Justia Securities Law Opinion Summaries

Morgan Keegan & Company, Inc. and Regions Bank (hereinafter referred to collectively as "Regions") appealed an order of the Baldwin Circuit Court which granted in part and denied in part their motions to compel arbitration in an action filed against them by Baldwin County Sewer Service, LLC ("BCSS"). In 2001 BCSS began discussing with AmSouth Bank ("AmSouth"), the predecessor-in-interest to Regions Bank, options to finance its existing debt. AmSouth recommended that BCSS finance its debt through variable-rate demand notes ("VRDNs").1 In its complaint, BCSS alleged that in late 2008 it received a notice of a substantial increase in the variable interest rates on its 2002, 2003, 2005, and 2007 VRDNs, which constituted BCSS's first notice that the interest-rate-swap agreements recommended by Regions did not fix the interest rate on the VRDNs but, instead, exposed BCSS to "an entirely new increased level of market risk in the highly complex derivative market." BCSS sued Regions Bank and Morgan Keegan asserting that Regions falsely represented to BCSS that swap agreements fixed BCSS's interest rates on all the BCSS debt that had been financed through the VRDNs. Following a hearing on the motions to compel arbitration, the trial court entered an order in which it granted the motions to compel arbitration as to BCSS's claims concerning the credit agreements but denied the motions to compel arbitration as to BCSS's claims concerning the failure of the swap transactions to provide a fixed interest rate. The trial court reasoned that the "Jurisdiction" clause in a master agreement, in combination with its merger clause, "prevent[ed] any argument that the VRDN arbitration agreement applies to disputes concerning the swap agreements" and that those clauses demonstrated that it was "the parties' intention, as it relates to the interest-swap agreement and any transaction related to that agreement, that the parties would not arbitrate but instead [any dispute] would be resolved by proceedings in a court of competent jurisdiction." Upon review, the Supreme Court concluded that Regions presented evidence of the existence of a contract requiring arbitration of the disputes at issue. The Court reversed the order of the trial court denying the motions to compel arbitration of BCSS's claims concerning the master agreement and the swap agreement and remanded the case for further proceedings.View "Regions Bank v. Baldwin County Sewer Service, LLC " on Justia Law

Central Mortgage and Morgan Stanley entered into a contract concerning the purchase of servicing rights for loans that Morgan Stanley planned to sell to Fannie Mae and Freddie Mac (the agencies) and private investors. Subsequently, many of the loans for which Morgan Stanley sold the servicing rights began to fall delinquent. The agencies exercised their contract right to put delinquent agency loans back to Central Mortgage. Central Mortgage then filed a complaint against Morgan Stanley for breach of contract. The Chancery Court granted Morgan Stanley's motion to dismiss. The Supreme Court reversed and remanded, holding that the claims were legally sufficient to withstand the motion. Central Mortgage then filed an amended complaint to add new claims for additional agency loans (new loans) that had been put back by the agencies and to challenge the private loans. Morgan Stanley moved to dismiss the amended complaint. The Chancery Court (1) denied the motion to dismiss to the extent that it rehashed theories that the Court and Supreme Court already considered in the context of its original motion to dismiss; but (2) granted the motion to dismiss the claims related to the new loans because those claims were barred by Delaware's statute of limitations. View "Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC" on Justia Law

This action involved claims of fraud and breach of fiduciary against an individual defendant, a former investment professional accused of having committed a massive fraud related to a quantitatively-based trading program that he allegedly developed to trade futures contracts. Plaintiffs, as a result of their association with defendant and Paron, the firm they founded with defendant, claimed that they have been stigmatized and thus face dismal prospects of finding employment in the financial services industry. The court found that defendant committed fraud and breached his fiduciary duties to plaintiff and Paron by making false statements of fact about his program, his investment track record, and his personal financial situation. As a result, plaintiffs were entitled to extensive damages against defendant based on their lost future earnings and other costs associated with the formation and operation of Paron. The court also awarded plaintiffs limited injunctive relief requiring defendant to destroy or return copies of Paron's trading program and to stop marketing any versions of that trading program.View "Paron Capital Mgmt., LLC, et al. v. Crombie" on Justia Law

Plaintiffs brought their Verified Complaint asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing against defendant. J.P.Morgan also asserted a claim for attorneys' fees and costs under an option agreement that J.P. Morgan and defendant entered into, which was the contract central to the dispute. Defendant moved to dismiss pursuant to Court of Chancery Rule 12(b)(6). The court held that J.P. Morgan has failed to state a claim that defendant breached the express terms of the Option Agreement and therefore, defendant's motion to dismiss was granted as to Count I. Defendant's motion to dismiss was denied as to Count II because J.P. Morgan's allegations, taken together, were sufficient to state a claim of the implied covenant. Finally, defendant's motion to dismiss was denied as to Count III where J.P. Morgan could eventually be the prevailing party in this action.View "JPMorgan Chase & Co. v. American Century Co." on Justia Law

