Justia Securities Law Opinion Summaries

Plaintiffs, former employees of brokerage firms, filed four class actions challenging California's forced-patronage statute, section 450(a) of the California Labor Code. At issue was whether federal securities law preempted the enforcement of California's forced-patronage statute against brokerage houses that forbid their employees from opening outside trading accounts. The court affirmed the judgment and concluded that the district court correctly determined that the Securities Exchange Act of 1934, 15 U.S.C. 78o(g), and related self-regulatory organizations (SROs) rules preempted plaintiffs' forced-patronage suits. View "McDaniel, et al v. Wells Fargo Investments, LLC, et al" on Justia Law

Plaintiffs filed a class action on behalf of stock purchasers, alleging that Boeing committed securities fraud under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5. The suit related to statements concerning the new 787-8 Dreamliner, which had not yet flown, and did not specify a damages figure. At argument the plaintiffs’ lawyer indicated that the class was seeking hundreds of millions of dollars. The district court dismissed the suit under Rule 12(b)(6) before deciding whether to certify a class. Plaintiffs appealed the dismissal; Boeing cross-appealed denial of sanctions on the plaintiffs’ lawyers for violating Fed. R. Civ. P. 11. The Seventh Circuit affirmed dismissal with prejudice, but remanded for consideration under 15 U.S.C. 78u-4(c)(1), (2), of Rule 11 sanctions on the plaintiffs’ lawyers. No one who made optimistic public statements about the timing of the first flight knew that their optimism was unfounded; there is no securities fraud by hindsight. Plaintiffs’ lawyers had made confident assurances in their complaints about a confidential source, their only barrier to dismissal of their suit, even though none of them had spoken to the source and their investigator had acknowledged that she could not verify what he had told her. View "City of Livonia Emps' Ret. Sys. v. Boeing Co." on Justia Law

Plaintiffs, former customers of Sterling Foster, for which Bear Stearns, as a clearing broker, performed certain settlement and record-keeping functions, alleged that Bear Stearns violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), by participating in Sterling Foster's market manipulation scheme. Bear Stearns pursued this interlocutory appeal from a decision and order of the district court granting in part and denying in part plaintiffs' motion for certification of a class pursuant to Rule 23(b)(3). The court concluded that plaintiffs' allegations failed to trigger a duty of disclosure to Sterling Foster's clients such that the Affiliated Ute Citizens of Utah v. United States presumption of reliance applied. Therefore, plaintiffs failed to satisfy Rule 23(b)(3)'s predominance requirement. Accordingly, the court reversed the judgment of the district court. View "Levitt v. J.P. Morgan Securities, Inc." on Justia Law

Plaintiffs in this consolidated action sought relief on behalf of two large putative classes - one whose members bought auction rate securities and one whose members issued them - alleging that defendants triggered the market's collapse by conspiring with each other to simultaneously stop buying auction rate securities for their own proprietary accounts. The district court dismissed plaintiffs' complaints pursuant to Rule 12(b)(6). The court affirmed, holding that plaintiffs' complaints did not successfully allege a violation of Section 1 of the Sherman Act, 15 U.S.C. 1. Although the court did not reach the district court's implied-repeal analysis under Credit Suisse Securities (USC) LLC v. Billing, the district court was ultimately correct that the complaints failed to state a claim upon which relief could be granted. View "Mayor and City Council of Baltimore v. Citigroup, Inc." on Justia Law

Plaintiff appealed the district court's dismissal of its complaint for failure to state a claim. At issue was whether plaintiff had stated plausible claims under sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that allegations in the complaint stated a plausible claim that the offering documents for the security misstated the applicable underwriting standards in violation of sections 11, 12(a)(2), and 15. The court also held that the alleged misstatements were not immaterial as a matter of law. Finally, the court vacated the district court's holding that plaintiff, even as the representative of a proposed class, lacked standing to pursue claims based on securities in which it had not invested. Rather than addressing this issue, the court instructed the district court to reconsider it in light of the court's intervening opinion in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co. Accordingly, the court reversed in part, vacated in part, and remanded for further proceedings. View "New Jersey Carpenters Health Fund v. The Royal Bank of Scotland" on Justia Law

