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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

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In 2008, Invenergy Wind LLC, a wind energy developer, was raising money for a Series B investment round, and Leaf Clean Energy Company (“Leaf Parent”), an investment fund, expressed interest. After extensive negotiations, Leaf Parent invested $30 million in Invenergy Series B notes through a vehicle called Leaf Invenergy Company (“Leaf”). The agreement governing the Series B notes gave noteholders such as Leaf the right to convert to equity and incorporated an LLC agreement that the noteholders and Invenergy would execute upon conversion. The Series B Note Agreement and the Series B LLCA also included provisions that prohibited Invenergy from conducting a “Material Partial Sale” without Leaf’s consent unless Invenergy paid Leaf a premium called a “Target Multiple.” Although the parties renegotiated several aspects of their agreements with one another over the next few years, the consent provisions persisted in substantially similar form into a Third Amended and Restated LLC Agreement, which was the operative agreement in this dispute. Leaf filed suit after Invenergy closed a $1.8 billion asset sale - a transaction that Invenergy conceded was a Material Partial Sale - without first obtaining Leaf’s consent or redeeming Leaf’s interest for the Target Multiple. After a trial, the Court of Chancery concluded that, although Invenergy had breached the Material Partial Sale consent provisions, Leaf was not entitled to the Target Multiple. The court then awarded only nominal damages because, according to the court, Invenergy had engaged in an “efficient breach.” The Court of Chancery directed the parties to complete a buyout of Leaf’s interests pursuant to another LLC Agreement provision that Invenergy had invoked after Leaf had filed suit. The Delaware Supreme Court disagreed with the Court of Chancery’s interpretation of the consent provision and its award of nominal damages and therefore reversed. Because Invenergy conducted a Material Partial Sale without Leaf’s consent and without paying Leaf the Target Multiple, Leaf was entitled to the Target Multiple as contractual damages. The Court awarded Leaf the Target Multiple in damages on condition that it surrenderd its membership interests in Invenergy. View "Leaf Invenergy Co. v. Invenergy Renewables LLC" on Justia Law

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After the SEC initiated federal proceedings against defendant, the district court appointed a receiver for one of defendant's entities. The receiver proposed a plan to collect and sell assets connected to a Ponzi scheme and distribute the proceeds. The Eleventh Circuit agreed with investors and held that the district court denied them due process by employing summary proceedings that did not allow them to present their claims and defenses or meaningfully challenge the receiver's decisions. In this case, the district court appointed the receiver, issued an injunction to freeze assets, and held status conferences regarding the receivership all within a few months. The receiver then separated investors into different categories and the district court issued an order that called for the receiver to collect and sell the receivership's insurance policies. These determinations by the receiver and the orders entered by the district court were made without giving investors sufficient notice and/or a meaningful opportunity to be heard. Accordingly, the court reversed and remanded for further proceedings. View "SEC v. Torchia" on Justia Law

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An investment adviser and its principals petitioned for review of the SEC's determination that they violated Section 206(2) and Section 207 of the Investment Advisers Act. The SEC alleged that petitioners failed for many years to disclose its arrangement with Fidelity and the conflicts of interest arising from that compensation. The DC Circuit denied the petition in part, holding that the Commission's findings of negligent violations under section 206(2) were supported by substantial evidence. However, the court granted the petition in part, holding that the Commission's findings of willful violations under section 207 based on the same negligent conduct were erroneous as a matter of law where the repeated failures to adequately disclose conflicts of interest were no more than negligent. View "The Robare Group, Ltd. v. SEC" on Justia Law

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The Court of Chancery found that the fair value of Aruba Networks, Inc., as defined by 8 Del. C. 262, was $17.13 per share, which was the thirty-day average market price at which its shares traded before the media reported news of the transaction that gave rise to the appellants’ appraisal rights. The issue this case presented for the Delaware Supreme Court's review centered on whether the Court of Chancery abused its discretion in arriving at Aruba’s thirty-day average unaffected market price as the fair value of the appellants’ shares. Because the Court of Chancery’s decision to use Aruba’s stock price instead of the deal price minus synergies was rooted in an erroneous factual finding that lacked record support, the Supreme Court answered that in the positive and reversed the Court of Chancery’s judgment. On remand, the Court of Chancery was directed to enter a final judgment for petitioners, awarding them $19.10 per share, which reflected the deal price minus the portion of synergies left with the seller as estimated by the respondent in this case, Aruba. View "Verition Partners Master Fund Ltd., et al. v. Aruba Networks, Inc." on Justia Law

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In this shareholder-derivative action, Shareholders of The Western Union Company averred several of Western Union’s Officers and Directors breached their fiduciary duties to the company by willfully failing to implement and maintain an effective anti-money-laundering-compliance program (AML-compliance program), despite knowing of systemic deficiencies in the company’s AML compliance. The Shareholders didn’t make a pre-suit demand on Western Union’s Board of Directors to pursue this litigation, and the district court found no evidence that such demand would have been futile. The district court thus dismissed the case, reasoning that the Shareholders’ obligation to make a pre-suit demand on the Board was not excused. The Tenth Circuit concurred with the district court's decision to dismiss, and affirmed. View "City of Cambridge Retirement v. Ersek" on Justia Law

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Nicholas Olenik, a stockholder of nominal defendant Earthstone Energy, Inc., brought class and derivative claims against defendants, challenging a business combination between Earthstone and Bold Energy III LLC. As alleged in the complaint, EnCap Investments L.P. controlled Earthstone and Bold and caused Earthstone stockholders to approve an unfair transaction based on a misleading proxy statement. Defendants moved to dismiss the complaint, claiming the proxy statement disclosed fully and fairly all material facts about the transaction, and Earthstone conditioned its offer on the approval of a special committee and the vote of a majority of the minority stockholders. The Court of Chancery agreed with the defendants and dismissed the case. While the parties briefed this appeal, the Delaware Supreme Court decided Flood v. Synutra International, Inc. Under Synutra, to invoke the MFW protections in a controller-led transaction, the controller must “self-disable before the start of substantive economic negotiations.” The controller and the board’s special committee must also “bargain under the pressures exerted on both of them by these protections.” The Court cautioned that the MFW protections would not result in dismissal when the “plaintiff has pled facts that support a reasonable inference that the two procedural protections were not put in place early and before substantive economic negotiations took place.” So the Supreme Court determined the Court of Chancery held correctly plaintiff failed to state a disclosure claim. But, the complaint should not have been dismissed in its entirety: applying Synutra, which the Court of Chancery did not have the benefit of at the time of its decision, plaintiff pled facts supporting a reasonable inference that EnCap, Earthstone, and Bold engaged in substantive economic negotiations before the Earthstone special committee put in place the MFW conditions. The Court of Chancery’s decision was affirmed in part and reversed in part, and the case remanded for further proceedings. View "Olenik v. Lodzinski, et al." on Justia Law