Defendant Randy J. Rouleau appealed the decision of the Washington Civil Division which held that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Security Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CF2 (Wells Fargo), was entitled to enforce his personal guaranty of a promissory note secured by mortgages on five mobile home parks.  The civil division concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3-301(i), which defines who may enforce a negotiable instrument.  Defendant argued that the court erred in ruling that Wells Fargo has standing to enforce the guaranty because Wells Fargo could not prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty.  Defendant also argued that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned.  Finally, defendant argued that because Wells Fargo lacked standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action.  Based on the evidence presented, the Supreme Court could not conclude that the court's finding that Wells Fargo was assigned the note and mortgage was clearly erroneous.  Moreover, the court's finding on this point, essential to Wells Fargo's status as a holder, directly supports its conclusion that Wells Fargo has standing to enforce the guaranty.  Because Wells Fargo had standing, Defendant's final argument that the court lacked jurisdiction over the enforcement action has no merit. The Supreme Court affirmed the civil division. View "Wells Fargo Bank Minnesota v. Rouleau" on Justia Law

Plaintiff sued defendant asserting causes of action for breach of fiduciary duty, gross negligence, and breach of contract where the gravamen of the complaint was that defendant mismanaged the portfolio of an entity whose obligations plaintiff guaranteed. At issue was whether the Martin Act, General Business Law art 23-A, preempted plaintiff's common-law causes of action for breach of fiduciary duty and gross negligence. The court agreed with plaintiff that the Martin Act did not preclude a private litigant from bringing a nonfraud common-law cause of action where the Martin Act did not expressly mention or otherwise contemplate the elimination of common-law claims.View "Assured Guar. (UK) Ltd. v J.P. Morgan Inv. Mgt. Inc." on Justia Law

This case involved a dispute over earn-out payments related to a merger between Viacom and Harmonix where plaintiff was one of the selling stockholders of Harmonix. Plaintiff sued on behalf of the selling stockholders, alleging that Viacom and Harmonix purposefully renegotiated the distribution contract with EA so as to reduce the earn-out payments payable to the Harmonix stockholders, and thus breached the covenant of good faith and fair dealing implied in the Merger Agreement. The court dismissed plaintiff's claim and held that it would be inequitable for the court to imply a duty on Viacom and Harmonix's part to share with the selling stockholders the benefits of a renegotiated contract addressing EA's right to distribute Harmonix products after the expiration of the earn-out period. View "Winshall v. Viacom Int'l, Inc., et al." on Justia Law

This appeal was the latest "in a decade-long dispute" between Joseph Dzwonkowski, Sr. (Joe Sr.) and two of his sons, Robert and Joseph Jr. (Joe Jr.) regarding the ownership and control of Sonitrol of Mobile, Inc., a closely-held corporation that provided commercial-security services in the greater Mobile area. Ten years prior, Joe Jr. sold his shares in the company to his father in order to settle some of his personal debts. Possession of the stock certificates was the central issue in the case. Joe Sr. fired his sons and offered to purchase their shares, but Joe Jr. demanded his former shares back from his father. Joe Sr. then filed suit for a declaratory judgment to determine who rightfully owned the stock and to uphold his decision to fire his sons. The trial court ruled against Joe Sr. In 2004, the Supreme Court dismissed Joe Sr.'s appeal of that judgment, holding that an appeal was premature because the damages to be awarded to Sonitrol had not yet been set. Those damages were eventually set in 2011, awarding Sonitrol $764,359 and Joe Jr. $1. Joe Sr. appealed. On appeal, Joe Sr. argued whether the trial court should have immediately entered an order declaring him owner of the disputed shares of Sonitrol stock. The Supreme Court found that the trial court did not act contrary to the appellate court's mandate on remand. Accordingly the trial court's judgment was affirmed. View "Dzwonkowski v. Sonitrol of Mobile, Inc." on Justia Law

SVIP brought an action in the Court of Chancery against ThoughtWorks for a declaratory judgment of the meaning of the phrase "funds legally available" as it related to ThoughtWorks' obligation under its Amended Charter to redeem Series A Preferred Stock. The court held that because the record supported the Court of Chancery's conclusion that SVIP did not show that ThoughtWorks had "funds legally available," even under its own proposed definition of that phrase, the court affirmed the judgment.View "SV Investment Partners, LLC, et al. v. Thoughtworks, Inc." on Justia Law

This case involved the interpretation of two provisions in a merger agreement between defendant corporation and a company whose former stockholders were represented by plaintiff. The two provisions at issue dealt with contingent payments due in certain circumstances from defendant to those stockholders. The court found that the language of the merger agreement was unambiguous, and that per its provisions, defendant's obligations under the merger agreement were assumed by the acquiring company, thus avoiding the acceleration of the remaining revenue contingent payments. Therefore, the court denied plaintiff's motion for summary judgment and granted summary judgment in favor of defendant.View "Coughlan v. NXP B.V." on Justia Law