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Plaintiffs appealed the district court's dismissal of their amended securities fraud class action complaint, alleging that Atossa and its Chairman and CEO, Steven Quay, made a series of public statements about Atossa's breast cancer screening products that were materially false or misleading. The district court dismissed the complaint. The Ninth Circuit held that plaintiffs have properly alleged falsity and materiality as to some, but not all, of these statements. In this case, plaintiffs have sufficiently alleged that the following were materially false or misleading: (1) Quay's statement quoted in Atossa's December 20, 2012 Form 8–K filing describing the ForeCYTE Test as "FDA-cleared"; (2) Quay's statement during his interview with NewsMedical.Net that the ForeCYTE test had "gone through all of the FDA clearance process"; (3) Atossa's Form 8–K filing on February 25, 2013, giving notice of the FDA's warning letter; and (4) Quay's statement during his interview with the Wall Street Transcript that "FDA clearance risk has been achieved." Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "Levi v. Atossa Genetics, Inc." on Justia Law

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Patel saved $560,000, enough to purchase a 7-Eleven franchise. He kept the money with Portfolio; the contract gave Wagha discretion over the funds’ deployment. Wagha invested much of the money in options. By the time Patel needed the funds (four months later), the market was down and he had lost a considerable sum. A jury concluded that Wagha and Portfolio had broken their promise to invest the money conservatively and awarded Patel $136,000 for breach of contract plus $64,000 for securities fraud. The district court remitted the $64,000 award, ruling that Patel has not shown loss causation, but entered judgment on the $136,000 award. The Seventh Circuit affirmed, holding that the district court retained jurisdiction after it resolved the federal law claim. In addition, the federal-law claim should not have been dismissed. The premise of that holding—that the securities laws are concerned only with inaccurate pricing—was incorrect. Securities laws forbid fraud in all aspects of securities transactions, whether or not the fraud affects the instruments’ prices. One kind of fraud is procuring securities known to be unsuitable to a client’s investment goals, after promising to further those goals. View "Patel v. Portfolio Diversification Group, Inc." on Justia Law

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OCC, a clearing agency that facilitates trades in options and other financial instruments, developed a Capital Plan in an attempt to boost its capital reserves and to alter how fees and refunds were calculated. The DC Circuit remanded to the SEC, which approved OCC's proposed change to its rules, for further proceedings. In this case, the change was subject to approval by the SEC, which granted approval without itself making the findings and determinations prescribed by the Securities Exchange Act of 1934. The court held that, because the SEC effectively abdicated its responsibility to OCC, this did not represent the kind of reasoned decisionmaking required by either the Exchange Act or the Administrative Procedure Act. View "Susquehanna International Group v. SEC" on Justia Law

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Plaintiffs filed this would-be class action on behalf of all persons or entities who purchased or otherwise acquired the common stock of QSI, alleging that during the Class Period, QSI and its officers made false or misleading statements about the current and past state of QSI's sales "pipeline," and used those statements to support public guidance to investors about QSI's projected growth and revenue. The Ninth Circuit reversed the district court's dismissal of the complaint and remanded for further proceedings. The panel held that some of defendants' statements were mixed statements, containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings; a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5, by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings; many of defendants' non-forward-looking statements were materially false or misleading; and some of defendants' forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature. View "City of Miami Fire Fighters' and Police Officers' Retirement Trust v. Quality Systems, Inc." on Justia Law

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Stratasys shareholders filed a securities fraud action claiming several company promotional statements were knowingly false. The Eighth Circuit affirmed the district court's determination that these statements were mere puffery and that the shareholders failed to sufficiently plead that Stratasys knew its statements were false when made. In this case, the statements the shareholders claim were materially misleading were so vague and such obvious hyperbole that no reasonable investor would rely upon them. Therefore, without tying the timing of the knowledge to the allegedly misleading statements, the shareholders did not plead facts sufficient to support a strong inference of scienter. View "Macomb County Employees Retirement System v. Stratasys Ltd." on Justia Law

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ACE filed suit against LifeTime Funds' investment adviser, PMC, for breach of its section 36(b) fiduciary duty to the LifeTime Funds under the Investment Company Act (ICA) of 1940, 15 U.S.C. 80a-35(b). ACE based its excessiveness-of-adviser-fees challenge on all or part of the adviser fees paid to PMC by the funds in which the LifeTime Funds invest, fees which indirectly reduced the net asset values of the LifeTime Funds. The Eighth Circuit affirmed the district court's entry of judgment for PMC based on lack of statutory standing, holding that ACE cannot sue on behalf of a fund in which it lacks an interest. In this case, each mutual fund was a separate unregistered investment company and ACE had no security interest in the underlying funds. Therefore, the cross appeal and the motion to dismiss the cross appeal were moot or denied as moot. View "American Chemicals & Equipment Inc. 401(K) Retirement Plan v. Principal Management Corp." on Justia Law

