Justia Securities Law Opinion Summaries
Myun-Uk Choi v. Tower Research Capital, LLC
Plaintiffs, five South Korean citizens who traded a derivative financial product called KOSPI 200 futures on an overnight market of the Korea Exchange (KRX), filed suit against Tower and its CEO, alleging that, in 2012, Tower's trading of KOSPI 200 futures violated the anti-manipulation provisions of the Commodity Exchange Act (CEA).The Second Circuit affirmed the district court's grant of summary judgment on plaintiffs' CEA claims. The court concluded that the trading of KOSPI 200 futures on the KRX is not subject to the rules of the Chicago Mercantile Exchange (CME), and therefore rejected plaintiffs' contention that there is a genuine factual dispute as to whether Tower's trading was subject to the rules of the CME. The court also concluded that the district court did not abuse its discretion by excluding a report from plaintiffs' expert witness who opined that Tower's trading of KOSPI 200 futures was "subject to" the rules of the CME. The court further concluded that the district court's judgment does not contradict the court's prior ruling in this case. Finally, the court concluded that the district court properly rejected plaintiffs’ public policy arguments. View "Myun-Uk Choi v. Tower Research Capital, LLC" on Justia Law
Fedance v. Harris
In mid-2017, Felton created an “offshore entity,” FLiK, for “developing [an] online viewing platform that [would] allow creatives to sell/rent their projects.” To raise funds, FLiK created cryptographic “FLiK Tokens” and represented that investors could redeem the tokens on its platform after it launched. FLiK never registered FLiK Tokens with the SEC but promoted FLik on social media and published a whitepaper with details about the company. FLiK announced that “T.I.,” an Atlanta-based rapper and actor (Harris), had joined Felton. The actor Kevin Hart tweeted a photograph of himself with Harris and wrote, “I’m Super Excited for [T.I.] and his new venture with @TheFlikIO! FLiK sold the tokens for about six cents each. The value of FLiK tokens soared and then crashed down. Felton largely ignored messages from token purchasers. None of FLiK’s services or projects came to fruition.Fedance, who had purchased $3,000 worth of FLiK Tokens, brought a putative class action under the Securities Act of 1933, 15 U.S.C. 77l(a)(1), 77o(a), alleging that Felton and Harris sold unregistered securities, that Harris acted as a “statutory seller” of unregistered securities, and that Felton and Harris were liable as controlling persons of an entity, The district court dismissed the complaint as untimely under a one-year statute of limitations. The Eleventh Circuit affirmed. The complaint does not plausibly allege that Felton or Harris fraudulently concealed the facts necessary to assert claims under sections 12(a)(1) or 15(a) against them. View "Fedance v. Harris" on Justia Law
Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System
Plaintiffs filed a securities-fraud class action alleging that Goldman violated securities laws prohibiting material misrepresentations and omissions in connection with the sale of securities, 15 U.S.C. 78j(b); 17 CFR 240.10b–5, and maintained an artificially inflated stock price by repeatedly making false and misleading generic statements about its ability to manage conflicts. Seeking to certify a class of Goldman shareholders, Plaintiffs invoked the “basic presumption” that investors rely on the market price of a company’s security, which in an efficient market will reflect all of the company’s public statements, including misrepresentations. The Second Circuit affirmed certification of the class.The Supreme Court vacated. The generic nature of a misrepresentation often is important evidence of price impact that courts should consider at class certification, including in inflation-maintenance cases, although the same evidence may be relevant to materiality, an inquiry reserved for the merits phase of a securities-fraud class action. The Second Circuit’s opinion leaves doubt as to whether it properly considered the generic nature of Goldman’s alleged misrepresentations. Defendants bear the burden of persuasion to prove a lack of price impact by a preponderance of the evidence at class certification and may rebut the presumption of reliance if they “show that the misrepresentation in fact did not lead to a distortion of price.” A defendant must do more than produce some evidence relevant to price impact and must “in fact” “seve[r] the link” between a misrepresentation and the price paid by the plaintiff. Assigning defendants the burden of persuasion to prove a lack of price impact by a preponderance of the evidence will be outcome-determinative only in the rare case in which the evidence is in perfect equipoise. View "Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System" on Justia Law
Panircelvan Kaliannan v. Ee Hoong Liang
Plaintiffs, Singapore residents and citizens who invested in a now-defunct North Dakota company called North Dakota Developments, LLC (NDD), filed suit seeking damages from defendant for his role in convincing plaintiffs to buy fraudulent, unregistered securities.The Eighth Circuit affirmed the district court's denial of defendant's motion to dismiss for lack of personal jurisdiction, concluding that the district court did not err in determining that it had personal jurisdiction over defendant because his conduct and connection with North Dakota were such that he should have reasonably anticipated being haled into court there. The court also agreed with the district court that venue was proper where plaintiffs' claims arose from the sale or solicitation of unregistered, fraudulent North Dakota securities related to real property located in North Dakota. The court declined to consider the issue of forum non conveniens because defendant failed to raise the claim in the district court. Finally, the court concluded that the district court correctly granted summary judgment where defendant decided to stop participating in the district court litigation, including not responding to the motion for summary judgment. View "Panircelvan Kaliannan v. Ee Hoong Liang" on Justia Law
Rhode Island v. Alphabet, Inc.
