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The Ninth Circuit affirmed the district court's grant of summary judgment for the SEC on its claims that defendant violated federal securities laws. Having considered the records in the criminal and civil proceedings in light of the relevant Restatement factors, the panel held that defendant's conviction determined the identical issues the SEC was required to prove to establish defendant's liability for securities fraud. Therefore, the district court did not err in entering summary judgment based on the preclusive effect of defendant's conviction. The panel rejected defendant's arguments to the contrary, and all pending motions were denied as moot. View "Securities and Exchange Commission v. Stein" on Justia Law

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The question before the Delaware Supreme Court in this case was whether the Court of Chancery properly applied Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) by reading it as: (1) allowing for the application of the business judgment rule if the controlling stockholder conditions its bid on both of the key procedural protections at the beginning stages of the process of considering a going private proposal and before any economic negotiations commence; and (2) requiring the Court of Chancery to apply traditional principles of due care and to hold that no litigable question of due care exists if the complaint fails to allege that an independent special committee acted with gross negligence. In the Supreme Court's previous affirmance of the Court of Chancery in Swomley v. Schlecht, 128 A.3d 992 (Del. 2015), the Court held that an interpretation of MFW based on these principles was correct. Accordingly, the Court affirmed. View "Flood v. Synutra International, Inc., et al." on Justia Law

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Plaintiff filed suit against Whole Foods and its executives, alleging that the company and its executives defrauded Whole Foods shareholders in violation of federal securities law by perpetuating weights-and-measures fraud against customers. The Fifth Circuit affirmed the district court's dismissal of the complaint for failure to state a claim, holding that plaintiffs failed to properly allege a material misrepresentation, scienter, or loss causation. In this case, plaintiffs failed to state a claim under section 10(b) of the Securities and Exchange Act based on defendants' comments because plaintiff failed to allege that defendants' particular statements about Whole Foods' prices were false. The court also held that defendants' comments about Whole Foods' commitments to transparency and quality, even if false, were immaterial. Furthermore, plaintiffs failed to identify a decline in stock price that shortly followed a corrective disclosure. Likewise, plaintiffs section 20(a) claims failed because they were derivative to the section 10(b) claims. View "Employees' Retirement System of the State of Hawaii v. Whole Foods Market, Inc." on Justia Law

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Esperion has never generated any revenue, relying solely upon investor funding. Esperion’s sole focus is the development of ETC-1002, a first-in-class oral medication for lowering LDL “bad cholesterol,” a significant risk factor in cardiovascular disease. Esperion hopes to market ETC-1002 as an alternative treatment for statin-intolerant patients and as an add-on for patients are unable to reach their recommended levels using statins alone. In 2015, Esperion had completed several clinical studies and reported that ETC-1002 was well-tolerated and demonstrated significant average LDL-cholesterol reductions. After a meeting with FDA officials regarding Phase 3 of the approval process, Esperion published a press release, stating that “[b]ased upon feedback from the FDA, approval of ETC-1002 in [specific] patient populations will not require the completion of a cardiovascular outcomes trial,” with cautionary language, suggesting that “Esperion may need to change the design of its Phase 3 program once final minutes from the FDA meeting are received.” Market reaction was mostly positive. Following its receipt of the final FDA minutes, Esperion published another press release, indicating that the “FDA has encouraged the Company to initiate a cardiovascular outcomes trial promptly.” Esperion’s stock dropped 48% the next day. Plaintiffs, the purchasers of Esperion common stock between the two press releases, brought a class action under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5. The Sixth Circuit reversed the district court holding that Plaintiffs failed to adequately plead a strong inference that Esperion’s CEO willfully or recklessly made misleading statements. Plaintiffs adequately alleged scienter. View "Dougherty v. Esperion Therapeutics, Inc." on Justia Law

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The Ninth Circuit affirmed the district court's holding that the general partnership interests at issue qualified as securities under federal law and that defendant violated federal securities law by selling unregistered securities and defrauding his investors. In this case, the general partnership interests at issue were stripped of the hallmarks of a general partnership and marketed as passive investments. The panel held that, in light of defendant's death during the pendency of the appeal and the executor replaced as the name party, as well as intervening Supreme Court precedent, several aspects of the district court's judgment require vacatur and remand. Therefore, the panel vacated the civil penalty order and the disgorgement order, remanding for further proceedings. View "USSEC v. Schooler" on Justia Law

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The Trusts initiated before FINRA an arbitration proceeding against the eight individuals who had owned Banque Pictet as partners and others, including Pictet Overseas, seeking to recover losses from custodial accounts with Banque Pictet. Pictet Overseas and the Partners then filed an action in federal district court, seeking to enjoin the arbitration, contending that, even if Rule 12200 of the FINRA Code of Arbitration Procedure for Customer Disputes required Pictet Overseas to arbitrate certain claims before FINRA, it did not require Pictet Overseas or the Partners to arbitrate the Trusts' claims. The Eleventh Circuit affirmed the district court's ruling that the Trusts' claims were non-arbitrable and held that FINRA Rule 12200 did not require arbitration. In this case, the Trusts' claims did not arise in connection with Pictet Overseas' or the Partners' business activities. Therefore, the court affirmed the district court's order permanently enjoining the Trusts from arbitrating in a FINRA forum their claims against Pictet Overseas and the Partners. View "Pictet Overseas Inc. v. Helvetia Trust" on Justia Law

