Justia Securities Law Opinion Summaries

Cobbs, Allen & Hall, Inc. ("Cobbs Allen"), and CAH Holdings, Inc. ("CAH Holdings") (collectively,"CAH"), appealed the grant of summary judgment entered in favor of EPIC Holdings, Inc. ("EPIC"), and EPIC employee Crawford E. McInnis, with respect to CAH's claims of breach of contract and tortious interference with a prospective employment relationship. Cobbs Allen was a regional insurance and risk-management firm specializing in traditional commercial insurance, surety services, employee-benefits services, personal-insurance services, and alternative-risk financing services. CAH Holdings was a family-run business. The families, the Rices and the Densons, controlled the majority, but pertinent here, owned less than 75% of the stock in CAH Holdings. Employees who were "producers" for CAH had the opportunity to own stock in CAH Holdings, provided they met certain sales thresholds; for CAH Holdings, the equity arrangement in the company was dictated by a "Restated Restrictive Stock Transfer Agreement." For several years, McInnis and other individuals who ended up being defendants in the first lawsuit in this case, were producers for CAH, and McInnis was also a shareholder in CAH Holdings. In the fall of 2014, a dispute arose between CAH and McInnis and those other producers concerning the management of CAH. CAH alleged that McInnis and the other producers had violated restrictive covenants in their employment agreements with the aim of helping EPIC. Because of the dispute, CAH fired McInnis, allegedly "for cause," and in November 2014 McInnis went to work for EPIC, becoming the local branch manager at EPIC's Birmingham office. After review, the Alabama Supreme Court affirmed the circuit court's judgment finding CAH's breach-of-contract claim against McInnis and EPIC failed because no duty not to disparage parties existed in the settlement agreement. EPIC was not vicariously liable for McInnis's alleged tortious interference because McInnis's conduct was not within the line and scope of his employment with EPIC. EPIC also was not directly liable for McInnis's alleged tortious interference because it did not ratify McInnis's conduct as it did not know about the conduct until well after it occurred. However, the Supreme Court disagreed with the circuit court's conclusion that McInnis demonstrated that he was justified as a matter of law in interfering with CAH's prospective employment relationship with Michael Mercer. Based upon the admissible evidence, an issue of fact existed as to whether McInnis gave Mercer honest advice. Therefore, the judgment of the circuit court was affirmed in part, reversed in part, and the matter remanded for further proceedings. View "Cobbs, Allen & Hall, Inc., and CAH Holdings, Inc. v. EPIC Holdings, Inc., and McInnis." on Justia Law

In 2017, Plaintiffs filed suit against the Defendants. Between 2002 and 2005, Plaintiffs (all retirees from BellSouth) rolled most of their retirement assets over to Steven Savell, their financial advisor at Morgan Keegan. Savell assured Plaintiffs “he would invest [their] money in a way that would provide [them] with income for the remainder of [their] life and that [their] principal would grow over time.” Savell remained in control of these accounts until 2013. During the years Savell handled these accounts, the Plaintiffs continually sustained sizeable losses. Plaintiffs claimed that Savell improperly recommended that they invest in two unsuitable penny stocks and then marked the purchases “unsolicited” so as to prevent detection by the brokerage firm’s policy against soliciting such stock. Plaintiffs also alleged that Savell purchased for them certain annuities designed to be held for the long term, which Savell had them cash out early in order to purchase new annuities that would pay him and Morgan Keegan and/or Raymond James large commissions. The trial court granted summary judgment in favor of Defendants, finding that all of the Plaintiffs’ claims were time-barred. The Court of Appeals reversed with respect to the Plaintiffs’ common-law claims, finding that a genuine issue of material fact existed as to when Plaintiffs learned or through reasonable diligence should have learned of Defendants’ alleged malfeasance. The Mississippi Supreme Court granted certiorari on Defendants’ claim that the Court of Appeals misapplied the latent-injury discovery-rule exception to the catch-all three-year limitations period provided by Mississippi Code Section 15-1-49 (Rev. 2019). Because the Supreme Court found no genuine issue of material fact existed as to whether Plaintiffs’ common-law claims were time barred, it reversed the Court of Appeals’ decision and reinstated the trial court’s judgment. View "Baker v. Raymond James & Associates Inc." on Justia Law

