Justia Securities Law Opinion SummariesArticles Posted in Antitrust & Trade Regulation
Noto v. 22nd Century Grp.
Plaintiffs, investors in 22nd Century Group, alleged on behalf of an investor class that (1) Defendants engaged in an illegal stock promotion scheme in which they paid authors to write promotional articles about the company while concealing the fact that they paid the authors for the articles; and (2) Defendants failed to disclose an investigation by the Securities and Exchange Commission (“SEC”) into the company’s financial control weaknesses. Plaintiffs alleged they were harmed after public articles revealed the promotion scheme and stock prices fell. The district court dismissed the complaint for failing to state a claim. On appeal, Plaintiffs argued (1) they adequately alleged material misrepresentations sufficient to sustain claims under SEC Rule 10b-5; (2) their claim under Section 20(a) of the Securities Exchange Act was premised on a valid predicate violation of Section 10(b); and (3) the district court erred in dismissing the complaint with prejudice. The Second Circuit affirmed in part and vacated in part. On the first and second points, the court agreed that the allegation that Defendants failed to disclose the SEC investigation states a material misrepresentation and could also support Section 20(a) liability. However, the court found no merit in the remaining challenges. The court reasoned that because the complaint does not adequately allege that Defendants had a duty to disclose that they paid for the articles’ publication, Plaintiffs fail to state a claim that the existence of the stock promotion scheme constituted a materially misleading omission. View "Noto v. 22nd Century Grp." on Justia Law
Legacy Res., Inc. v. Liberty Pioneer Energy Source, Inc.
Legacy Resources, Inc. brought several claims against Liberty Pioneer Energy Source, Inc. The district court dismissed Legacy's breach of contract and trade secret claims on summary judgment, determining (1) Legacy violated the securities laws by acting as an unlicensed broker in recruiting investors on behalf of Liberty; and (2) Legacy's securities violations rendered its contract unenforceable under Utah Code 61-1-22(8). The Supreme Court affirmed in part and reversed in part, holding (1) the undisputed facts sustained the conclusion that Legacy acted as an unlicensed broker, which violation foreclosed the enforcement of one of its contracts; but (2) another of Legacy's contracts was not implicated by the securities violation, and thus the district court erred by granting summary judgment on Legacy's claim under that contract, along with its trade secret claim. View "Legacy Res., Inc. v. Liberty Pioneer Energy Source, Inc." on Justia Law
Mayor and City Council of Baltimore v. Citigroup, Inc.
Plaintiffs in this consolidated action sought relief on behalf of two large putative classes - one whose members bought auction rate securities and one whose members issued them - alleging that defendants triggered the market's collapse by conspiring with each other to simultaneously stop buying auction rate securities for their own proprietary accounts. The district court dismissed plaintiffs' complaints pursuant to Rule 12(b)(6). The court affirmed, holding that plaintiffs' complaints did not successfully allege a violation of Section 1 of the Sherman Act, 15 U.S.C. 1. Although the court did not reach the district court's implied-repeal analysis under Credit Suisse Securities (USC) LLC v. Billing, the district court was ultimately correct that the complaints failed to state a claim upon which relief could be granted. View "Mayor and City Council of Baltimore v. Citigroup, Inc." on Justia Law