Justia Securities Law Opinion Summaries

Plaintiffs appealed from a decision granting defendants' motion to dismiss plaintiffs' complaints for failure to state a claim upon which relief could be granted. Plaintiffs, participants in two retirement plans offered by defendants, brought suit alleging breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Plaintiff alleged that defendants acted imprudently by including employer stock as an investment option in the retirement plans and that defendants failed to provide adequate and truthful information to participants regarding the status of employer stock. The court held that the facts alleged by plaintiffs were, even if proven, insufficient to establish that defendants abused their discretion by continuing to offer plan participants the opportunity to invest in McGraw-Hill stock. The court also held that plaintiffs have not alleged facts sufficient to prove that defendants made any statements, while acting in a fiduciary capacity, that they knew to be false. Accordingly, the judgment was affirmed. View "Gearren, et al. v. The McGraw-Hill Companies, Inc., et al." on Justia Law

Plaintiffs, participants in retirement plans offered by defendants and covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., appealed from a judgment dismissing their ERISA class action complaint. Plan documents required that a stock fund consisting primarily of Citigroup common stock be offered among the plan's investment options. Plaintiffs argued that because Citigroup stock became an imprudent investment, defendants should have limited plan participants' ability to invest in it. The court held that plan fiduciaries' decision to continue offering participants the opportunity to invest in Citigroup stock should be reviewed for an abuse of discretion and the court found that they did not abuse their discretion here. The court also held that defendants did not have an affirmative duty to disclose to plan participants nonpublic information regarding the expected performance of Citigroup stock and that the complaint did not sufficiently allege that defendants, in their fiduciary capacities, made any knowing misstatements regarding Citigroup stock. Accordingly, the court affirmed the judgment. View "Gray, et al. v. Citigroup, Inc., 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

Davis learned that the government was suspending sale of new 30-year bonds.The information was embargoed until 10 AM. He passed the information to traders, who bought futures contracts with an eight-minute head start and reaped profits. The brokerage settled SEC charges. PPP sought to represent a class of traders who held short positions in futures when the brokerage took the long side. The district judge concluded that such a class would be unrelated to trading that occurred during eight minutes of October 31, 2001 and denied certification. Investors, all of whom held short positions during the eight minutes, filed their own suit. The court dismissed because the two-year limitations period (7 U.S.C. 25(c)), had expired, rejecting an argument that claims did not accrue until the SEC filed its complaint. Meanwhile PPP's proposal for a reduced class was rejected. PPP accepted an offer of judgment under Fed. R. Civ. P. 68. The court rejected PPP's proposal to continue the suit. The investor suit plaintiff sought to intervene as class representative. The district court denied that motion. The Seventh Circuit affirmed. With respect to the limitations period, the court noted when the investors were aware of their harm. There cannot be a class action without a viable representative and there was no such representative involved in the appeal. View "Premium Plus Partners v. Goldman Sachs & Co., Inc." on Justia Law

Sheet Metal Workers Local 33 et al. appealed from a judgment of the district court dismissing their putative securities class action complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. At issue was whether the securities issuer made false statements and omissions of material facts in the registration documents accompanying its initial public offering, in violation of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that the alleged misstatements were not material because the value of the transactions composed an immaterial portion of the issuer's total assets. Accordingly, the court affirmed the district court's motion to dismiss on the ground of immateriality. View "Hutchison, et al. v. CBRE Realty Finance, Inc." on Justia Law

This suit followed BP Exploration (Alaska) Inc.'s (BPXA) temporary shut-down of its pipelines and oil production in Prudhoe Bay, Alaska, upon its discovery of a leak in a pipeline located in its Prudhoe Bay Eastern Operating Area. Plaintiff, on behalf of a class of purchasers of BP p.l.c. shares, subsequently brought a class action suit against BPXA alleging claims arising under Sections 10(b), 18, and 20(a) of the Securities and Exchange Act (SEC), 15 U.S.C. 78b(b), 78r, and 78t(a), and Rule 10b-5. Both parties appealled in part from the judgment of the district court. The court held that BPXA's breach of a contractual promise of specific future conduct, even though the contract was filed in conjunction with SEC reporting requirements, was not a sufficient foundation for a securities fraud action. The court declined plaintiff's invitation to review other issues that were not certified for interlocutory appeal. In light of the court's conclusion that breached contractual obligations did not constitute misrepresentations by BPXA that were actionable under the securities laws, the court did not reach the issue of scienter. Accordingly, the court reversed and remanded. View "Reese v. BP Exploration Alaska Inc." 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.

Petitioner, the lead plaintiff in a putative securities fraud class action, filed suit against respondent alleging violations under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., and Securities and Exchange Commission Rule 10b-5, and sought to have its proposed class certified pursuant to Federal Rule of Civil Procedure 23. The Court of Appeals affirmed the District Court's conclusion that the "loss causation" element of class certification was not satisfied and denied class certification. At issue was whether securities fraud plaintiffs must also prove loss causation in order to obtain class certification. The Court held that securities fraud plaintiffs need not prove loss causation in order to obtain class certification and that the Court of Appeals' rule contravened Basic Inc. v. Levinson's fundamental premise that an investor presumptively relied on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The Court also distinguished that, where loss causation was a familiar and distinct concept in securities law, it was not price impact. Accordingly, the Court vacated the judgment and remanded for further proceedings.

Plaintiffs appealed from judgments dismissing their class-action complaints seeking to hold defendants (collectively, "Rating Agencies") liable as underwriters or control persons for misstatements or omissions in securities offering documents in violation of sections 11 and 15 of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. 77k(a)(5), 77o(a). At issue was whether the Rating Agencies were "underwriters" as defined by 15 U.S.C. 77b(a)(11) because they helped structure securities transactions to achieve desired ratings. Also at issue was whether the Rating Agencies were "control persons" because of their alleged provision of advice and direction to primary violators regarding transaction structures under section 77o(a) of the 1933 Act. The court held that plaintiffs' section 11 claims that the Rating Agencies were "underwriters" was properly dismissed because the Rating Agencies' alleged structuring or creation of securities was insufficient to demonstrate their involvement in the requisite distributional activities. The court also held that plaintiffs' "control person" claims under section 77o(a) were properly dismissed because the Rating Agencies' provision of advice and guidance regarding transaction structures was insufficient to permit an inference that they had the power to direct the management or policies of alleged primary violators of section 11. The court further held that the district court did not abuse its discretion in denying implicitly plaintiffs' cursory requests for leave to amend.

Purchasers of common stock brought a class action alleging violations of federal securities laws; the case settled for $190,000,000. The same underlying facts resulted in an action by employees and former employees under ERISA; the company's 401(k) profit-sharing plan claimed a share of the settlement. The district court rejected the claim and the Seventh Circuit affirmed. Although individual plan participants did not purchase publicly-traded stock, the plan itself did so and is not excluded from the class definition of persons who purchased publicly traded common stock. The definition does, however, exclude any âaffiliateâ of the company and the plan is an affiliate. Plan administrators are either directors of the company or appointed by directors.