Justia Securities Law Opinion Summaries

Republic bought more than $50 million worth of residential-mortgage-backed securities from Bear Stearns. It did not read the relevant offering documents before investing. As the national economy crumbled in 2007 and 2008, so did the value of the investments. Republic brought suit in 2009, alleging that Bear Stearns and one of its employees fraudulently induced it to buy, and then to retain, the securities. It claimed that a series of misrepresentations and omissions, both oral and in the written offering documents, were actionable under common-law theories of fraud and negligent misrepresentation, and under the Blue Sky Law, Kentucky’s securities statute. The district court dismissed. The Sixth Circuit affirmed. Republic cannot maintain any of its common-law fraud, negligent-misrepresentation, or Kentucky Blue Sky Law claims. It failed to adequately plead actionable misrepresentations or omissions of fact, complained of risks disclosed in offering documents that it failed to read before investing tens of millions of dollars in risky securities, and attempted to maintain claims that are time-barred. View "Republic Bank & Tr. Co. v. Bear Stearns & Co., Inc." on Justia Law

Petitioner, a Russian citizen, petitioned the court to review the default order the SEC entered against him for failing to respond to administrative proceedings initiated by the SEC on allegations that he violated securities laws. The court agreed with petitioner that the SEC's application of Rule 155(b), 17 C.F.R. 201.155(b), was inconsistent with its precedent and therefore arbitrary. Accordingly, the court granted the petition for review, vacated the SEC's order denying petitioner's motion to set aside the default entered against him, and remanded for further proceedings. View "Rapoport v. SEC" on Justia Law

Plaintiff, an attorney admitted to practice in New York, appealed from an order of the district court dismissing his complaint for lack of subject matter jurisdiction because Section 25(a) of the Securities and Exchange Act of 1934, 15 U.S.C. 78y(a)(1), provided a comprehensive remedial scheme that required plaintiff to appeal an SEC debarment order to a court of appeals. The court affirmed the district court's conclusion that Section 25(a) did, under this Circuit's precedent, supply the jurisdictional route that plaintiff must follow to challenge the SEC action in this case. View "Altman v. SEC, et al." on Justia Law

In 2007-2008, Textron made public statements assuring investors of the strength and depth of the backlog of orders to carry it through difficult economic times. In January 2008 an officer referred to "unusually low cancellations." Several similar statements followed. In a 2009 analyst report, J.P. Morgan wondered "how we go from 3.5 years of backlog six months ago to a 20% y/y production decline for 2009 that is only 80% sold out." Plaintiffs, purchasers of Textron securities, claim that for more than 18 months, Textron misstated the strength of the backlog. The complaint does not challenge the technical accuracy of most of Textron's statements, but claimed that Textron deliberately omitted material information, that Textron's officers could not have believed the truth of their unrelentingly positive statements, and that certain factual statements about cancellation figures were false when made. The main thrust of plaintiffs' complaint concerned failure to disclose information about the weakness of the backlog due to relaxed financing arrangements and other practices. The district court dismissed. The First Circuit affirmed. The complaint was deficient; the materiality issue was a close call, but the complaint failed to plead facts justifying a reasonable inference of scienter. View "Auto. Indus. Pension Trust Fund v. Textron Inc." on Justia Law

Plaintiff owned a rental center and retained defendants, who provide investment banking services to the equipment rental industry, to help him obtain an investor or buyer. Defendants’ advice culminated in sale of a majority of plaintiff’s stock for about $30 million. Defendants billed plaintiff $758,675. Plaintiff paid without complaint but later sued for return of the entire fee on the ground that defendants lacked a brokerage license required by Wis. Stats. 452.01(2)(a), 452.03. The district court dismissed, finding the parties equally at fault. The Seventh Circuit affirmed, declining to definitively answer whether a license was required under the circumstances that a negotiated sale of assets fell through in favor of a sale of stock. Plaintiff is not entitled to relief even if there was a violation. Referring to the classic Highwayman’s Case, the court rejected claims of in pari delicto and unclean hands; plaintiff was not equally at fault. To bar relief, however, is not punishing a victim. Plaintiff did not incur damages and is not entitled to restitution. Plaintiff sought compensation for spotting a violation and incurring expenses to punish the violator, a bounty-hunter or private attorney general theory, not recognized under Wisconsin law. The voluntary-payment doctrine is inapplicable. View "Schlueter v. Latek" on Justia Law

