Justia Securities Law Opinion Summaries

Bebo is the respondent in an administrative enforcement proceeding before the Securities and Exchange Commission, alleging that she violated federal law by manipulating internal books and records, making false representations to auditors, and making false disclosures to the SEC. Rather than wait for a final decision in the administrative enforcement proceeding, Bebo filed suit in federal court challenging on constitutional grounds the authority of the SEC to conduct the proceeding. She invoked federal question jurisdiction under 28 U.S.C. 1331. The district court dismissed for lack of subject matter jurisdiction, based on the administrative review scheme. The Seventh Circuit affirmed. The administrative law judge assigned to the case is expected to issue an initial decision within the coming months. If the decision is adverse to Bebo, she will have the right to file a petition for review with the SEC. The SEC will then have the power either to adopt the ALJ’s initial decision as the final decision of the agency or to grant the petition and conduct de novo review. If the SEC’s final decision is adverse, Bebo will then have the right under 15 U.S.C. 78y(a)(1) to seek judicial review and will be able to raise her constitutional claims. View "Bebo v. Sec. Exchange Comm'n" on Justia Law

The Bank and a group of States challenged the constitutionality of various provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376. The district court concluded that plaintiffs lacked standing and that their claims were not ripe. The court concluded that the Bank has standing to challenge the constitutionality of the Consumer Financial Protection Bureau, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the Bureau. The court also concluded that the Bank has standing to challenge Director Cordray’s recess appointment, and that claim is ripe. Therefore, the court reversed as to that claim and remanded for reconsideration in the first instance the Bank’s constitutional challenge to the recess appointment. The court further concluded that the Bank lacks standing to challenge the constitutionality of the Financial Stability Oversight Council and affirmed the judgment as to that claim. Finally, the court concluded that the State plaintiffs lack standing to challenge the Government’s orderly liquidation authority, and that claim is not ripe. Therefore, the court affirmed as to that claim. View "State Nat'l Bank of Big Spring v. Lew" on Justia Law

Plaintiffs, pension funds, filed suit, seeking to hold BNYM responsible for the losses allegedly caused by Countrywide's breach of its representations and warranties in connection with 530 residential mortgage-backed securities (RMBS) created between 2004 and 2008 for which BNYM acts as trustee. The court affirmed the portion of the district court's order dismissing plaintiffs' claims related to the trusts in which they did not invest for lack of standing because plaintiffs' claims do not implicate the "same set of concerns" as those of absent class members who purchased certificates issued by trusts in which no named plaintiff invested; reversed the portion of that order denying BNYM's motion to dismiss plaintiffs' Trust Indenture Act (TIA), 15 U.S.C. 77aaa-77aaaa, claims related to the PSA-governed (pooling and servicing agreements) New York trusts where the New York certificates at issue are exempt from section 304(a)(2) of the TIA; and the court remanded in part for further proceedings. View "Retirement Board v. Bank of New York Mellon" on Justia Law

Dynegy filed a voluntary Chapter 11 bankruptcy petition. Charles Silsby then filed a securities class action complaint against Dynegy and others alleging dissemination of false and misleading information and failure to disclose material facts about Dynegy's financial performance and prospects, in violation of securities laws. Stephen Lucas was appointed lead plaintiff in Silsby v. Icahn, the securities class action litigation. In this appeal, Lucas challenged the district court's conclusion that he lacked standing to opt out of or object to the joint reorganization plan on behalf of the putative class in the securities litigation. The court concluded that Lucas' status as lead plaintiff of the putative class in the district court securities litigation did not automatically extend to the bankruptcy proceedings; because Lucas did not seek application of Rule 23 in bankruptcy court, he represented no one but himself; and since he opted out of the release in his individual capacity, Lucas lacks standing to appeal the order confirming the Plan. Accordingly, the court affirmed the judgment. View "In re: Dynegy, Inc.," on Justia Law