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Pension Funds brought a putative securities fraud class action against Hertz and several of its current and former executives for violating sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995 (PSLRA), and Rule 10b-5, 17 C.F.R. 240.10b-5 by making materially false and misleading statements concerning the company’s financial results, internal controls, and future earnings projections. The Funds’ securities fraud allegations rely on a financial restatement Hertz issued with its fiscal year 2014 Form 10-K. In it, the Company admitted that “an inconsistent and sometimes inappropriate tone at the top was present under the then existing senior management” and that the tone “resulted in an environment which in some instances may have led to inappropriate accounting decisions and the failure to disclose information critical to … effective review[.]”. The Third Circuit affirmed the dismissal of the fourth amended complaint for failure to plead a strong inference of scienter, as required by the PSLRA. The court conducted a comparative analysis by considering both inferences favorable to the Funds as well as “plausible, nonculpable explanations for the defendant’s conduct” and did not effectively require the Funds to submit “smoking-gun” evidence to survive the defendants’ motions to dismiss. View "In re: Hertz Global Holdings Inc" on Justia Law

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Guadalupe Ontiveros, as minority shareholder in Omega Electric, Inc. (Omega), sued majority shareholder Kent Constable, his wife Karen, and Omega, asserting direct and derivative claims arising from a dispute over management of Omega and its assets. In response to Ontiveros's claim of involuntary dissolution of Omega, Appellants filed a motion to stay proceedings and appoint appraisers to fix the value of Ontiveros's stock. The superior court granted the motion, staying the action. Ontiveros then tried to dismiss his claim for involuntary dissolution without prejudice, but the court clerk would not accept his filing because the matter had been stayed. Ontiveros thus filed a motion, asking the court to revoke its order granting Appellants' motion, or in the alternative, to reconsider and then vacate the order. The court treated that motion as a motion for leave to file a dismissal with prejudice under Code of Civil Procedure section 581 (e), granted the motion, and allowed Ontiveros to dismiss his cause of action for involuntary dissolution of Omega. Without the existence of that claim, the court found no basis on which to stay the action and order an appraisal of the stock. As such, the court lifted the stay, terminating the procedure. Appellants appealed, contending the court abused its discretion in granting Ontiveros's motion. In addition, Appellants argued the trial court improperly interpreted section 2000 in granting the motion. Ontiveros countered by arguing the trial court's order was not appealable. The Court of Appeal determined Appellants presented an appealable issue, and was persuaded the trial court abused its discretion here: the superior court relied upon that code section as a mechanism to lift the stay and terminate the section 2000 special proceeding, misapplying the law. Consequently, the trial court's order was reversed. View "Ontiveros v. Constable" on Justia Law

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The Securities Litigation Uniform Standards Act (SLUSA) barred a plaintiff class from bringing a covered class action based on state law claims alleging that the defendants made a misrepresentation or omission or employed any manipulative or deceptive device in connection with the purchase or sale of a covered security. The panel held, in this case, that SLUSA precluded all of Northstar's claims against Schwab and that the district court correctly dismissed them. However, the panel held that the district court erred in dismissing the claims with prejudice. View "Northstar Financial Advisors v. Schwab Investments" on Justia Law

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Vanguard offers retail securities brokerage accounts. Its website stated that Vanguard offered a price of “$2 commissions for stock . . . trades” for customers who maintained a balance in Vanguard accounts of $500,000-$1,000,000. The Taksirs, whose holdings met that threshold, used Vanguard to purchase Nokia stock. Vanguard charged them a $7 commission for each of their respective purchases, stating that the Taksirs’ accounts “are not eligible for discounts for trading stocks and other brokerage securities because of IRS nondiscrimination rules” and that “[u]nfortunately, this information is not listed on the Vanguard Brokerage Commission and Fee Schedule.” Weeks later, Orit Taksir acquired additional Nokia stock in the same Vanguard account and was charged a $2 commission. The Taksirs filed a putative class action for fraud or deception under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law and breach of contract. The district court dismissed the UTPCPL claim but denied Vanguard’s motion to dismiss the contract claim. On interlocutory appeal, the Third Circuit affirmed. The Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. 78bb, does not bars investors’ claims that their broker overcharged them for the execution of securities transactions. The issue is whether the overcharges constitute “misrepresentation . . . in connection with the purchase or sale of a covered security.” The overcharges do not have a “connection that matters” to the securities transactions. View "Taksir v. Vanguard Group" on Justia Law