Plaintiffs, groups of investors who purchased the securities of KV, brought this class action lawsuit alleging that KV and some of its individual officers committed securities fraud. Plaintiffs alleged that KV made false or misleading statements about its compliance with Food and Drug Administration (FDA) regulations governing the manufacture of pharmaceutical products, and made false or misleading statements about earnings resulting from pharmaceutical products allegedly manufactured in violation of FDA regulations. The court concluded plaintiffs' complaint adequately set forth the reasons why KV's statements about is compliance were false, or at least misleading, at the time they were made; the district court did not err when it determined the investors' complaint did not sufficiently plead that KV made false or misleading statements about earnings tied to the manufacture of generic Metoprolol; the district court correctly dismissed the scheme liability claims against the two individual KV officers; but the district court erred in denying the motion to amend the complaint. Accordingly the court affirmed in part, reversed in part, and remanded for further proceedings. View "Public Pension Fund Group, et al. v. KV Pharmaceutical Co., et al." on Justia Law

Defendants appealed from the district court's holding that defendants were liable to plaintiff in the total amount of $4,965,898.95 for profits earned in short-swing insider trading and from an order denying defendants' motion for reconsideration. At issue, inter alia, was the rarely-construed "debt exception" to liability under Section 16(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78p(b), and the treatment of "hybrid" derivative securities under Section 16(b). The court agreed with the district court that the acquisition of the 2004 Note was a purchase of a security for purposes of Section 16(b), that the conversion of the 2004 Note was also a Section 16(b) purchase, and that neither of these purchases came within the debt and borderline transaction exceptions to section 16(b) liability. The court further concurred that Tonga and Cannell Capital, in addition to Cannell, were subject to disgorgement of profits, and the court concluded that the district court did not abuse its discretion in denying defendants' motion for reconsideration. Accordingly, the court affirmed the judgment. View "Analytical Surveys, Inc. v. Tonga Partners, L.P., et al." on Justia Law

S&A sued Farms.com alleging that Farms.com violated the Commodity Exchange Act (CEA), 7 U.S.C. 1 et seq., breached its fiduciary duty, committed negligence, and made misrepresentations. The district court granted Farms.com's motion for summary judgment and S&A appealed. The court found that S&A did not sufficiently plead a fraudulent-inducement claim under 7 U.S.C. 6, but only alleged that Farms.com engaged in a fraudulent scheme under 7 U.S.C. 6o(1)(B). The court concluded that the district court did not err by granting Farms.com's motion for summary judgment on S&A's fraud claim where S&A's complaint alleged only a fraudulent scheme, not that Farms.com's failure to register caused it damages. The court also concluded that the district court did not err in granting Farms.com's motion for summary judgment on S&A's breach of fiduciary duty claim where S&A presented no evidence describing a commodity-trading advisor's standard of care or how Farms.com breached that standard of care. View "S & A Farms, Inc. v. Farms.com, Inc., et al." on Justia Law

The SEC brought a civil enforcement action against defendant after he orchestrated a plan to manipulate the amount of money his company was required to set aside to safeguard customer assets. Defendant was subsequently liable for committing securities fraud and on appeal, defendant challenged the district court's holding on liability and the propriety of the resulting injunction. After reviewing the record and having the benefit of oral argument, the court agreed with defendant that the facts as found by the district court did not support securities fraud liability and the court reversed the judgment on this claim. The court held, however, that it was clear from the district court's factual findings that defendant aided and abetted violations of the Securities Exchange Act, 15 U.S.C. 78a et seq., so the court affirmed the judgment finding liability on these counts. Since the court reversed the district court's finding of securities fraud, the court vacated the portion of the injunction restraining defendant from violating section 10(b) of the Exchange Act and Rule 10b-5. The court also vacated the injunction barring defendant from the securities business for life. Defendant contended that the remaining portions of the injunctions were impermissible "obey-the-law" commands and the court agreed in part, vacating these paragraphs of the injunction. View "Securities & Exchange Comm. v. Goble" on Justia Law

Plaintiffs sued on behalf of a class of similarly-situated participants and beneficiaries of the Keycorp 401(k) Savings Plan, under the Employee Retirement Income Security Act, 29 U.S.C. 1109, 1132, alleging that defendants breached their duties by failing to prudently manage the Plan’s investment in KeyCorp securities; that defendants failed to adequately inform participants about the true risk of investing in KeyCorp stock; that certain defendants breached fiduciary duties by failing to adequately monitor the management and administration of Plan assets; that certain defendants failed to avoid impermissible conflicts of interest; and that certain defendants are liable for the breaches of fiduciary duty committed by their co-fiduciaries. The district court dismissed one plaintiff because she had benefited from the alleged breaches of fiduciary duty, which allowed her to sell the majority of her holdings at an inflated price. The court denied a motion to allow another to intervene as named plaintiff. The Sixth Circuit affirmed. View "Taylor v. KeyCorp" on Justia Law