Justia Securities Law Opinion Summaries

Nonneman, acting through Fencorp, a family investment corporation, invested $3,980,345.50 in OKO for domestic oil and gas exploration, although he had no experience in such businesses, was showing signs of dementia, and suffered disabilities. In 2003, Nolfi assumed management of Nonneman’s affairs and it was apparent that the OKO investments would yield no returns. Of 128 wells, only 11 produced oil, and did not produce enough to recoup the investment. Nolfi filed suit in Ohio state court. During discovery plaintiffs learned facts indicating federal and state securities violations and filed in federal court, alleging violations of the Securities Act of 1933, 15 U.S.C. 77l(a)(1); violations of the Ohio Blue Sky laws by the sale of unregistered securities; federal securities fraud; common law fraud; misrepresentation; breach of fiduciary duties; and breach of contract. After a complicated set of rulings, the district court awarded Fencorp $1,012,835.50, the maximum not barred by the statute of repose. The Sixth Circuit affirmed in part, upholding rulings concerning the statute of repose, but setting aside the verdict on the state common law fraud claim and directing reinstatement of the verdict on the federal securities claim ($847,858). View "Fencorp Co. v. OH KY Oil Corp." on Justia Law

The brokerage entered into agreements with customers that set a fee for handling, postage, and insurance for mailing confirmation slips after each securities trade. Plaintiff filed claims of breach of contract and unjust enrichment, seeking class certification and recovery of fees charged since 1998. The brokerage removed to federal court under the Class Action Fairness Act, 28 U.S.C. 1332(d), or the Securities Litigation Uniform Standards Act 15 U.S.C. 78p(b) and (c) and 78bb(f), and obtained dismissal. The Seventh Circuit affirmed, first holding that SLUSA did not apply because any alleged misrepresentation was not material to decisions to buy or sell securities, but CAFA's general jurisdictional requirements were met. The agreement did not suggest that the fee represents actual costs, and it was not reasonable to read this into the agreement. Nor did the brokerage have an implied duty under New York law to charge a fee reasonably proportionate to actual costs where it notified customers in advance and they were free to decide whether to continue their accounts. View "Appert v. Morgan Stanley Dean Witter, Inc." on Justia Law

Defendant sells brokerage and investment products and services, typically to registered broker-dealers and investment advisers that trade securities for clients. One of its services, NetExchange Pro, an interface for research and managing brokerage accounts via the Internet, can be used for remote access to market dynamics and customer accounts. A firm may make its clients' personal information, including social security numbers and taxpayer identification numbers, accessible to end-users in NetExchange Pro. Some of defendant's employees also have access to this information. Plaintiff, a brokerage customer with NPC, which made its customer account information accessible in NetExchange Pro, received notice of the company's policy and filed a putative class action, alleging breach of contract, breach of implied contract, negligent breach of contractual duties, and violations of Massachusetts consumer protection laws. The district court dismissed. The First Circuit affirmed. Despite "dire forebodings" about access to personal information, plaintiff failed to state any contractual claim for relief and lacks constitutional standing to assert a violation of any arguably applicable consumer protection law. View "Katz v. Pershing, LLC" on Justia Law

This appeal concerned the maintenance of a suit for rescission under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., by plaintiffs Kenneth Weiss and his wholly-owned corporation. The district court granted summary judgment to defendants on all claims and awarded defendants attorneys' fees. The court held that a plaintiff suing under section 10(b) seeking rescission must demonstrate economic loss and that the misrepresentation or fraud conduct caused the loss. The court found that the record revealed that rescission was not feasible in the instant case. Yet employing a rescissionary measure of damages, Weiss would be able to convince the finder of fact that he was entitled to relief. On that basis, the court reversed the district court's grant of summary judgment of Weiss's federal and state securities claims and remanded for consideration under a rescissionary measure of damages. With respect to the statue of limitations issue, the court remanded for consideration in light of Merck & Co., Inc. v. Reynolds. The court affirmed the district court's judgment on Weiss's state law claims of common law fraud, negligent misrepresentation, mutual mistake, and unjust enrichment. The court vacated the district court's attorneys' fee award and dismissed the appeal of this award as moot. View "Strategic Diversity, Inc., et al. v. Alchemix Corp., et al." on Justia Law

Former customers of RCM, a subsidiary of the now-bankrupt Refco, appealed from a dismissal of their securities fraud claims against former corporate officers of Refco and Refco's former auditor. RCM operated as a securities and foreign exchange broker that traded in over-the-counter derivatives and other financial products on behalf of its clients. Appellants, investment companies and members of the putative class, claimed that appellees, former officers and directors of Refco, breached the agreements with the RCM customers when they rehypothecated or otherwise used securities and other property held in customer brokerage accounts. The district court dismissed the claims for lack of standing and failure to allege deceptive conduct. The court held that appellants have no remedy under the securities laws because, even assuming they have standing, they failed to make sufficient allegations that their agreements with RCM misled them or that RCM did not intend to comply with those agreements at the time of contracting. View "Capital Mgmt Select Fund Ltd., et al. v. Bennett et al." on Justia Law

