Justia Securities Law Opinion Summaries

This appeal stemmed from a putative securities fraud class action brought by lead plaintiff Nitesh Banker on behalf of all persons who purchased common stock in Gold Resource Corporation (GRC) during the class period between January 30, 2012, and November 8, 2012. GRC, a Colorado corporation, was a publicly traded mining company engaged in Mexico in the exploration and production of precious metals, including gold and silver. GRC’s aggressive business plan called for a dramatic increase in mining production during its initial years. Plaintiff alleged the "El Aguila" project experienced severe production problems during the class period, and that defendants knew about these problems but concealed them from investors. Plaintiff alleged GRC and four of its officers and directors committed securities fraud in violation of federal securities laws. He also asserted claims against individual defendants as "control persons." The district court dismissed the complaint with prejudice pursuant to Fed. R. Civ. P. 12(b)(6), holding that plaintiff failed to meet the heightened pleading standard for scienter required by the Private Securities Litigation Reform Act of 1995. Plaintiff appealed. But finding no reversible error, the Tenth Circuit affirmed. View "In re: Gold Resource Corp." on Justia Law

Shareholders are required to make a “demand” on the corporation’s board of directors before filing a derivative suit, unless they sufficiently allege that demand would be futile. Before Arduini filed his derivative action against IGT and its board, four shareholders filed derivative suits that were consolidated. They argued that a demand was excused because: the IGT board extended the employment contract of IGT’s former CEO and chairman of IGT’s board of directors, and allowed him to resign rather than terminating him for cause; three directors received such high compensation from IGT that their ability to impartially consider a demand was compromised; six directors faced a substantial likelihood of liability for breaches of their fiduciary duties as committee members; and that other members had engaged in insider trading. The district court dismissed the consolidated suit for failure to make a demand or sufficiently allege futility; the Ninth Circuit affirmed. The district court then dismissed Arduini’s action, holding that Arduini had failed to make a demand and could not allege demand futility based on issue preclusion due to its ruling in the prior suit. The Ninth Circuit affirmed, holding that under Nevada law and these facts, issue preclusion barred relitigation of futility. View "Arduini v. Int'l Gaming Tech." on Justia Law

Plaintiff, the receiver for the Stanford entities, filed suit seeking to recover funds that were paid to defendants, purchasers of certificate of deposits from Standard International Bank (SIB) as part of a Ponzi scheme. The court concluded that the district court properly applied the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code 24.010, to the receiver's claims; the receiver has standing to bring the TUFTA claims on behalf of the Stanford entities; and the receiver's claims are not barred by the statute of limitations. On the merits, the court concluded that the receiver established that the Stanford principles transferred monies to the investor-defendants with fraudulent intent; unlike interest payments, it is undisputed that the principal payments were payments of an antecedent debt, namely fraud claims that the investor-defendants have as victims of the Stanford Ponzi scheme; the district court did not err in denying an exemption under Texas Property Code 42.0021(a) where investor-defendants have offered no evidence that they have a legal right to the funds despite those funds being the product of a fraudulent transfer; and the court declined to reach the investor-defendants' argument that certain factual issues remain. Accordingly, the court affirmed the district court's grant of the receiver's motion for summary judgment. View "Janvey, et al. v. Brown, et al." on Justia Law

Allergan, the pharmaceutical manufacturer of Botox, settled several qui tam suits concerning allegations that it had acted illegally in marketing and labeling Botox, and pled guilty in a criminal case. Plaintiffs, all Allergan shareholders, subsequently filed a derivative action alleging that Allergan's directors are liable for violations of various state and federal laws, as well as breaches of their fiduciary duties to Allergan. Plaintiffs failed to make a demand on Allergan's board requesting that Allergan bring the derivative claims in its own name. The court concluded that the district court misapplied governing Delaware law and improperly drew inferences against plaintiffs rather than in their favor when the district court dismissed the action on the ground that plaintiffs failed to allege particularized facts showing that demand was excused under Federal Rule of Civil Procedure 23.1. The court concluded that demand was excused where plaintiffs' particularized allegations established a reasonable doubt as to whether the Board faces a substantial likelihood of liability and as to whether the Board is protected by the business judgment rule. Accordingly, the court reversed the judgment of the district court. View "Rosenbloom v. Pyott" on Justia Law

Plaintiff filed suit against AECOM and AME under the whistleblower retaliation provision created by the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A. The district court dismissed plaintiff's claim against AECOM and plaintiff appealed. The court concluded that an alleged whistleblowing employee's communications need not "definitively and specifically" relate to one of the listed categories of fraud or securities violations in section 1514A in order for that employee to claim protection under the statute; a complaint under section 1514A must, however, plausibly plead that plaintiff engaged in protected activity - that plaintiff reasonably believed the conduct he challenged constituted a violation of an enumerated provision; in this case, plaintiff did not plausibly allege that it was objectively reasonable for him to believe that there was such a violation here; and, therefore, the court affirmed the judgment of the district court. View "Nielsen v. AECOM Technology Corp." on Justia Law