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Plaintiffs, retired officers of Booz Allen, filed suit alleging that they were improperly denied compensation when, after their retirement, Booz Allen sold one of its divisions in the Carlyle Transaction. The Second Circuit affirmed the district court's dismissal of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., claims on the ground that Booz Allen's stock-distribution program was not a pension plan within the meaning of ERISA, and denial as futile leave to amend to "augment" the ERISA claims with new allegations; affirmed the dismissal of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 et seq., claims on the ground that they were barred by the Private Securities Litigation Reform Act of 1995 (PSLRA), 18 U.S.C. 1964(c); but vacated the district court's judgment to the extent it denied Plaintiff Kocourek leave to amend to add securities-fraud causes of action. The court remanded for the district court to consider his claims. View "Pasternack v. Shrader" on Justia Law

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Plaintiffs, holders of Petrobras equity, filed a class action against various defendants after the multinational oil and gas company was involved in money-laundering and kickback schemes. The district court certified two classes: the first asserting claims under the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq.; and the second asserting claims under the Securities Act of 1933,15 U.S.C. 77a et seq. The Second Circuit clarified the scope of the contested ascertainability doctrine and held that a class is ascertainable if it is defined using objective criteria that establish a membership with definite boundaries. That threshold requirement was met in this case. The court held that the district court committed legal error by finding that Federal Rule of Civil Procedure 23(b)(3)'s predominance requirement was satisfied without considering the need for individual Morrison v. National Australia Bank Ltd., 561 U.S. 247 (2010), inquiries regarding domestic transactions. Therefore, the court vacated this portion of the Certification Order. The court also held that the district court did not abuse its discretion by determining that the Exchange Act class met their burden under Basic Inc. v. Levinson, 485 U.S. 224 (1988), with a combination of direct and indirect evidence of market efficiency.  Accordingly, the court affirmed as to this issue. View "In re Petrobras Securities" on Justia Law

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ZPRIM sought review of the SEC's final order finding that petitioners made material misrepresentations to prospective clients in violation of the Investment Advisers Act of 1940, 15 U.S.C. 80b-1. The Eleventh Circuit vacated the violations and monetary sanctions related to the newsletter ZPRIM published in December 2009. In this case, ZPRIM's disclaimer was not boilerplate and was not buried among too many other things, but was explicit, repetitive and linked to the statement about which the SEC complains. Therefore, in light of the clear cautionary statements in the newsletter, the Commission's finding of materiality for that newsletter was not supported by substantial evidence. The court affirmed all other violations and sanctions. View "ZPR Investment Management Inc. v. SEC" on Justia Law

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In case no. 1130590, Kathryn L. Honea appealed the denial of her motion to vacate an arbitration award entered in favor of Raymond James Financial Services, Inc. ("Raymond James"), and Bernard Michaud, an employee of Raymond James (collectively, "RJFS"). In case no. 1130655, RJFS appealed the trial court's denial of its motion to dismiss for lack of jurisdiction; that appeal was dismissed. Honea opened several investment accounts with Raymond James. Honea and Raymond James executed a "client agreement" that included an arbitration provision. Honea filed a complaint in the Jefferson Circuit Court asserting that she had opened four accounts with Raymond James and that Michaud had acted as her financial advisor as to those accounts. She alleged that RJFS engaged in "abusive brokerage practices" in that her investments were not diversified, "were far too risky," and "were of poor quality." The arbitration panel dismissed Honea's breach-of-fiduciary-duty, negligence, wantonness, fraud, and Alabama Securities Act claims and proceeded to hear the breach-of-contract claims. An arbitration panel entered an award in favor of RJFS. The arbitration panel found that "Michaud did not sufficiently know his client nor make sufficient inquiry to attempt to know his client, her holdings, and/or her investment experience. These failures contributed to losses in [Honea's] account." However, the arbitration panel "denied" Honea's breach-of-contract claims, stating that they were "barred by the applicable statutes of limitations." Although the Alabama Supreme Court found one contract appeared to govern this case and that RJFS breached its duties by failing to properly understand Honea's investment knowledge before March 2000, Honea contended that allegedly improper transactions--the excessive use of margin and overly aggressive, high-risk trading occurring after March 2000--represented independent breaches of the FINRA rules. Those claims accrued within the six-year limitations period before her complaint was filed. Further, any knowledge by Honea of her losses did not mean that the trading activity was proper. Thus, to the extent that any transactions after March 2000 would be considered separate breaches of contract unrelated to the failure to properly know Honea, her holdings, or her investment experience, or setting up an "unsuitable" account, the Court found Honea demonstrated probable merit--for purposes of a Rule 59(g) hearing--that those claims would not be barred by the statute of limitations. Honea demonstrated that, in relation to the certain breach-of-contract claims, she was entitled to a Rule 59(g) hearing on her motion to vacate the arbitration award. View "Honea v. Raymond James Financial Services, Inc." on Justia Law