Justia Securities Law Opinion SummariesArticles Posted in California Courts of Appeal
Jensen v. iShares Trust
Investors purchased shares of BlackRock iShares Exchange-Traded Funds (ETFs) and suffered financial losses when their shares were sold pursuant to “market orders” or “stop-loss orders” during a “flash crash” in August 2015, when ETF trading prices fell dramatically. The investors claim that BlackRock’s registration statements, prospectuses, and amendments thereto issued or filed between 2012 and 2015, were false or misleading in that they failed to sufficiently disclose the risks associated with flash crashes. The investors sued, alleging violations of disclosure requirements under the Securities Act of 1933. 15 U.S.C. 77k. The court of appeal affirmed that the investors lacked standing. Liability under sections 11 and 12(a)(2) of the 1933 Act applies only to initial offerings; the investors purchased their ETF shares on the secondary market. The court rejected claims citing section 11, under which a plaintiff has standing if shares purchased in the secondary market can be traced back to an offering made under a misleading registration statement. Given the greater availability of information about potential investments to secondary market investors, limiting the stricter liability imposed by the 1933 Act to primary market transactions is not necessarily unreasonable. In contrast to the “catchall” provisions of the Exchange Act, 15 U.S.C. 77j(b)[ 22]—sections 11 and 12(a)(2) of the Securities Act “apply more narrowly but give rise to liability more readily.” View "Jensen v. iShares Trust" on Justia Law
Ontiveros v. Constable
Guadalupe Ontiveros, as minority shareholder in Omega Electric, Inc. (Omega), sued majority shareholder Kent Constable, his wife Karen, and Omega, asserting direct and derivative claims arising from a dispute over management of Omega and its assets. In response to Ontiveros's claim of involuntary dissolution of Omega, Appellants filed a motion to stay proceedings and appoint appraisers to fix the value of Ontiveros's stock. The superior court granted the motion, staying the action. Ontiveros then tried to dismiss his claim for involuntary dissolution without prejudice, but the court clerk would not accept his filing because the matter had been stayed. Ontiveros thus filed a motion, asking the court to revoke its order granting Appellants' motion, or in the alternative, to reconsider and then vacate the order. The court treated that motion as a motion for leave to file a dismissal with prejudice under Code of Civil Procedure section 581 (e), granted the motion, and allowed Ontiveros to dismiss his cause of action for involuntary dissolution of Omega. Without the existence of that claim, the court found no basis on which to stay the action and order an appraisal of the stock. As such, the court lifted the stay, terminating the procedure. Appellants appealed, contending the court abused its discretion in granting Ontiveros's motion. In addition, Appellants argued the trial court improperly interpreted section 2000 in granting the motion. Ontiveros countered by arguing the trial court's order was not appealable. The Court of Appeal determined Appellants presented an appealable issue, and was persuaded the trial court abused its discretion here: the superior court relied upon that code section as a mechanism to lift the stay and terminate the section 2000 special proceeding, misapplying the law. Consequently, the trial court's order was reversed. View "Ontiveros v. Constable" on Justia Law
Rossetta v. CitiMortgage, Inc.
Plaintiff Antoinette Rossetta appealed the dismissal of her second amended complaint after the trial court sustained a demurrer by defendants CitiMortgage, Inc. (CitiMortgage) and U.S. Bank National Association as Trustee for Citicorp Residential Trust Series 2006-1 (2006-1 Trust). The complaint asserted multiple causes of action sounding in tort, and unlawful business practices in violation of the Unfair Competition Law arising from loan modification negotiations spanning more than two years. Rossetta also appealed the trial court’s dismissal of a cause of action for conversion that appeared in an earlier iteration of the complaint to which CitiMortgage and the 2006-1 Trust (collectively, CitiMortgage, unless otherwise indicated) also successfully demurred. After review, the Court of Appeal concluded: (1) the trial court erred in sustaining the demurrer to the causes of action for negligence and violations of the Unfair Competition Law; (2) the trial court properly sustained the demurrer to the causes of action for intentional misrepresentation and promissory estoppel, but should have granted leave to amend to give Rossetta an opportunity to state a viable cause of action based on an alleged oral promise to provide her with a Trial Period Plan (TPP) under the Home Affordable Mortgage Program (HAMP) in April 2012; and (3) the trial court properly sustained the demurrer to the causes of action for negligent misrepresentation, breach of contract, intentional infliction of emotional distress and conversion without leave to amend. View "Rossetta v. CitiMortgage, Inc." on Justia Law
Flowers v. Financial Industry Regulatory Authority, Inc.
Between 2000 and 2001, plaintiff-appellant Troy Flowers's application for a securities sales license was rejected by Ohio state officials because they found that he was "not of 'good business repute.'" In addition, Flowers was subjected to discipline by securities regulators with respect to his violation of securities laws and regulations and his failure to cooperate in a securities investigation. Flowers filed a complaint against the Financial Industry Regulatory Authority, Inc. (FINRA), seeking an order that FINRA expunge his disciplinary history from its records. The trial court sustained without leave to amend FINRA's demurrer to Flowers's complaint. Because federal securities laws and regulations provided Flowers with a process by which he may challenge FINRA's publication of his disciplinary history, and Flowers has not pursued that process, the Court of Appeal concluded he may not now, by way of a civil action, seek that relief from the trial court. Accordingly, the Court affirmed the trial court's order sustaining the demurrer and its judgment in favor of FINRA. View "Flowers v. Financial Industry Regulatory Authority, Inc." on Justia Law