FutureSelect invested nearly $200 million in the Rye Funds, which pooled and fed money into Bernard Madoff's fraudulent securities investment scheme. The investments were lost when Madoff's fraud collapsed. FutureSelect sued Tremont Group Holdings (proponent of the Rye Funds), Oppenheimer Acquisition Corporation and Massachusetts Mutual Life Insurance Company (Tremont's parent companies) and Ernst & Young, LLP (Tremont's auditor) for their failure to conduct due diligence on Madoff's investments. The trial court dismissed on the pleadings, finding Washington's security law did not apply, and that Washington courts lacked jurisdiction over Oppenheimer. The Court of Appeals reversed, and the defendants sought to reinstate the trial court's findings. Finding no error with the Court of Appeals' decision, the Washington Supreme Court affirmed. View "Futureselect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc." on Justia Law

Plaintiffs filed this complaint on behalf of a class of all persons and entities who purchased or otherwise acquired Chesapeake common stock from 2009 to 2012, and who were damaged from those purchases/acquisitions. The complaint alleged that Defendants materially misled the public through false statements and omissions regarding two different types of financial obligations: (1) Volumetric Production Payment transactions (under which Chesapeake received immediate cash in exchange for the promise to produce and deliver gas over time); and (2) the Founder Well Participation Program (under which Chesapeake CEO Aubrey McClendon was allowed to purchase up to a 2.5% interest in the new gas wells drilled in a given year). With respect to the "VPP program," Plaintiffs alleged Defendants touted the more than $6.3 billion raised through these transactions but failed to disclose that the VPPs would require Chesapeake to incur future production costs totaling approximately $1.4 billion. Plaintiffs contended the failure to disclose these future production costs was a material omission that misled investors into believing there would be no substantial costs associated with Chesapeake’s obligations to produce and deliver gas over time. The district court granted Defendants’ motion to dismiss the complaint, holding that Plaintiffs had failed to plead with particularity facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act of 1995. Viewing all of the allegations in the complaint collectively, the Tenth Circuit was not persuaded they gave rise to a cogent and compelling inference of scienter. Accordingly, the Court affirmed the district court's dismissal of the case. View "Weinstein, et al v. McClendon, et al" on Justia Law

Lukas owns stock in Miller, a publicly owned corporation engaged in production of oil and natural gas. In 2009, Miller announced that it had acquired the “Alaska assets,” worth $325 million for only $2.25 million. Miller announced several increases in the value of the Alaska assets over the following months, causing increases in its stock price. In 2010, Miller amended its employment agreement with its CEO (Boruff), substantially increasing his compensation and giving him stock options. The Compensation Committee (McPeak, Stivers, and Gettelfinger) recommended the amendment and the Board, composed of those four and five others, approved it. In 2011 a website published a report claiming that the Alaska assets were worth only $25 to $30 million and offset by $40 million in liabilities. In SEC filings, Miller acknowledged “errors in . . . financial statements” and “computational errors.” The stock price decreased., Lukas filed suit against Miller and its Board members, alleging: breach of fiduciary duty and disseminating materially false and misleading information; breach of fiduciary duties for failing to properly manage the company; unjust enrichment; abuse of control; gross mismanagement; and waste of corporate assets. The district court dismissed. The Sixth Circuit affirmed. Lukas brought suit without first making a demand on the Miller Board of Directors to pursue this action, as required by Tennessee law, and did not establish futility.View "Lukas v. McPeak" on Justia Law

The Funds, closed-end investment companies registered under the Investment Company Act of 1940, 15 U.S.C. 80a- 5(a)(1)(2), are organized as Massachusetts business trusts under G.L. c. 182. Plaintiffs are beneficial owners of preferred shares of each of the Funds. The Funds’ declarations of trust state that meetings shall be held “so long as Common Shares are listed for trading on the New York Stock Exchange, on at least an annual basis." After plaintiffs delivered written notice stating an intention to nominate one of their partners for election as a preferred shares trustee of each fund at the 2011 annual meeting, the Funds issued a press release stating that their annual meeting was being rescheduled to July 2012, the last day of the Funds' 2012 fiscal year. Plaintiffs claimed that the bylaws require that an annual shareholders’ meeting be held within 12 months of the last annual shareholder meeting. The Funds argued that the bylaws require only that one meeting be held each fiscal year. The Massachusetts Supreme Court held that "on at least an annual basis" means that a shareholders' meeting for each Fund must be held no later than one year and 30 days after the last annual meeting. View "Brigade Leveraged Capital Structures Fund, Ltd. v. PIMCO, Income Strategy Fund" on Justia Law

Mike Richey sold his interest in Richey Oilfield Construction, Inc. to Nighthawk Oilfield Services, Ltd. Richey remained employed as president of Richey Oil and became a limited partner in Nighthawk. The primary agreements regarding the transaction were a stock purchase agreement, an agreement for the purchase of Richey Oil’s goodwill, and a promissory note. Each of the acquisition agreements contained a forum selection clause naming Tarrant County as the venue for state court actions. When the business did not go as well as the parties had hoped, Richey filed suit in Wise County, where Richey resided, against two Nighthawk executives (together, Relators) for, among other claims, breach of fiduciary duty, common law fraud, statutory fraud, and violations of the Texas Securities Act. Relators responded by unsuccessfully moving the trial court to transfer venue to Tarrant County or dismiss the suit pursuant to the mandatory venue selection clauses in the acquisition agreements. Relators subsequently sought mandamus relief. The Supreme Court conditionally granted relief, holding that the trial court abused its discretion by failing to enforce the forum selection clauses in the acquisition agreements. View "In re Fisher" on Justia Law