Plaintiff Jed Goldfarb claimed defendant David Solimine reneged on a promise of employment after Goldfarb quit his job to accept the promised position managing the sizeable investment portfolio of defendant’s family. The key issue in this appeal involved whether plaintiff could bring a promissory estoppel claim because he relied on defendant’s promise in quitting his prior employment even though, under New Jersey’s Uniform Securities Law of 1997 (Securities Law or the Act), he could not bring a suit on the employment agreement itself. The New Jersey Supreme Court determined the Securities Law did not bar plaintiff’s promissory estoppel claim for reliance damages. The Court affirmed the liability judgment on that claim and the remanded for a new damages trial in which plaintiff would have the opportunity to prove reliance damages. The Court found he was not entitled to benefit-of-the-bargain damages. To the extent that the Appellate Division relied on an alternative basis for its liability holding -- that a later-adopted federal law “family office” exception had been incorporated into the Securities Law -- the Court rejected that reasoning and voided that portion of the appellate court’s analysis. View "Goldfarb v. Solimine" on Justia Law

The Second Circuit affirmed the district court's dismissal of Cavello Bay's claims of securities fraud for failure to plead a domestic application of the law. The court assumed without deciding that the transaction was "domestic," and agreed with the district court that Cavello Bay's claims are predominantly foreign under Parkcentral Global HUB Ltd. v. Porsche Automobile Holdings SE, 763 F.3d 198 (2d Cir. 2014). In this case, the claims are based on a private agreement for a private offering between a Bermudan investor (Cavello Bay) and a Bermudan issuer (Spencer Capital); Cavello Bay purchased restricted shares in Spencer Capital in a private offering; and the shares reflect only an interest in Spencer Capital, and they are listed on no U.S. exchange and are not otherwise traded in the United States. The court explained that it is not enough for Cavello Bay to allege that Spencer Capital made a misstatement from New York (through defendant); planned to use the funds to invest in U.S. insurance services; had its principal place of business and CEO and directors in New York; and was managed by a U.S. company. The court concluded that the contacts that matter are those that relate to the purchase and sale of securities. View "Cavello Bay Reinsurance Ltd. v. Stein" on Justia Law

After a $3.3 billion “roll up” of minority-held units involving a merger between Enbridge, Inc. and Spectra Energy Partners L.P. (“SEP”), Paul Morris, a former SEP minority unitholder, lost standing to litigate an alleged $661 million derivative suit on behalf of SEP against its general partner, Spectra Energy Partners (DE) GP, LP (“SEP GP”). Morris repeated the derivative claim dismissal by filing a new class action complaint that alleged the Enbridge/SEP merger exchange ratio was unfair because SEP GP agreed to a merger that did not reflect the material value of his derivative claims. The Court of Chancery granted SEP GP’s motion to dismiss the new complaint for lack of standing. The court held that, to have standing to bring a post-merger claim, Morris had to allege a viable and material derivative claim that the buyer would not assert and provided no value for in the merger. Focusing on the materiality requirement, the court first discounted the $661 million recovery to $112 million to reflect the public unitholders’ beneficial interest in the derivative litigation recovery. The court then discounted the $112 million further to $28 million to reflect what the court estimated was a one in four chance of success in the litigation. After the discounting, the $28 million, less than 1% of the merger consideration, was immaterial to a $3.3 billion merger. On appeal, Morris argued the trial court should not have dismissed the plaintiff’s direct claims for lack of standing. After its review, the Delaware Supreme Court agreed with Morris finding that, on a motion to dismiss for lack of standing, he sufficiently pled a direct claim attacking the fairness of the merger itself for SEP GP’s failure to secure value for his pending derivative claims. The Court of Chancery’s judgment was reversed and the matter remanded for further proceedings. View "Morris v. Spectra Energy Partners" on Justia Law

The Alaska Division of Banking and Securities civilly fined Sitnasuak Native Corporation shareholder Austin Ahmasuk for submitting a newspaper opinion letter about Sitnasuak’s shareholder proxy voting procedures without filing that letter with the Division as a shareholder proxy solicitation. Ahmasuk filed an agency appeal, arguing that the Division wrongly interpreted its proxy solicitation regulation to cover his letter and violated his constitutional due process and free speech rights. An administrative law judge upheld the Division’s sanction in an order that became the final agency decision, and the superior court upheld that decision in a subsequent appeal. Ahmasuk raised his same arguments on appeal to the Alaska Supreme Court. After review, the Supreme Court concluded Ahmasuk’s opinion letter was not a proxy solicitation under the Division’s controlling regulations, therefore reversing the superior court’s decision upholding the Division’s civil sanction against Ahmasuk without reaching the constitutional arguments. View "Ahmasuk v. Division of Banking and Securities" on Justia Law