Southfield appealed the dismissal of its consolidated class-action securities fraud complaint against St. Joe and St. Joe's current and former officers for alleged violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Securities and Exchange Commission (SEC) Rule 10b-5, 17 C.F.R. 240.10b-5. Southfield argued that the district court erred in holding that they failed to adequately plead loss causation, actionable misrepresentation, or scienter, and also by denying their post-judgment motion to alter or amend. The court held that the complaint as framed by Southfield failed to adequately allege loss causation and the district court was therefore correct to dismiss Southfield's complaint for failure to state a claim. Accordingly, the court affirmed the judgment. View "City of Southfield Fire & Police Retirement System v. Greene, et al" on Justia Law

To recover damages in a private securities-fraud action under section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5, a plaintiff must prove reliance on a material misrepresentation or omission made by the defendant. The Supreme Court has endorsed a “fraud-on-the-market” theory, which permits plaintiffs to invoke a rebuttable presumption of reliance on public, material misrepresentations regarding securities traded in an efficient market. The theory facilitates the certification of securities-fraud class actions by permitting reliance to be proved on a class-wide basis. Connecticut Retirement sought FRCP 23(b)(3) certification of a securities-fraud class action against a biotechnology company (Amgen). The district court certified the class. The Ninth Circuit affirmed, rejecting an argument that Connecticut Retirement was required to prove materiality before class certification under Rule23(b)(3)’s requirement that “questions of law or fact common to class members predominate over any questions affecting only individual members.” The Supreme Court affirmed. Proof of materiality is not a prerequisite to certification of a securities-fraud class action. Materiality is judged by an objective standard and can be proved through evidence common to the class. Failure of proof of materiality would not result in individual questions predominating, but would end the case. A requirement that putative class representatives establish that they executed trades “between the time the misrepresentations were made and the time the truth was r¬vealed” relates primarily to typicality and adequacy of representation, not to the predominance inquiry. The Court rejected Amgen’s argument that, because of pressure to settle, materiality may never be addressed by a court if it is not evaluated at the class-certification stage. The potential immateriality of Amgen’s alleged misrepresentations and omissions was no barrier to finding that common questions predominate. View "Amgen Inc. v. CT Ret. Plans & Trust Funds" on Justia Law

Plaintiffs brought this putative class action under sections 11, 12, and 15 of the Securities Act, alleging that a prospectus and registration statement (the offering documents) issued by AMAG Pharmaceutical, Inc. in connection with a secondary stock offering held in 2010 contained two serious omissions: (1) a failure to disclose almost two dozen reports of serious adverse effects linked to a make-or-break drug for AMAG's future; and (2) failure to disclose information the FDA revealed in a warning letter issued after the offering. The district court dismissed the entire complaint on the ground that Plaintiffs failed sufficiently to plead section 11 claims pursuant to an SEC regulation. The First Circuit Court of Appeals (1) reversed the dismissal of the claims of actionable omissions because of the undisclosed reports because the reports gave rise to uncertainties AMAG knew would adversely affect future revenues and risk factors that made the offering risky and speculative; (2) affirmed as to the claims of omissions regarding the FDA information; and (3) reversed the dismissal of Plaintiffs' sections 12 and 15 causes of action. Remanded. View "Silverstrand Invs. v. Amag Pharms., Inc." on Justia Law

Plaintiffs purchased variable universal life insurance policies from defendant. Plaintiffs subsequently filed a class action suit against defendant under the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 78bb(f)(1), for levying excessive cost of insurance charges. The court concluded that claims of breach of contract and breach of the duty of good faith and fair dealing were not precluded by SLUSA, even if such claims related to the purchase or sale of a covered security. The court reversed the district court's dismissal of the two contract claims, on the condition that plaintiffs amend their complaint to remove any reference to deliberate concealment or fraudulent omission. The court affirmed the dismissal of the class claim for unfair competition in violation of California law. View "Freeman Investments, L.P., et al v. Pacific Life Ins. Co." on Justia Law

National Elevator, lead plaintiff on behalf of investors who purchased VeriFone stock, appealed the dismissal of its securities fraud class action. National Elevator alleged that VeriFone, the CEO and former Chairman of the Board of Directors, and the company's former CFO and Executive Vice President, violated sections 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), 78t-1(a), and 78t(a), and Securities and Exchange Commission Rule 10-b, 17 C.F.R. 240.10b-5(b), in connection with a December 2007 restatement of financial results. The court held that National Elevator adequately pleaded violations of section 10B and Rule 10b as to all defendants; its section 20A claim against the individual defendants was sufficiently pled; but the section 20(a) claim was properly dismissed. Accordingly, the court affirmed in part and dismissed in part. View "National Elevator Industry Pension Fund v. VeriFone Holdings, Inc., et al" on Justia Law