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The Supreme Court reversed the decision of the court of appeals reversing the judgment of the district court in this action alleging that Defendants sold or offered to sell unregistered securities and committed fraud in selling or offering to sell securities, holding that Kansas courts did not have jurisdiction to prosecute the criminal charges in this case. Defendants David Lundberg and Michael Elzufon were Minnesota residents who sold as principals for Kansas limited liability corporations what the State alleged to be securities by using intermediaries who resided in California. The California intermediaries, in turn, made sales presentations in California and sold the securities from California to individuals who were not Kansas residents. The district court dismissed the counts against Defendants related to the sales involving the California intermediaries. The court of appeals reversed, holding that the sales originated in Kansas and thus Kansas had territorial jurisdiction. The Supreme Court reversed, holding that the Kansas Uniform Securities Act, Kan. Stat. Ann. 17-21a101 et seq., did not allow Kansas courts to exercise jurisdiction over Defendants because neither an offer to sell nor a sale of securities occurred in Kansas. View "State v. Lundberg" on Justia Law

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The Ninth Circuit reversed the district court's dismissal of a putative class action against Northern Trust, alleging violations of state law involving breaches of fiduciary duty by a trustee. The district court determined that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) barred the case from proceeding in federal court. The panel held that SLUSA did not preclude plaintiffs' imprudent investment claims, because these claims did not meet the "in connection with' requirement for SLUSA preclusion. The panel also held that SLUSA did not preclude plaintiffs' fee-related claims, as well as plaintiffs' elder abuse claims and claims against NT Corp. The panel remanded for further proceedings. View "Banks v. Northern Trust Corp." on Justia Law

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The First Circuit affirmed the judgment of the district court dismissing this federal securities class action under the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78a-4, for failing adequately to plead scienter, holding that Plaintiffs failed to plead facts such that one could draw the "strong inference" of scienter required by the PSLRA. Plaintiffs brought this suit against Biogen Inc. and three Biogen executives alleging that Defendants committed fraud in violation of regulations promulgated by the Securities and Exchange Commission pursuant to the Securities and Exchange Act, 15 U.S.C. 78a et seq., by falsely stating that Tecfidera, Biogen's product, was safer and more widely used than it was. The district court granted Defendants' motion to dismiss for failing to plead facts "giving rise to a strong inference" of scienter, 15 U.S.C. 78a-4(b)(2)(A). The First Circuit affirmed, holding that the district court properly ruled that, under the PSLRA, Plaintiffs failed adequately to plead scienter for purposes of surviving a motion to dismiss for failure to state a claim. View "Metzler Asset Management GMBH v. Kingsley" on Justia Law

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The Fifth Circuit withdrew its prior panel opinion and substituted the following opinion. The court reversed the district court's grant of summary judgment for the SEC in a civil enforcement action against defendants. At issue was whether investors expected to profit solely from the efforts of managers. The court held that defendants put forth enough evidence to raise genuine issues of fact regarding the three Williamson factors, which addressed situations were investors depend on a third-party manager for their investment's success. Accordingly, the court reversed the district court's ruling on the Williamson factors: whether the drilling projects left the investors so little power that the arrangement in fact distributes power as would a limited partnership; whether the drilling project investors were so inexperienced and unknowledgeable in business affairs that they were incapable of intelligently exercising their powers; and whether the investors are so dependent on some unique entrepreneurial or managerial ability of the managers that they cannot replace the manager of the enterprise or otherwise exercise meaningful partnership or venture powers. View "SEC v. Arcturus Corp." on Justia Law

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StoneMor sells funeral products and services and is required by state law to hold in trust a percentage of proceeds from “pre-need sales.” Under Generally Accepted Accounting Principles (GAAP), preneed sales held in trusts may not be represented as current revenue StoneMor issued nonGAAP financials that represented pre-need sales as a portion of current revenue; borrowed cash to distribute to investors the proceeds of preneed sales in the same quarter the sale was made; and used proceeds from equity sales to pay down the borrowed cash that funded those distributions. In 2016, StoneMor announced that it would restate about three years of previously-reported financial statements. Under GAAP regulations, StoneMor was temporarily prohibited from selling units and receiving corresponding equity proceeds. Plaintiffs allege that this prohibition caused StoneMor’s October 2016 unit distribution to fall by nearly half; StoneMor blamed the cut on salesforce issues. StoneMor’s unit price dropped by 45%. Investors sued under the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5, alleging that Defendants made false or misleading statements, with scienter, which Plaintiffs relied on to their financial detriment. The Third Circuit affirmed the dismissal of the case for failure to satisfy the heightened pleading standards of the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4. In a securities fraud case, a defendant’s sufficient disclosure of information can render alleged misrepresentations immaterial. StoneMor’s disclosures sufficiently informed reasonable investors of the risks inherent in its business. View "Fan v. Stonemor Partners LP" on Justia Law