The Eleventh Circuit affirmed separate district court orders directing defendant and MinTrade to comply with SEC subpoenas for the production of documentary evidence and testimony. The court held that the district court properly exercised personal jurisdiction over defendant in the Southern District of Florida. As to MinTrade, the court held that the district court did not abuse its discretion in not holding an evidentiary hearing. On the merits, the court held that neither district court abused its considerable discretion in concluding that the subpoenas were relevant to a legitimate investigation into possible violations of the Securities Exchange Act of 1934. View "Securities and Exchange Commission v. Marin" on Justia Law

Mohlman became a licensed securities professional in 2001. The Financial Industry Regulatory Authority, a not-for-profit member organization, regulates practice in the securities industry and enforces disciplinary actions against its members. In 2012, Mohlman had conversations with several individuals concerning WMA. Mohlman did not attempt to sell WMA investments and did not receive compensation from WMA. Mohlman learned in 2014 that WMA was a Ponzi scheme and immediately informed all persons who had invested in WMA. Mohlman appeared for testimony as part of FINRA’s investigation. Another day of testimony was scheduled but instead of appearing, Mohlman and his counsel signed a Letter of Acceptance, Waiver, and Consent, agreeing to a permanent ban from the securities industry. FINRA agreed to refrain from filing a formal complaint against him. Mohlman waived his procedural rights under FINRA’s Code of Procedure and the Securities Exchange Act, 15 U.S.C. 78a and agreed to “not take any position in any proceeding brought by or on behalf of FINRA, or to which FINRA is a party, that is inconsistent with any part of [the Letter].” FINRA accepted the Letter in 2015.In 2019, Mohlman filed suit, alleging that FINRA fraudulently avoided considering mitigating factors in administering the sanction. The Sixth Circuit affirmed the dismissal of the suit without addressing the merits. Mohlman failed to exhaust administrative remedies under the Exchange Act by appealing to the National Adjudicatory Council and petitioning the SEC for review. View "Mohlman v. Financial Industry Regulatory Authority" on Justia Law

In 2017, Sibanye Gold Ltd. (“Sibanye”) acquired Stillwater Mining Co. (“Stillwater”) through a reverse triangular merger. Under the terms of the merger agreement, each Stillwater share at closing was converted into the right to receive $18 of merger consideration. Between the signing and the closing of the merger, the commodity price for palladium (which Stillwater mined) increased by nine percent, improving Stillwater’s value. Certain former Stillwater stockholders dissented to the merger, perfected their statutory appraisal rights, and pursued this litigation. During the appraisal trial, petitioners argued the flawed deal process made the deal price an unreliable indicator of fair value and that increased commodity prices raised Stillwater’s fair value substantially between the signing and closing of the merger. In 2019, the Delaware Court of Chancery issued an opinion, holding that the $18 per share deal price was the most persuasive indicator of Stillwater’s fair value at the time of the merger. The court did not award an upward adjustment for the increased commodity prices. Petitioners appealed the Court of Chancery’s decision, arguing that the court abused its discretion when it ignored the flawed sale process and petitioners’ argument for an upward adjustment to the merger consideration. After review of the parties’ briefs and the record on appeal, and after oral argument, the Delaware Supreme Court found no reversible error and affirmed the Court of Chancery. View "Brigade Leveraged Capital Structures Fund Ltd v. Stillwater Mining Co." on Justia Law

The SEC investigated Gentile for his role in a penny-stock manipulation scheme in 2007-08 and civilly sued Gentile, who was indicted for securities fraud violations. The criminal prosecution was dismissed as untimely. The SEC separately investigated securities transactions through an unregistered broker-dealer in violation of the Securities and Exchange Act of 1934, 15 U.S.C. 78o(a): Traders Café, a day-trading firm, maintained an account with Gentile’s Bahamian broker-dealer, which was not registered in the U.S. The SEC issued a Formal Order of Investigation into Café in 2013. Without issuing a new Formal Order, the SEC informed Gentile that he was a target in that investigation.The SEC subpoenaed Gentile for testimony. He refused to comply. The SEC did not seek enforcement against Gentile but subpoenaed Gentile’s attorney and an entity affiliated with Gentile’s Bahamian broker-dealer, which also refused to comply. The SEC commenced enforcement actions against those entities. Gentile unsuccessfully moved to intervene; the Florida district court ordered compliance. Gentile filed suit in New Jersey, seeking a declaration that the Café investigation was unlawful, requesting the quashing of the subpoenas, and seeking an injunction to prevent the SEC from using the fruits of that investigation against him.The Third Circuit affirmed the dismissal of the suit. The APA’s waiver of sovereign immunity, 5 U.S.C. 702, includes an exception for “agency action committed to agency discretion by law,” section 701(a)(2); sovereign immunity prevents judicial review of the Formal Order of Investigation. View "Gentile v. Securities and Exchange Commission" on Justia Law