Justia Securities Law Opinion Summaries

Articles Posted in Commercial Law
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Ryan Cox filed a class action lawsuit alleging that the defendants manipulated the price of a cryptocurrency called HEX by artificially lowering its ranking on CoinMarketCap.com. The defendants include two domestic companies, a foreign company, and three individual officers of the foreign company. Cox claimed that the manipulation caused HEX to trade at lower prices, benefiting the defendants financially.The United States District Court for the District of Arizona dismissed the case for lack of personal jurisdiction, concluding that Cox needed to show the defendants had sufficient contacts with Arizona before invoking the Commodity Exchange Act's nationwide service of process provision. The court found that none of the defendants had sufficient contacts with Arizona.The United States Court of Appeals for the Ninth Circuit reviewed the case and held that the Commodity Exchange Act authorizes nationwide service of process independent of its venue requirement. The court concluded that the district court had personal jurisdiction over the U.S. defendants, CoinMarketCap and Binance.US, because they had sufficient contacts with the United States. The court also found that Cox's claims against these defendants were colorable under the Commodity Exchange Act. Therefore, the court reversed the district court's dismissal of the claims against the U.S. defendants and remanded for further proceedings.However, the Ninth Circuit affirmed the district court's dismissal of the claims against the foreign defendants, Binance Capital and its officers, due to their lack of sufficient contacts with the United States. The court vacated the dismissal "with prejudice" and remanded with instructions to dismiss the complaint against the foreign defendants without prejudice. View "COX V. COINMARKETCAP OPCO, LLC" on Justia Law

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This case involves Commerzbank AG, a German bank, and U.S. Bank, N.A., an American bank. Commerzbank sued U.S. Bank, alleging that it had failed to fulfill its duties as a trustee for residential mortgage-backed securities (RMBS) that Commerzbank had purchased. The case revolved around three main issues: whether Commerzbank could bring claims related to trusts with "No Action Clauses"; whether Commerzbank's claims related to certificates held through German entities were timely; and whether Commerzbank could bring claims related to certificates it had sold to third parties.The district court had previously dismissed Commerzbank's claims related to trusts with No Action Clauses, granted judgment in favor of U.S. Bank on the timeliness of Commerzbank's claims related to the German certificates, and denied Commerzbank's claims related to the sold certificates. Commerzbank appealed these decisions.The United States Court of Appeals for the Second Circuit affirmed the district court's decisions on the timeliness of the German certificate claims and the denial of the sold certificate claims. However, it vacated the district court's dismissal of Commerzbank's claims related to trusts with No Action Clauses and remanded the case for further proceedings. The court found that Commerzbank's failure to make pre-suit demands on parties other than trustees could be excused in certain circumstances where these parties are sufficiently conflicted. View "Commerzbank AG v. U.S. Bank, N.A." on Justia Law

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Walworth, a former stockholder, sued Mu Sigma, a privately held data analytics company, and Rajaram, the company’s founder, CEO, and board chairman, alleging that after reaping the benefits of Walworth’s $1.5 million investment and reputational capital, the defendants embarked on a fraudulent scheme to oust Walworth of its substantial ownership interest in the company.The Cook County circuit court dismissed the complaint, citing the stock repurchase agreement (SRA), which included anti-reliance and general release provisions. The appellate court reversed, holding that the anti-reliance language was ambiguous. The Illinois Supreme Court reinstated the dismissal, stating that “the broad and comprehensive release agreed to by [Walworth], a sophisticated party represented by experienced counsel, unambiguously encompasses” the unjust enrichment and breach of contract claims. The bargained-for anti-reliance provisions reflected the understanding that there may be undisclosed information but that Walworth was satisfied by the information provided. Walworth had direct access to Rajaram to negotiate the arm’s-length transaction at issue and Rajaram was not acting as a fiduciary for Walworth. A corporation owes no fiduciary duty to its shareholder and Delaware law does not impose “an affirmative fiduciary duty of disclosure for individual transactions.” View "Walworth Investments-LG, LLC v. Mu Sigma, Inc." on Justia Law

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In this case, a byproduct of litigation stemming from the derailment of a Montreal, Maine & Atlantic Railway, Ltd. (MMA) freight train carrying crude oil in Lac-Megantic, Quebec, the First Circuit affirmed the district court's entry of judgment in favor of Robert Keath, the estate representative of MMA, and against creditor Wheeling & Lake Erie Railway Company, holding that, giving due deference to the fact-finder's resolution of the burden of proof, the judgment must be affirmed.One month after the derailment, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. Wheeling instituted an adversary proceeding in the bankruptcy court against MMA and the estate representative, seeking a declaratory judgment regarding the existence and priority of its security interest in certain property of the MMA estate. The case involved intricate questions concerning secured transactions, carriage of goods, and corporate reorganization. After a settlement, the bankruptcy court ruled in favor of the estate representative. The First Circuit affirmed, holding (1) ultimately, this case turned on principals relating to the allocation of the burden of proof and the deference due to the finder of fact; and (2) giving due deference to the fact-finder's resolution of the burden of proof issue, the district court's judgment must be affirmed. View "Wheeling & Lake Erie Railway Co. v. Keach" on Justia Law