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Blue Bell Creameries USA, Inc. suffered a listeria outbreak in early 2015, causing the company to recall all of its products, shut down production at all of its plants, and lay off over a third of its workforce. Three people died as a result of the listeria outbreak. Pertinent here, stockholders also suffered losses because, after the operational shutdown, Blue Bell suffered a liquidity crisis that forced it to accept a dilutive private equity investment. Based on these unfortunate events, a stockholder brought a derivative suit against two key executives and against Blue Bell’s directors claiming breaches of the defendants’ fiduciary duties. The complaint alleges that the executives breached their duties of care and loyalty by knowingly disregarding contamination risks and failing to oversee the safety of Blue Bell’s food-making operations, and that the directors breached their duty of loyalty. The defendants moved to dismiss the complaint for failure to plead demand futility. The Court of Chancery granted the motion as to both claims. The Delaware reversed: "the mundane reality that Blue Bell is in a highly regulated industry and complied with some of the applicable regulations does not foreclose any pleading-stage inference that the directors’ lack of attentiveness rose to the level of bad faith indifference required to state a 'Caremark' claim. ... The complaint pled facts supporting a fair inference that no board-level system of monitoring or reporting on food safety existed." View "Marchand v. Barnhill, et al." on Justia Law

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Individual retail-brokerage customers of Paine-Webber who purchased Enron securities, and Enron employees who acquired employee stock options, filed suit against subsidiaries of UBS, alleging violations of the securities laws for their role as a broker of Enron's employee stock option plan and for failure to disclose material information about Enron's financial manipulations to its retail investors. The Fifth Circuit affirmed the district court's dismissal of the complaint for failure to state a claim under the Securities Act of 1933 and the Securities Exchange Act of 1934. The court held that plaintiffs failed to demonstrate that the grant of Enron options amounted to the sale of a security, and failed to establish that either defendant had material, nonpublic knowledge to disclose and a duty to disclose. Furthermore, the district court did not abuse its discretion in denying plaintiffs an additional chance to amend their complaint. View "Lampkin v. UBS Financial Services, Inc." on Justia Law

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Petitioner sought review of a 2016 order entered by the Commission denying his motion to set aside a 1992 default judgment order requiring him to pay reparations plus interest to June and Louie Stidham for violations of the Commodity Exchange Act. The Eleventh Circuit granted respondents' motion to dismiss the petition for lack of jurisdiction and dismissed the petition for want of jurisdiction. The court held that, taken together, the statutory text, context, and legislative history are a "clear statement" of congressional intent that the bond requirement in 7 U.S.C. 18(e) is jurisdictional. Therefore, the petition for review must be dismissed because petitioner failed to post the bond. View "Word v. U.S. Commodity Futures Trading Commission" on Justia Law

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Plaintiffs filed suit alleging that defendants induced them to join a business enterprise with material misrepresentations and omissions in violation of the Securities Exchange Act of 1934. Defendants proposed to plaintiffs that if they will set up businesses that provide intraoperative neuromonitoring procedures, defendants would manage them, and through signature billing practices, make plaintiffs a substantial profit. The district court granted defendants' motion to dismiss. The Fifth Circuit held that the limited partnership interests in this case were securities and thus plaintiffs have adequately pleaded the existence of a security; Statements 1, 6, and 7, as well as all three omissions, were properly dismissed; but plaintiffs adequately stated a 10b-5 claim with regard to Villarreal and the defendant entities for Statements 2–5. However, plaintiffs' case against Casarez failed with regard to these statements. Accordingly, the court reversed and remanded in part and affirmed in part. View "Masel v. Villarreal" on Justia Law

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The Supreme Court modified and affirmed the decision of the court of appeals to uphold the judgment of the trial court refusing to grant a new trial to Defendant, who was held liable pursuant to N.C. Gen. Stat. 78A-56(a)(2), which prohibits a person from selling securities by means of false and misleading statements of material fact, holding that the court of appeals did not err by affirming the challenged judgment and orders. Defendant argued, among other things, that the trial court had erred in determining that Plaintiffs had sufficiently established that Defendant was liable pursuant to section 78A-56(a)(2). The court of appeals concluded that "any person who is a seller or offeror" of securities is liable pursuant to section 78A-56(a) and that Plaintiffs were not required to prove that Defendant acted with scienter. The Supreme Court affirmed as modified, holding (1) the trial court did not abuse its discretion by denying Defendant's motion for a new trial; (2) Defendant did not preserve his challenge to the trial court's refusal to give an explicit "safe harbor" instruction to the jury for purposes of appellate review; and (3) Defendant was not entitled to relief from the trial court's judgment and orders on the basis of his primary liability and scienter claims. View "Piazza v. Kirkbride" on Justia Law