Justia Securities Law Opinion Summaries

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

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

This case involved a stockholder challenge to the decision of two funds within the Vanguard mutual fund complex to purchase shares of allegedly illegal foreign online gambling businesses that were publicly traded in overseas capital markets. Plaintiffs' complaint asserted both derivative and direct claims based on their allegations that defendants' actions constituted a violation of their fiduciary duties, negligence, and waste. Defendants moved to dismiss the complaint on the grounds that the court could not assert personal jurisdiction over the individual defendants named in the complaint; all plaintiffs' claims were derivative in nature and therefore, the complaint must be dismissed for plaintiffs' failure to make demand on the board of trustees or demonstrate why a demand would be futile; and the complaint failed to state a claim. The court granted defendants' motions and dismissed with prejudice all of the claims in the complaint based on the first two grounds. Consequently, the court did not address defendants' additional argument that the complaint failed to state a claim.View "Hartsel, et al. v. The Vanguard Group, Inc., et al." on Justia Law

This case stemmed from Reliance Group Holdings, Inc.'s ("RGH") and Reliance Financial Services Corporation's ("RFS") voluntary petitions in Bankruptcy Court seeking Chapter 11 bankruptcy protection and the trust that was established as a result. The trust subsequently filed an amended complaint alleging actuarial fraud and accounting fraud against respondents. At issue was whether the trust qualified for the so-called single-entity exemption that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA"), 15 U.S.C. 77p(f)(2)(C); 78bb(f)(5)(D), afforded certain entities. The court held that the trust, established under the bankruptcy reorganization plan of RGH as the debtor's successor, was "one person" within the meaning of the single-entity exemption in SLUSA. As a result, SLUSA did not preclude the Supreme Court from adjudicating the state common law fraud claims that the trust had brought against respondents for the benefit of RGH's and RFS's bondholders. Accordingly, the court reversed and reinstated the order of the Supreme Court.View "The RGH Liquidating Trust v. Deloitte & Touche LLP, et al." on Justia Law

Respondent, First Derivative Traders, representing a class of stockholders in petitioner Janus Capital Group, Inc. ("JCG"), filed a private action under the Securities and Exchange Commission ("SEC") Rule 10b-5, alleging that JCG and its wholly owned subsidiary, petitioner Janus Capital Management LLC ("JCM"), made false statements in mutual funds prospectuses filed by Janus Investment Fund, for which JCM was the investment adviser and administrator, and that those statements affected the price of JCG's stock. Although JCG created Janus Investment Fund, it was a separate legal entity owned entirely by mutual fund investors. At issue was whether JCM, a mutual fund investment adviser, could be held liable in a private action under Rule 10b-5 for false statements included in its client mutual funds' prospectuses. The Court held that, because the false statements included in the prospectuses were made by Janus Investment Fund, not by JCM, JCM and JCG could not be held liable in a private action under Rule 10b-5. The Court found that, although JCM could have been significantly involved in preparing the prospectuses, it did not itself "make" the statements at issue for Rule 10b-5 purposes where its assistance in crafting what was said was subject to Janus Investment Fund's ultimate control. Accordingly, respondent had not stated a claim against JCM under Rule 10b-5 and the judgment of the Fourth Circuit was reversed. View "Janus Capital Group, Inc. v. First Derivative Traders" on Justia Law

This is an adversary proceeding arising out of the bankruptcy of debtor (Derivium). Plaintiff (Grayson), assignee of the Chapter 7 bankruptcy trustee, appealed from a district court judgment affirming the bankruptcy court's decision to grant summary judgment for defendants (Wachovia). The court concluded that the district court did not err in affirming the grant of summary judgment for Wachovia on Grayson's Customer Transfers claim; summary judgment for Wachovia on Grayson's Cash Transfers claim; the bankruptcy court's determinations that the stockbroker defense applied to commissions; and the bankruptcy court's ruling that in pari delicto barred Grayson's tort claims against Wachovia. View "Grayson Consulting, Inc. v. Wachovia Securities, LLC" on Justia Law

CVS Corp. and Caremark Rx Inc. merged in 2007, creating CVS Caremark Corporation. In 2010, Plaintiffs filed this putative class action against CVS Caremark and certain of its current and former employees. The complaint was later amended to add new plaintiffs - the retirement systems of the city of Brockton and the counties of Plymouth and Norfolk, Massachusetts (collectively, the Retirement Systems). The Retirement Systems claimed that Defendants made material misrepresentations in violation of the Securities Exchange Act and rule 10b-5 of the Securities and Exchange Commission. Specifically, the Retirement Systems alleged that CVS Caremark's CEO's statements in an earnings call with investors caused a drop in CVS Caremark's share price. The district court granted Defendants' motion to dismiss the complaint for failure to state a claim for relief. The First Circuit Court of Appeals vacated the dismissal of the complaint and remanded, holding that Plaintiffs' complaint alleged loss causation sufficiently plausible to foreclose dismissal. View "Mass. Ret. Sys. v. CVS Caremark Corp." on Justia Law

The Kepleys owned 30% of ATA’s outstanding capital stock. Lanz bought one share of Series A Convertible Preferred Stock in the corporation and a right to purchase common stock. At that time, Lanz, ATA, and its shareholders entered into an agreement, prohibiting sale of restricted shares (including Lanz’s share) to ATA’s competitors. In 2010, the Kepleys learned that Lanz sought to sell his share and purchase option to Crimson, an ATA competitor, for $2,799,000. The Kepleys sued, contending that Crimson’s president told them that they could not afford the Lanz shares or litigation and that Crimson would “shut it down or squeeze them out.” The Kepleys sold their shares to Crimson. Lanz did not complete the sale of his stock and remained a shareholder in ATA, 30 percent of which Crimson then owned. The Kepleys sought the difference between the sale price and the fair market value of the shares. The district court dismissed, finding that the Kepleys lacked standing because their alleged injury amounted to diminution in stock value, suffered by the corporation, and only derivatively shared by the Kepleys. The Sixth Circuit reversed, holding that the Kepleys, who are no longer shareholders and cannot pursue derivative claims, have standing for a direct suit. View "Kepley v. Lanz" on Justia Law

Plaintiff brought a derivative suit on behalf of Goldman Sachs under Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78p(b), seeking to require defendant to disgorge all profits from short-swing transactions in Goldman Sachs shares. On appeal, plaintiff challenged the district court's orders and judgment granting defendant's motion to dismiss pursuant to Rule 12(b)(6). The court agreed with the district court that plaintiff failed to plead that defendant was a beneficial owner under Section 16(b) and Rule 16a-1, 17, C.F.R. 240, 16a-1. The court also declined to extend the term "beneficial owner" to encompass, perforce, "tippers" who provided insider information, in exchange for payment, to another party who engaged in the short-swing trading of shares. Accordingly, the court affirmed the orders and judgment of the district court. View "Mercer v. Gupta" on Justia Law

Plaintiff appealed from the district court's judgment dismissing her claims against her ex-husband and his brother for failure to state a claim and untimeliness. Plaintiff alleged that, in representing a certain investment as worthless and concealing the $5.5 million received on its account, defendants conspired in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d), committed common law fraud, and breached fiduciary duties, and that her ex-husband was unjustly enriched. The court held that the district court's reasons for dismissing the fraud-based claims were erroneous and that the district court erred in ruling on the existing record that the RICO, common law fraud, and breach of fiduciary duty claims were time-barred. The court sustained the dismissal of the unjust enrichment claim as untimely. Accordingly, the court affirmed in part and vacated and remanded in part. View "Cohen v. Cohen" on Justia Law