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In 2005, the Harrises bought tens of thousands of shares in Bancorp through a TD Ameritrade account. Six years later, the Harrises sought to hold some of their Bancorp stock in another form, registered in their name and reflected in a physical copy of a certificate signifying their ownership. TD Ameritrade refused to convert the Harrises’ form of ownership, stating that all Bancorp stock was in a “global lock,” prohibiting activity in the stock, including changing the Harrises’ form of ownership. The lock was created because someone had fraudulently created hundreds of millions of invalid shares of Bancorp stock. The Harrises sued, alleging that TD Ameritrade had violated SEC Rule 15c3-3 and Nebraska’s version of the Uniform Commercial Code. The Sixth Circuit affirmed dismissal.. Neither the SEC Rule nor Nebraska’s Commercial Code creates a private right of action to vindicate the alleged problem. View "Harris v. TD Ameritrade, Inc." on Justia Law

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Rahman filed a securities class action against KB, an importer of infant furniture and products, and individuals, alleging violation of Section 10(b) of the Securities Exchange Act and SEC Rule 10b-5 and (2) and Section 20(a) of the Exchange Act. The complaint alleged that defendants misled investors by artificially inflating KB’s stock price by issuing deceptive public financial reports and press releases dealing with compliance with customs laws and overall financial performance. A second amended complaint specified failure to disclose product recalls, safety violations, and illegal staffing practices. The district court dismissed for failure to satisfy the heightened scienter pleading standard required by the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b)(2). The Third Circuit affirmed. View "Rahman v. Kid Brands, Inc." on Justia Law

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This case presented a battle between banks over the proceeds of the sale of cattle by a financially strapped borrower who had financial dealings with both banks. When Security Savings Bank (Security) obtained the proceeds of the sale, Peoples Trust and Savings Bank (Peoples) claimed a security interest in the proceeds and sued for conversion. The district court granted summary judgment in favor of Peoples. After Security appealed, Peoples commenced garnishment proceedings against Security to enforce its judgment, and Security paid the underlying judgment. The court of appeals then determined that Security had waived its right to appeal and dismissed the case. The Supreme Court affirmed, holding (1) a defendant faced with post-judgment garnishment does not waive a pending appeal by paying the judgment in order to avoid further enforcement proceedings; and (2) the district court correctly determined that Peoples had a security interest in the proceeds superior to Security's interest and that Peoples did not waive its superior position through its course of conduct.View "Peoples Trust & Savings Bank v. Sec. Savings Bank" on Justia Law

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Earl and Nawana Wallace (the Senior Wallaces) borrowed $15,789 from Pinnacle Bank - Wyoming to finance a vehicle the Senior Wallaces purchased for their son and his wife (the Junior Wallaces). The collateral for the loan was the vehicle the Senior Wallaces bought for and titled in the Junior Wallaces' names. To that end, the Junior Wallaces signed a third party security agreement pledging the vehicle as collateral. The Junior Wallaces subsequently filed a bankruptcy petition. The bankruptcy trustees eventually sold the vehicle to benefit the bankruptcy estate. The Senior Wallaces thereafter stopped making payments on the loan. Pinnacle then filed a complaint seeking damages in the amount of the principal due on the note. The district court granted Pinnacle's motion for summary judgment. The Supreme Court affirmed, holding that none of the Senior Wallaces' asserted defenses excused them from meeting their loan obligation. View "Wallace v. Pinnacle Bank - Wyo." on Justia Law

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The parties to this lawsuit claimed rights to a punch press used in the manufacturing business of now-defunct Vitco Industries. Plaintiff, Gibraltar Financial Corporation, held a perfected security interest in Vitco's tangible and intangible property, including its equipment. Defendants, several entities including Prestige Equipment, who had acquired the press, and Key Equipment Finance, claimed that the security interest did not cover the press because the press was not Vitco's equipment, but rather, the press had been leased to Vitco by Key Equipment. The trial court granted summary judgment in favor of Defendants after concluding that the lease was a true lease. The court of appeals affirmed. The Supreme Court reversed, holding that genuine issues of material fact existed regarding whether the press was leased. The Court noted that no evidence was on the record relating to the economic expectations of Vitco and Key Equipment at the time the transaction was entered into. Remanded. View "Gibraltar Fin. Corp. v. Prestige Equip. Corp." on Justia Law

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This case arose when Commerzbank agreed to acquire Dresdner Bank in September 2008. As part of the deal, Commerzbank also acquired Dresdner Bank's trust preferred structures, and holders of Dresdner's trust preferred securities received distributions in both 2009 and 2010. Plaintiff claimed that paying those distributions "pushed," or required Commerzbank to make distributions on, a class of its owned preferred securities in which plaintiff had an interest, and, by the complaint, plaintiff asked the court to enforce that alleged obligation. Plaintiff also sought specific performance of a support agreement that was argued to require the elevation of the liquidation preference of Commerzbank's trust preferred securities in response to a restructuring of one class of the Dresdner securities. The parties filed cross-motions for summary judgment. The court held, among other things, that because the DresCap Trust Certificates did not qualify as either Parity Securities, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim under the Pusher Provision. The court also held that because DresCap Trust Certificates did not qualify as either Parity Securities or Junior Securities, Section 6 of the Support Undertaking was not triggered by amendment of the DresCap Trust IV Certificates. Accordingly, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim that the amendment of the DresCap Trust IV Certificates required defendants to amend the Trusted Preferred Securities.View "The Bank of New York Mellon v. Commerzbank Capital Funding Trust II, et al." on Justia Law