. Chicago Bd. Options Exch., Inc." on Justia Law 2015-12-11 federal U.S. Court of Appeals for the Seventh Circuit Joel Martin Flaum 14-3071 http://law.justia.com/cases/oregon/supreme-court/2015/s062642.html Roberts v. TriQuint Semiconductor, Inc. 2015-12-10T08:09:07-08:00 2015-12-10T09:42:22-08:00 TriQuint Semiconductor, Inc., and its directors were defendants in two consolidated shareholder derivative suits filed in Washington State. TriQuint moved to dismiss those suits on the ground that its corporate bylaws establish Delaware as the exclusive forum for shareholder derivative suits. The trial court denied TriQuint's motion to dismiss, and the Supreme Court allowed TriQuint's petition for an alternative writ of mandamus. After review, the Supreme Court concluded that, as a matter of Delaware law, TriQuint's bylaw was a valid forum-selection clause and bound its shareholders. The Court also concluded that, as a matter of Oregon law, the bylaw was enforceable. The Court issued a peremptory writ of mandamus directing the trial court to grant TriQuint's motion to dismiss. View "Roberts v. TriQuint Semiconductor, Inc." on Justia Law 2015-12-10 state Oregon Oregon Supreme Court Rives Kistler S062642 http://law.justia.com/cases/federal/appellate-courts/ca1/15-1080/15-1080-2015-12-08.html Flannery v. Securities & Exchange Comm'n 2015-12-08T13:30:03-08:00 2015-12-08T14:48:27-08:00 James Hopkins and John Flannery, two former employees of State Street Bank and Trust Company, were charged with violations of 15 U.S.C. 77q(a), 15 U.S.C. 78j(b), and 17 C.F.R. 240.10b-5 for engaging making material misrepresentations and omissions that misled investors about two State Street-managed funds. The United States Securities and Exchange Commission's (SEC) Chief Administrative Law Judge (ALJ) dismissed the proceeding, finding that neither defendant was responsible for or had ultimate authority over the documents at issue and that these documents did not contain materially false or misleading statements or omissions. The SEC reversed the ALJ with regard to a slide that Hopkins used at a presentation to a group of investors and two letters that Flannery wrote or had seen before they were sent to a investors. The Commission imposed cease-and-desist orders on both defendants, suspended them from association with any investment adviser or company for one year, and imposed civil monetary penalties. The First Circuit vacated the Commission's order, holding that the Commission's findings were not supported by substantial evidence. View "Flannery v. Securities & Exchange Comm'n" on Justia Law 2015-12-08 federal U.S. Court of Appeals for the First Circuit Sandra Lea Lynch 15-1080 15-1117 http://law.justia.com/cases/federal/appellate-courts/ca7/14-2150/14-2150-2015-11-24.html Stifel, Nicolaus & Co., Inc. v. Lac Du Flambeau Band of Lake Superior Chippewa Indians 2015-11-24T15:00:48-08:00 2015-11-24T20:11:07-08:00 This appeal was the most recent appeal in a series of lawsuits that have arisen over the sale of bonds by a corporation wholly owned by the Lac du Flambeau Band of Lake Superior Chippewa Indians (collectively, "the Tribal Entities"). In a prior action, the Seventh Circuit held that a bond indenture constituted an unapproved management contract under the Indian Gaming Regulatory Act ("IGRA") and was therefore void. Following more than three years of litigating the validity of other bond-related documents in federal and state court, the Tribal Entities instituted a tribal court action seeking a declaration that the bonds are invalid under the IGRA as well as tribal law. Certain "Financial Entities" and Godfrey & Kahn S.C. sought an injunction in the Western District of Wisconsin to preclude the Tribal Entities from pursuing their tribal court action. The district court preliminarily enjoined the Tribal Entities from proceeding against the Financial Entities but allowed the tribal action to proceed against Godfrey. The Seventh Circuit affirmed in part and reversed in part, holding that the district court (1) did not abuse its discretion in enjoining the tribal court action against the Financial Entities; but (2) made several errors of law in assessing whether Godfrey had established a likelihood of success on the merits. Remanded. View "Stifel, Nicolaus & Co., Inc. v. Lac Du Flambeau Band of Lake Superior Chippewa Indians" on Justia Law 2015-11-24 federal U.S. Court of Appeals for the Seventh Circuit Kenneth Francis Ripple 14-2150 14-2287 http://law.justia.com/cases/federal/appellate-courts/ca2/14-3373/14-3373-2015-11-16.html Deutsche Bank Nat'l v. Quicken Loans 2015-11-16T07:30:05-08:00 2015-11-16T18:26:27-08:00 The FHFA filed a summons with notice in state court asserting breach of contractual obligations to repurchase mortgage loans that violated representations