This appeal concerned the maintenance of a suit for rescission under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., by plaintiffs. The district court granted summary judgments to defendants on all claims and awarded defendants attorneys' fees. The court held that a plaintiff suing under section 10(b) seeking rescission must demonstrate economic loss and that the misrepresentation of fraudulent conduct caused the loss. In this case, the court found that the record revealed the rescission was not feasible. Yet employing a rescissionary measure of damages, plaintiffs could be able to convince the finder of fact that plaintiffs were entitled to relief. On that basis, the court reversed the district court's grant of summary judgment on plaintiffs' federal and state securities claims and remanded for consideration under rescissionary measure of damages. With respect to the statute of limitations issue, the court remanded for consideration in light of Merck & Co. The court affirmed the district court's judgment on plaintiffs' state law claims of common law fraud, negligent misrepresentation, mutual mistake, failure of a condition precedent, and unjust enrichment. The court vacated the district court's attorneys' fee award and dismissed the appeal of the award as moot. View "Strategic Diversity, Inc., et al. v. Alchemix Corp., et al." on Justia Law

Appellants brought various claims before Financial Industry Regulatory Authority (FINRA) arbitrators against Ameriprise, a financial-services company, for, inter alia, breach of fiduciary duty, breach of contract, fraud, and negligent misrepresentation related to the decline in value of various financial assets owned by appellants and managed by Ameriprise. Ameriprise answered appellants' FINRA complaint by asserting, principally, that appellants released their claims by operation of a settlement agreement in a class-action agreement suit that had proceeded between 2004 and 2007 in the United States District Court for the Southern District of New York. After FINRA arbitrators denied Ameriprise's motion to stay appellants' arbitration, Ameriprise moved in the district court, in which the class action had been litigated and settled, for an order to enforce the settlement agreement that would enjoin appellants from pressing any of their claims before FINRA arbitrators. The district court concluded that the class settlement barred all of appellants' arbitration claims and therefore granted Ameriprise's motion and ordered appellants to dismiss their FINRA complaint with prejudice. The court held that the district court had the power to enter such an order and that several of appellants' arbitration claims were barred by the 2007 class-action settlement. Therefore, the court affirmed in part. But because the court concluded that appellants' arbitration complaint plead claims that were not, and could not have been, released by the class settlement, the court vacated in part the district court's judgment, and remanded the case for the entry of an order permitting the non-Released claims to proceed in FINRA arbitration. The court dismissed as moot appellants' appeal from the district court's denial of their motion for reconsideration. View "In Re: American Express Finance Advisors Securities Litigation" on Justia Law

Plaintiffs appealed from a dismissal of their complaint, which sought a declaratory judgment that, inter alia, the Financial Industry Regulatory Authority, Inc. (FINRA) lacked the authority to bring court actions to collect disciplinary fines as imposed. The court held that the heavy weight of evidence suggested that Congress did not intend to empower FINRA to bring court proceedings to enforce its fines and that the 1990 Rule Change did not authorize FINRA to judicially enforce the collection of its disciplinary fines. View "John J. Fiero and Fiero Brothers, Inc. v. FINRA" on Justia Law

This case involved a fallout of a $3.65 billion Ponzi scheme perpetrated by Minnesota businessman Thomas J. Petters. Appellants, investment funds (collectively, Ritchie), incurred substantial losses as a result of participating in Petters' investment scheme. Ritchie subsequently sued two officers of Petters' companies, alleging that they assisted Petters in getting Ritchie to loan over $100 million to Petters' company. Ritchie's five-count complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(a), (c)-(d), common law fraud, and tortious inference with the contract. The court held that the district court erred in concluding that Ritchie's action was barred by a Receivership Order. The court also rejected arguments challenging the sufficiency of Ritchie's pleadings in the common law fraud count and did not to address other arguments related to abstention, lack of causation, and absolute privilege. Accordingly, the court reversed the judgment of the district court and remanded for further proceedings. View "Ritchie Capital Mgmt., et al. v. Jeffries, et al." on Justia Law

This case concerned the bankruptcy estate of Qualia Clinical Service, Inc. The estate's Chapter 7 Trustee sought to avoid as a preferential transfer a security interest recorded by one of Qualia's creditors shortly before the bankruptcy petition. The bankruptcy court and the Bankruptcy Appellate Panel (BAP) held the security interest voidable. The court held that the bankruptcy court and the BAP properly applied 11 U.S.C. 547(c)(5)(A) to conclude that the preferential transfer in this case, though it concerned an interest in accounts receivable, improved Inova Capital Funding, LLC's position as against Qualia's other creditors and so was not exempt from avoidance under that subsection. The court found Inova's remaining arguments unpersuasive. View "Lange v. Inova Capital Funding, LLC, et al." on Justia Law