After Cambridge Analytica improperly harvested user data from Facebook's social network, Google discovered that a security glitch in its Google+ social network had left the private data of some hundreds of thousands of users exposed to third-party developers. Google and its holding company, Alphabet, chose to conceal this discovery, made generic statements about how cybersecurity risks could affect their business, and stated that there had been no material changes to Alphabet's risk factors since 2017.Rhode Island, in a consolidated amended complaint, filed suit against Alphabet, Google, and others, alleging violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 for securities fraud, as well as violations of Section 20(a) of the Exchange Act. The district court granted Alphabet's motion to dismiss on the grounds that Rhode Island failed to adequately allege a materially misleading misrepresentation or omission and that Rhode Island failed to adequately allege scienter.The Ninth Circuit concluded that the complaint adequately alleged that Google, Alphabet, and individual defendants made materially misleading statements by omitting to disclose these security problems and that defendants did so with sufficient scienter, meaning with an intent to deceive, manipulate, or defraud. Applying an objective materiality standard, the panel concluded that Rhode Island's complaint plausibly alleges the materiality of the costs and consequences associated with the Privacy Bug, and its public disclosure, and how Alphabet's decision to omit information about the Privacy Bug in its 10-Qs significantly altered the total mix of information available for decisionmaking by a reasonable investor. Furthermore, the complaint adequately alleges scienter for the materially misleading omissions from the 10-Q statements. The panel also concluded that Rhode Island adequately alleged falsity, materiality, and scienter for the April 2018 and July 2018 10-Q statements. Accordingly, the panel reversed the district court's holdings to the contrary and reversed the dismissal of the section 20(a) control-person claims based on the 10-Q statements.Because the complaint does not plausibly allege that the remaining statements at issue are misleading material misrepresentations or omissions, the panel affirmed the district court's dismissal of the Section 10(b) and Rule 10b-5(b) statement liability claims based on these statements. The panel also affirmed the district court's dismissal of the Section 20(a) controlling-person claims for these statements. Finally, because the district court erred in sua sponte dismissing Rhode Island's claims under Rule 10b-5(a) and (c) when Alphabet had not targeted those claims in its motion to dismiss, the panel reversed the dismissal of the claims under Section 10(b) and Rule 10b-5(a) and (c) against all defendants and remanded to the district court. The panel also reversed the dismissal of Rhode Island's claims under Section 20(a) to the extent those claims depend on claims alleging violations of Rule 10b-5(a) and (c). View "Rhode Island v. Alphabet, Inc." on Justia Law
Aly v. Valeant Pharmaceuticals International, Inc.
