Justia Securities Law Opinion Summaries

Plaintiff co-established Company. Plaintiff later sold his majority interest pursuant to an agreement calling for payments to Plaintiff and giving Plaintiff a security interest in Company's assets. Company subsequently applied for credit with Bank, which transaction made Plaintiff's security interest in Company's assets subordinate to Bank's. Thereafter, Company went out of business, leaving loans unpaid. Plaintiff brought claims against Bank for negligence, constructive fraud, actual fraud, and tortious interference with a contract. The trial court granted Bank's motion for judgment on the evidence on all claims, including finding that Bank owed no duty to Purcell. The court of appeals affirmed the trial court's ruling as to the issues of duty but reversed the trial court's judgment on the evidence as to Purcell's remaining claims. The Supreme Court granted transfer and affirmed the trial court, holding (1) there was not sufficient evidence presented in this case to withstand a motion for judgment on the evidence on Purcell's claims of fraud, deception, and tortious interference with a contract; and (2) Purcell's relationship with Bank as a subordinate creditor did not give rise to a duty of care required to prove Purcell's claims of negligence and constructive fraud.View "Purcell v. Old Nat'l Bank" on Justia Law

This case presented a battle between banks over the proceeds of the sale of cattle by a financially strapped borrower who had financial dealings with both banks. When Security Savings Bank (Security) obtained the proceeds of the sale, Peoples Trust and Savings Bank (Peoples) claimed a security interest in the proceeds and sued for conversion. The district court granted summary judgment in favor of Peoples. After Security appealed, Peoples commenced garnishment proceedings against Security to enforce its judgment, and Security paid the underlying judgment. The court of appeals then determined that Security had waived its right to appeal and dismissed the case. The Supreme Court affirmed, holding (1) a defendant faced with post-judgment garnishment does not waive a pending appeal by paying the judgment in order to avoid further enforcement proceedings; and (2) the district court correctly determined that Peoples had a security interest in the proceeds superior to Security's interest and that Peoples did not waive its superior position through its course of conduct.View "Peoples Trust & Savings Bank v. Sec. Savings Bank" on Justia Law

Earl and Nawana Wallace (the Senior Wallaces) borrowed $15,789 from Pinnacle Bank - Wyoming to finance a vehicle the Senior Wallaces purchased for their son and his wife (the Junior Wallaces). The collateral for the loan was the vehicle the Senior Wallaces bought for and titled in the Junior Wallaces' names. To that end, the Junior Wallaces signed a third party security agreement pledging the vehicle as collateral. The Junior Wallaces subsequently filed a bankruptcy petition. The bankruptcy trustees eventually sold the vehicle to benefit the bankruptcy estate. The Senior Wallaces thereafter stopped making payments on the loan. Pinnacle then filed a complaint seeking damages in the amount of the principal due on the note. The district court granted Pinnacle's motion for summary judgment. The Supreme Court affirmed, holding that none of the Senior Wallaces' asserted defenses excused them from meeting their loan obligation. View "Wallace v. Pinnacle Bank - Wyo." on Justia Law

Plaintiff sued defendant asserting causes of action for breach of fiduciary duty, gross negligence, and breach of contract where the gravamen of the complaint was that defendant mismanaged the portfolio of an entity whose obligations plaintiff guaranteed. At issue was whether the Martin Act, General Business Law art 23-A, preempted plaintiff's common-law causes of action for breach of fiduciary duty and gross negligence. The court agreed with plaintiff that the Martin Act did not preclude a private litigant from bringing a nonfraud common-law cause of action where the Martin Act did not expressly mention or otherwise contemplate the elimination of common-law claims.View "Assured Guar. (UK) Ltd. v J.P. Morgan Inv. Mgt. Inc." on Justia Law

Liberty commenced this action against the Trustee under the Indenture, seeking injunctive relief and a declaratory judgment that the proposed Capital Splitoff would not constitute a disposition of "substantially all" of Liberty's assets in violation of the Indenture. The Court of Chancery concluded, after a trial, that the four transactions at issue should not be aggregated, and entered judgment for Liberty. The Court of Chancery concluded that the proposed splitoff was not "sufficiently connected" to the prior transactions to warrant aggregation for purposes of the Successor Obligor Provision. The court agreed with the judgment of the Court of Chancery and affirmed.View "The Bank of New York Mellon Trust Co. v. Liberty Media Corp." on Justia Law

This case arose when Commerzbank agreed to acquire Dresdner Bank in September 2008. As part of the deal, Commerzbank also acquired Dresdner Bank's trust preferred structures, and holders of Dresdner's trust preferred securities received distributions in both 2009 and 2010. Plaintiff claimed that paying those distributions "pushed," or required Commerzbank to make distributions on, a class of its owned preferred securities in which plaintiff had an interest, and, by the complaint, plaintiff asked the court to enforce that alleged obligation. Plaintiff also sought specific performance of a support agreement that was argued to require the elevation of the liquidation preference of Commerzbank's trust preferred securities in response to a restructuring of one class of the Dresdner securities. The parties filed cross-motions for summary judgment. The court held, among other things, that because the DresCap Trust Certificates did not qualify as either Parity Securities, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim under the Pusher Provision. The court also held that because DresCap Trust Certificates did not qualify as either Parity Securities or Junior Securities, Section 6 of the Support Undertaking was not triggered by amendment of the DresCap Trust IV Certificates. Accordingly, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim that the amendment of the DresCap Trust IV Certificates required defendants to amend the Trusted Preferred Securities.View "The Bank of New York Mellon v. Commerzbank Capital Funding Trust II, et al." on Justia Law

