Justia Securities Law Opinion Summaries

Plaintiff appealed the district court's grant of summary judgment to defendant on his claim of malicious prosecution under Arkansas law. The district court held that plaintiff failed to present evidence sufficient to withstand summary judgment on two of the five elements necessary to sustain his claim. The court held that the district court erred in holding that the evidence was insufficient as a matter of law to sustain plaintiff's claim that defendant brought suit against him on the guaranty without probable cause. The court also held that a jury must decide what was defendant's motive or purpose in suing plaintiff if it in fact understood it had no reasonable chance of prevailing on the merits of its claim against plaintiff. View "Stokes v. Southern States Cooperative, Inc." on Justia Law

WPP Luxembourg Gamma Three Sarl (WPP) appealed from the district court's dismissal of the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant and cross-appellants cross-appealed the district court's decision to dismiss some of WPP's claims without prejudice. WPP generally alleged violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78(a), that amidst large operating losses unknown to investors, Spot Runner executives solicited WPP to buy shares in it at the same time that executives of the company were selling personally owned shares. The court affirmed the dismissal of the Rule 10b-5(a) and (c) fraudulent scheme against all of the defendants, the dismissal of the Rule 10b-5(b) fraudulent omissions claim against the general counsel for Spot Runner and Spot Runner, and the dismissal of the Rule 10b-5 insider trading claim against Spot Runner. The court reversed the dismissal of the Rule 10b-5(b) omission claims against the founders of Spot Runner. View "WPP Luxembourg Gamma Three Sarl, et al. v. Spot Runner, Inc., et al." on Justia Law

This case arose from the IRS's investigation of a type of tax shelter known as a "Son-of-Boss" (a variant of the Bond and Options Sales Strategy (BOSS) shelter). Petitioner appealed the Tax Court's decision in favor of the Commissioner of Internal Revenue. The court held that the IRS properly sent petitioner an affected item notice of deficiency because the deficiency required a partner-level determination. The court also held that the Tax Court had jurisdiction to redetermine affected items based on the partnership item determinations in the Final Partnership Administrative Adjustment (FPAA). Therefore, the court affirmed the judgment of the Tax Court. View "Napoliello v. Commissioner of Internal Revenue" on Justia Law

This case arose when plaintiff filed a putative class action complaint against defendant and others following the decline of defendant's stock price. At issue was whether certain statements concerning goodwill and loan loss reserves in a registration statement of defendant's gave rise to liability under sections 11 and 12 of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that the statements in question were opinions, which were not alleged to have falsely represented the speakers' beliefs at the time they were made. Therefore, the court affirmed the judgment of the district court. View "Fait, et al. v. Regions Financial Corp., et al." on Justia Law

Appellant appealed the bankruptcy court's approval of a multi-million dollar, global settlement in one of the largest Ponzi scheme bankruptcies in American history. The settlement had been substantially consummated and the appeal had been rendered largely moot. The court held that the bankruptcy court did not abuse its discretion in approving the settlement where the record upon which the bankruptcy court based its approval of the settlement was sufficient and where the settlement satisfied the Flight Transportation/Drexel factors. Accordingly, the order of the bankruptcy court approving the settlement was affirmed. View "Interlachen Harriet Investment v. Kelley, et al." on Justia Law

In 1991, Carpenter pled guilty to aggravated theft and bank fraud. He served jail time and was disbarred. Between 1998 and 2000, he ran a Ponzi scheme, selling investments in sham companies, promising a guaranteed return. A class action resulted in a judgment of $15,644,384 against Carpenter. Plaintiffs then sued drawee banks, alleging that they violated the UCC "properly payable rule" by paying checks plaintiffs wrote to sham corporations, and depositary banks, alleging that they violated the UCC and committed fraud by depositing checks into accounts for fraudulent companies. The district court dismissed some claims as time-barred and some for failure to state a claim. After denying class certification, the court granted defendant summary judgment on the conspiracy claim, based on release of Carpenter in earlier litigation; a jury ruled in favor of defendant on aiding and abetting. The Sixth Circuit affirmed. Claims by makers of the checks are time-barred; the "discovery" rule does not apply and would not save the claims. Ohio "Blue Sky" laws provide the limitations period for fraud claims, but those claims would also be barred by the common law limitations period. The district court retained subject matter jurisdiction to rule on other claims, following denial of class certification under the Class Action Fairness Act, 28 U.S.C. 1332(d). View "Metz v. Unizan Bank" 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.

This criminal appeal arose from a "finite reinsurance" transaction between American International Group, Inc. (AIG) and General Reinsurance Corporation (Gen Re). Defendants, four executives of Gen Re and one of AIG, appealed from judgments convicting them of conspiracy, mail fraud, securities fraud, and making false statements to the Securities and Exchange Commission. Defendants appealed on a variety of grounds, some in common and others specific to each defendant, ranging from evidentiary challenges to serious allegations of widespread prosecutorial misconduct. Most of the arguments were without merit, but defendants' convictions must be vacated because the district court abused its discretion by admitting the stock-price data and issued a jury instruction that directed the verdict on causation. View "United States v. Ferguson, et al." on Justia Law

This case arose when the SEC brought suit against Stanford Group Company (SGC), along with various other Stanford entities, including Stanford International Bank (SIB), for allegedly perpetrating a massive Ponzi scheme. In this interlocutory appeal, defendants appealed the preliminary injunction that the receiver subsequently obtained against numerous former financial advisors and employees of SGC, freezing the accounts of those individuals pending the outcome of trial. The court held that the district court had the power to decide the motion for preliminary injunction before deciding the motion to compel arbitration; the district court did not abuse its discretion in granting a preliminary injunction; the preliminary injunction was not overbroad; and the district court acted within its power to grant a Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code Ann. 24.005(a)(1), injunction rather than an attachment; and that the court did not have jurisdiction to rule on the motion to compel arbitration. Accordingly, the court affirmed and remanded the motion to compel arbitration for a ruling in the first instance. View "Janvey v. Alguire, et al." on Justia Law

Petitioners, each of which had corporate members that issued publicly traded securities, petitioned for review of Exchange Act Rule 14a-11. At issue was whether the Securities and Exchange Commission promulgated the rule in violation of the Administrative Procedure Act, 5 U.S.C. 551 et seq., because, among other things, the Commission failed adequately to consider the rule's effect upon efficiency, competition, and capital formation, as required by Section 3(f) of the Exchange Act and Section 2(c) of the Investment Company Act and Section 2(c) of the Investment Company Act of 1940, 15 U.S.C. 78c(f) and 80a-2(c). The court held that the Commission acted arbitrarily and capriciously for having failed once again to adequately assess the economic effects of a new rule. The court also held that the Commission inconsistently and opportunistically framed the costs and benefits of the rule; failed adequately to quantify the certain costs or to explain why those costs could not be quantified; neglected to support its predictive judgments; contradicted itself; and failed to respond to substantial problems raised by commenters. Therefore, the Commission's decision to apply the rule to investment companies was also arbitrary. Because the court concluded that the Commission failed to justify Rule 14a-11, the court need not address petitioners' additional argument that the Commission arbitrarily rejected proposed alternatives that would have allowed shareholders of each company to decide for that company whether to adopt a mechanism for shareholders' nominees to get access to proxy materials. Accordingly, the petition was granted and the rule was vacated. View "Business Roundtable, et al. v. SEC" on Justia Law