Valeant develops and manufactures generic pharmaceuticals. Appellants purchased stock in Valeant after Valeant changed its business model to focus more on acquiring new drugs from other companies rather than developing its own. Valeant made promising representations about its financial performance based on its new business model. The price of Valeant stock skyrocketed nearly 350% in 2015. Before the district court addressed class certification in a putative class action on behalf of investors who purchased Valeant stock in 2015, alleging that the price was artificially inflated as a result of deceptive practices, the Appellants filed an “opt-out” complaint bringing the same claims in their individual capacities. The district court dismissed that complaint as untimely under the two-year limitations period.The Third Circuit vacated the dismissal. Putative class members may recover as part of the class or seek individual recourse. Members may initially proceed as part of a class, but certification may be denied later or members may discover that their individual claims are more valuable than the class claims and decide to pursue an opt-out complaint even if certification is likely. In either case, members are generally allowed to initiate an individual action. When a class complaint is filed, the limitations period governing the individual claims of putative members is tolled to protect the rights of putative members while avoiding needless identical lawsuits. Nothing further, such as a certification denial, is required to benefit from tolling. View "Aly v. Valeant Pharmaceuticals International, Inc." on Justia Law
United States v. Jean-Pierre
Guy Jean-Pierre, a corporate and securities attorney, aided an illegal stock trading operation. Through a series of self-dealing transactions, Jean-Pierre and his co-conspirators artificially inflated stock prices of a company they controlled. Jean- Pierre sent letters on the company’s behalf to the U.S. Securities and Exchange Commission (“SEC”) that contained false and misleading information and omitted material information from disclosures to potential investors. Jean-Pierre appealed his convictions for conspiracy to commit securities fraud and securities fraud as to four of the twenty-eight counts of conviction, arguing the district court erred in admitting evidence that he had previously used his niece’s signature without her permission to submit attorney letters to a stock trading website. Jean- Pierre also argued that three of the four convictions should have been reversed because the district court declined to give a requested instruction reiterating the government’s burden as to a specific factual theory. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Jean-Pierre" on Justia Law
The Nasdaq Stock Market LLC v. Securities and Exchange Commission
The DC Circuit dismissed, based on lack of jurisdiction, petitions for review of the SEC's order directing stock exchanges to submit a proposal to replace three plans that govern the dissemination of certain types of data with a single, consolidated plan. The exchanges specifically challenge provisions of the order requiring them to include three features relating to plan governance.The court concluded that the Commission has yet to decide whether the challenged features will make it into the new plan, and that section 25(a) of the Securities Exchange Act confers authority on the courts of appeals to review only final orders. In this case, although the Governance Order was definitive on the question whether the three challenged plan elements had to be included in the proposal, it was not a "definitive statement of position" on the question the Commission had initiated proceedings to answer—whether the three features should be included in the eventual plan. View "The Nasdaq Stock Market LLC v. Securities and Exchange Commission" on Justia Law
Donelson v. Ameriprise Financial Services, Inc.
Plaintiff filed suit against Defendants Sachse, Ameriprise, and individual Ameriprise officers, alleging violations of federal securities law. Plaintiff also sought to represent other Sachse and Ameriprise clients in a class action. Defendants filed motions to strike plaintiff's class action allegations and to compel arbitration, which the district court denied.The Eighth Circuit reversed and remanded for entry of an order striking plaintiff's class action allegations and compelling arbitration. The court concluded that it has appellate jurisdiction to review the district court's denial of defendants' motions to strike class action allegations because this denial was contained in an order reviewable under 9 U.S.C. 16(a)(1)(B). The court also concluded that defendants have not waived their right to arbitrate by moving to strike plaintiff's class action allegations at the same time they moved to compel arbitration where the action was not inconsistent with their right to arbitrate and did not substantially invoke the litigation machinery. On the merits, the court concluded that a valid arbitration clause exists and that it encompasses the dispute between the parties. In this case, the court agreed with defendants that the arbitration clause was valid because it was supported by mutual assent, was supported by consideration, and was not unconscionable. View "Donelson v. Ameriprise Financial Services, Inc." on Justia Law
GXP Capital v. Argonaut Manufacturing Services, et al
GXP Capital, LLC filed two lawsuits against defendants in different federal courts. GXP alleged defendants violated non-disclosure agreements by using confidential information to buy key assets at bargain prices from GXP’s parent company. Those cases were dismissed for lack of personal and subject matter jurisdiction. GXP then filed a third suit in Delaware Superior Court, which stayed the case on forum non conveniens grounds to allow GXP to file the same case in California state court - a forum the court decided had a greater connection to the dispute and was more convenient for the parties. On appeal GXP argued: (1) the Superior Court did not apply the correct forum non conveniens analysis when Delaware was not the first-filed action, the prior-filed lawsuits have been dismissed, and no litigation was pending in another forum; and (2) defendants waived any inconvenience objections in Delaware under the forum selection clause in their non-disclosure agreements. The Delaware Supreme Court affirmed, finding the trial court properly exercised its discretion in this case’s procedural posture to stay the Delaware case in lieu of dismissal when another forum with jurisdiction existed and that forum was the more convenient forum to resolve the dispute. “And certain of the defendants’ consent to non-exclusive jurisdiction in California did not waive their right to object to venue in other jurisdictions, including Delaware.” View "GXP Capital v. Argonaut Manufacturing Services, et al" on Justia Law