This case arose out of the collapse of SIV, managed by Cheyne and structured by Morgan Stanley. PSERS and Commerzbank appealed from the final order of judgment denying class certification, dismissal of Commerzbank's claim for lack of standing; and dismissal of PSERS's claim because its presence as a party would destroy complete diversity, the sole basis of subject matter jurisdiction. The court affirmed the denial of class certification and dismissal of PSERS; held that it was not a permissible exercise of discretion for the district court to limit Commerzbank's ability to establish its standing; certified to the New York Court of Appeals the question of whether a reasonable trier of fact could find that Commerzbank had acquired from a third party that had purchased securities a fraud claim against Morgan Stanley; and certified the question whether, if Commerzbank has standing, a reasonable trier of fact could hold Morgan Stanley liable for fraud based on the present record. View "Pennsylvania Public School Employees’ Retirement System v. Morgan Stanley" on Justia Law

The SEC filed suit against Arthur Nadel and two of his investment companies for operating a Ponzi scheme. The district court appointed a receiver to take possession and control over Quest because the officers were funding the company with proceeds from a Ponzi scheme. The district court enjoined the current officers from taking any actions on behalf of Quest and vested the receiver with the authority to "[d]efend, compromise or settle legal actions, including the instant proceeding." The officers now appeal the appointment of the receiver. The court granted the receiver's motion to dismiss for lack of jurisdiction because the officers did not have standing to appeal in the name of Quest where the district court enjoined the officers from taking any action on behalf of Quest. View "SEC v. Quest Energy Mgmt. Grp." on Justia Law

FutureSelect invested nearly $200 million in the Rye Funds, which pooled and fed money into Bernard Madoff's fraudulent securities investment scheme. The investments were lost when Madoff's fraud collapsed. FutureSelect sued Tremont Group Holdings (proponent of the Rye Funds), Oppenheimer Acquisition Corporation and Massachusetts Mutual Life Insurance Company (Tremont's parent companies) and Ernst & Young, LLP (Tremont's auditor) for their failure to conduct due diligence on Madoff's investments. The trial court dismissed on the pleadings, finding Washington's security law did not apply, and that Washington courts lacked jurisdiction over Oppenheimer. The Court of Appeals reversed, and the defendants sought to reinstate the trial court's findings. Finding no error with the Court of Appeals' decision, the Washington Supreme Court affirmed. View "Futureselect Portfolio Mgmt., Inc. v. Tremont Grp. Holdings, Inc." on Justia Law

After a jury trial, Defendant was convicted of theft by misapplication of property and securities fraud. Defendant appealed, contending that the court's jury instructions impermissibly shifted the burden of proof onto him to prove his innocence. The Supreme Court affirmed, holding that the burden of proof was not improperly shifted onto Defendant to prove his innocence where (1) there was no obvious error in the instructions the trial court gave because, as a whole, the instructions correctly stated the law; and (2) the court correctly stated the State's burden of proof and Defendant's presumption of innocence several times during the jury selection, at the beginning of the trial, in its final instructions, and in its written instructions sent to the jury room. View "State v. Philbrook" on Justia Law

The issue before the Tenth Circuit in this case stemmed from a civil-enforcement action brought by the Securities and Exchange Commission ("SEC") against Defendant-Appellant Ralph Thompson, Jr., in connection with an alleged Ponzi scheme Thompson ran through his company, Novus Technologies, L.L.C. ("Novus"). The district court granted summary judgment in favor of the SEC on several issues, including the issue of whether the instruments Novus sold investors were "securities." Thompson's single issue on appeal was that the district court ignored genuine disputes of material fact on the issue of whether the Novus instruments were securities, and that he was entitled to have a jury make that determination. After careful consideration, the Tenth Circuit concluded that under the test articulated by the U.S. Supreme Court in "Reves v. Ernst & Young" (494 U.S. 56 (1990)), the district court correctly found that the instruments Thompson sold were securities as a matter of law. View "SEC v. Thompson" on Justia Law

In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law