and warranties and then Quicken removed the action to federal court. Plaintiff, as trustee of the subject residential mortgage‐backed securities trust, took control of the litigation and filed the complaint. Quicken moved to dismiss the suit. The court affirmed the district court's conclusion that (1) the statute of limitations ran from the date the representations and warranties were made; (2) the extender provision of the Housing and Economic Recovery Act,12 U.S.C. 4617(b)(12), did not apply to the Trustee's claim; and (3) the Trustee's claim for breach of the implied covenant of good faith and fair dealing was duplicative. View "Deutsche Bank Nat'l v. Quicken Loans" on Justia Law 2015-11-16 federal U.S. Court of Appeals for the Second Circuit Richard C. Wesley 14-3373 http://law.justia.com/cases/federal/appellate-courts/ca9/12-57232/12-57232-2015-10-23.html Costa Brava P'ship v. ChinaCast Educ. Corp. 2015-10-23T09:05:31-08:00 2015-10-24T06:55:54-08:00 ChinaCast founder and CEO Ron Chan embezzled millions from his corporation and misled investors through omissions and false statements. At issue was whether Chan's fraud can be imputed to ChinaCast, his corporate employer, even though Chan's actions was adverse to ChinaCast's interests. The court agreed with the Third Circuit and concluded that Chan's fraudulent misrepresentations - and, more specifically, his scienter or intent to defraud - can be imputed to ChinaCast. The court concluded that imputation is proper because Chan acted with apparent authority on behalf of the corporation, which placed him in a position of trust and confidence and controlled the level of oversight of his handling of the business. Accordingly, the court dismissed the complaint alleging securities fraud under Rule 12(b)(6). View "Costa Brava P'ship v. ChinaCast Educ. Corp." on Justia Law 2015-10-23 federal U.S. Court of Appeals for the Ninth Circuit M. Margaret McKeown 12-57232 http://law.justia.com/cases/federal/appellate-courts/ca7/15-1006/15-1006-2015-10-20.html Donnawell v. Hamburger 2015-10-20T14:00:43-08:00 2015-10-20T14:17:33-08:00 Plaintiff, a stockholder in DeVry, which operates for-profit colleges and universities, filed a shareholders' derivative suit against DeVry's board of directors. A 2005 incentive plan authorized awards of stock options to key employees, including the CEO. The plan limited awards to 150,000 shares per employee per year. Nonetheless, the company granted Hamburger, who became its CEO in 2006, options on 184,100 shares in 2010, 170,200 in 2011, and 255,425 in 2012. DeVry, discovering its mistake, reduced each grant under the 2005 plan to 150,000 shares, but allocated Hamburger 87,910 shares available under the company's 2003 incentive plan, which held shares that had not been allocated. Only the company's Plan Committee, not the Compensation Committee, was authorized to grant stock options under the 2003 plan; there was no Plan Committee in 2012. The grant of 87,910 stock options was approved by the Compensation Committee, and then by the independent directors as a whole. The Seventh Circuit affirmed dismissal. The directors who approved the Compensation Committee's recommendation were disinterested: the recommendation was a valid exercise of business judgment. Administration of the 2003 plan by the Compensation Committee, given the nonexistence of the Plan Committee, was not "a clear or intentional violation of a compensation plan," View "Donnawell v. Hamburger" on Justia Law 2015-10-20 federal U.S. Court of Appeals for the Seventh Circuit Richard Allen Posner 15-1006 http://law.justia.com/cases/federal/appellate-courts/ca6/15-5220/15-5220-2015-10-08.html Harris v. TD Ameritrade, Inc. 2015-10-08T07:00:41-08:00 2015-10-08T07:09:51-08:00 In 2005, the Harrises bought tens of thousands of shares in Bancorp through a TD Ameritrade account. Six years later, the Harrises sought to hold some of their Bancorp stock in another form, registered in their name and reflected in a physical copy of a certificate signifying their ownership. TD Ameritrade refused to convert the Harrises' form of ownership, stating that all Bancorp stock was in a "global lock," prohibiting activity in the stock, including changing the Harrises' form of ownership. The lock was created because someone had fraudulently created hundreds of millions of invalid shares of Bancorp stock. The Harrises sued, alleging that TD Ameritrade had violated SEC Rule 15c3-3 and Nebraska's version of the Uniform Commercial Code. The Sixth Circuit affirmed dismissal.. Neither the SEC Rule nor Nebraska's Commercial Code creates a private right of action to vindicate the alleged problem. View "Harris v. TD Ameritrade, Inc." on Justia Law 2015-10-08 federal U.S. Court of Appeals for the Sixth Circuit Jeffrey S. Sutton 15-5220