Central Mortgage Company (CMC) sued Morgan Stanley after mortgages for which CMC purchased servicing rights from Morgan Stanley began to fall delinquent during the early financial crisis of 2007. CMC subsequently appealed the dismissal of its breach of contract and implied covenant of good faith and fair dealings claims. The court held that the Vice Chancellor erroneously dismissed CMC's breach of contract claims on the basis of inadequate notice where CMC's pleadings regarding notice satisfied the minimal standards required at this early stage of litigation. The court also held that the Vice Chancellor erroneously dismissed CMC's implied covenant of good faith and fair dealings claim where the claims were not duplicative. Accordingly, the court reversed the Vice Chancellor's judgment dismissing all three of CMC's claims and remanded for further proceedings.View "Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC" on Justia Law

Plaintiffs James Adams, Stanley Dye and Ed Holcombe were all shareholders in Altrust Financial Services, Inc. They sued Altrust, the Peoples Bank of Alabama (collectively, Altrust) and Dixon Hughes, LLC, Altrust's public-accounting firm, for violating the Alabama Securities Act. Altrust is a holding company that fully owns, controls and directs the operations of the Bank. Altrust and the Bank share common officers and directors and issue consolidated financial statements. Shareholders voted to reorganize the company in 2008 from a publicly held company to a privately held company. The move would have freed the company of certain reporting obligations imposed by the federal Securities Exchange Act and allowed the company to elect Subchapter S status for tax purposes. Relying on information in a proxy statement, Plaintiffs elected not to sell their shares of Altrust stock and instead voted for reorganization. Plaintiffs alleged that the proxy statement and financial reports contained material misrepresentations and omissions that induced them to ultimately sign shareholder agreements that made them shareholders in the newly reorganized Altrust. Plaintiffs contended that if (in their view) instances of mismanagement, self-dealing, interested-party transactions and "skewing" of company liabilities had been fully disclosed, they would have elected to sell their shares rather than remain as shareholders. Upon review, the Supreme Court found that Plaintiffs' allegations were not specific to them but to all shareholders, and as such, they did not have standing to assert a direct action against the company. Because Plaintiffs did not have standing to assert claims against Altrust, they also lacked standing to assert professional negligence claims against the accounting firm. The Court remanded the case for further proceedings. View "Altrust Financial Services, Inc. v. Adams" on Justia Law

Plaintiffs, companies that acquired Floating Rate Accrual Notes (FRANs), commenced numerous separate actions against Argentina seeking damages for the nation's default on the bonds and the claims were subsequently consolidated. At issue, through certified questions, was whether Argentina's obligation to make biannual interest-only payments to a bondholder continued after maturity or acceleration of the indebtedness, and if so, whether the bondholders were entitled to CPLR 5001 prejudgment interest on payments that were not made as a consequence of the nation's default. The court answered the certified questions in the affirmative and held that the FRANs certificate required the issuer to continue to make biannual interest payments post-maturity while the principal remained unpaid; having concluded that the obligation to make biannual interest payments continued after the bonds matured if principal was not promptly repaid, and that nothing in the bond documents indicated that the payments were to stop in the event of acceleration of the debt, it followed that Argentina's duty to make the payments continued after NML Capital accelerated its $32 million of the debt in February 2005; and based on the court's analysis in Spodek v. Park Prop. Dev. Assoc., the bondholders were entitled to prejudgment interest under CPLR 5001 on the unpaid biannual interest payments that were due, but were not paid, after the loads were either accelerated or matured on the due date.View "NML Capital v. Republic of Argentina" on Justia Law

To safeguard investors and restore trust in financial markets after the Enron collapse, Congress passed the Sarbanes-Oxley Act of 2002, which provides that no public company nor any contractor or subcontractor of such a company, may discharge, demote, suspend, threaten, harass, or discriminate against an employee in the terms and conditions of employment because of whistleblowing activity, 18 U. S. C. 1514A(a). Plaintiffs are former employees of FMR, private companies that contract to advise or manage mutual funds. As is common in the industry, those mutual funds are public companies with no employees. Plaintiffs allege that they blew the whistle on putative fraud relating to the mutual funds and suffered retaliation by FMR. FMR argued that the Act protects only employees of public companies, and not employees of private companies that contract with public companies. The district court denied FMR’s motion to dismiss. The First Circuit reversed, concluding that the term “an employee” refers only to employees of public companies. The Supreme Court reversed and remanded, concluding that section 1514A’s whistleblower protection includes employees of a public company’s private contractors and subcontractors. FMR’s interpretation would shrink the protection against retaliation by contractors to insignificance. The Court stated that its reading fits the goal of warding off another Enron debacle; fear of retaliation was the primary deterrent to reporting by the employees of Enron’s contractors. FMR’s reading would insulate the entire mutual fund industry from section 1514A. Virtually all mutual funds are structured to have no employees of their own and are managed, instead, by independent investment advisors. View "Lawson v. FMR LLC" on Justia Law