Justia Securities Law Opinion Summaries

In 2017, a third-party entity acquired Authentix Acquisition Company, Inc. (“Authentix”). The cash from the merger was distributed to the stockholders pursuant to a waterfall provision. The Authentix common stockholders received little to no consideration. A group of common stockholders filed a petition for appraisal to the Court of Chancery under Section 262 of the Delaware General Corporation Law (“DGCL”). Authentix moved to dismiss the petition, arguing that the petitioners had waived their appraisal rights under a stockholders agreement that bound the corporation and all of its stockholders. The Court of Chancery granted the motion to dismiss, holding that the petitioners had agreed to a clear provision requiring that they “refrain” from exercising their appraisal rights with respect to the merger. The court awarded the petitioners equitable interest on the merger consideration and declined to award Authentix pre-judgment interest under a fee-shifting provision. All parties appealed the Court of Chancery’s decisions. Pointing to Delaware’s "strong policy favoring private ordering," Authentix argued stockholders were free to set the terms that will govern their corporation so long as such alteration was not prohibited by statute or otherwise contrary to Delaware law. Authentix contended a waiver of the right to seek appraisal was not prohibited by the DGCL, and was not otherwise contrary to Delaware Law. "As a matter of public policy, there are certain fundamental features of a corporation that are essential to that entity’s identity and cannot be waived." Nonetheless, the Delaware Supreme Court determined the individual right of a stockholder to seek a judicial appraisal was not among those fundamental features that could not be waived. Accordingly, the Court held that Section 262 did not prohibit sophisticated and informed stockholders, who were represented by counsel and had bargaining power, from voluntarily agreeing to waive their appraisal rights in exchange for valuable consideration. Further, the Court found the Court of Chancery did not abuse its discretion by awarding the petitioners equitable interest on the merger consideration; nor did the court abuse its discretion by declining to award Authentix pre-judgment interest under a fee-shifting provision. Accordingly, the Court of Chancery’s judgment was affirmed. View "Manti Holdings, LLC et al. v. Authentix Acquisition Company, Inc." on Justia Law

Following the 2018 merger between Vectren, an Indiana public utility and energy company, and CenterPoint, a public utility holding company, CenterPoint acquired all Vectren stock for $72.00 per share in cash. Several Vectren shareholders had filed suit alleging violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a. The district court declined to enjoin the shareholder vote on the merger. The shareholders then filed an amended complaint alleging that Vectren’s Proxy Statement was misleading under Section 14(a) of the Act, arguing that the Proxy Statement should have included financial metrics used by Vectren’s financial advisor in its analysis leading to its opinion that the merger terms were fair to Vectren shareholders. The first omitted metric, Unlevered Cash Flow Projections, forecast the gross after‐tax annual cash flow for Vectren, 2018-2027. The second omitted metric, Business Segment Projections, showed separate financial projections for each of Vectren’s three main business lines.The Seventh Circuit affirmed the dismissal of the suit. The shareholders failed to allege adequately both materiality of the omissions and any resulting economic loss. The court noted that the plaintiffs did not allege the existence of a viable superior offer to support their allegations of economic loss. View "Kuebler v. Vectren Corp." on Justia Law

Plaintiffs filed suit for fraud, rescission, conspiracy, aiding and abetting, fraudulent conveyance, and unjust enrichment alleging that defendants had misrepresented that collateral managers would exercise independence in selecting assets for collateralized debt obligations (CDOs). The district court granted summary judgment in favor of defendants.The Second Circuit affirmed and held that plaintiffs have failed to establish, by clear and convincing evidence, reliance on defendants' representations. In this case, plaintiffs based their investment decisions solely on the investment proposals their investment advisor developed; the advisor developed these detailed investment proposals based on offering materials defendants provided and on the advisor's own due diligence; plaintiffs premised their fraud claims on the advisor's reliance on defendants' representations; but New York law does not support this theory of third-party representations. The court also held that plaintiffs have failed to establish that defendants misrepresented or omitted material information for two of the three CDO deals at issue—the Octans II CDO and the Sagittarius CDO I. The court explained that defendants' representations that the collateral managers would exercise independence in selecting assets were not misrepresentations at all, and defendants did not have a duty to disclose their knowledge of the hedge fund's investment strategy because this information could have been discovered through the exercise of due care. View "Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo" on Justia Law

In March 2010, Orrstown made a stock offering at $27 per share. SEPTA invested some of its pension funds in Orrstown stock during this offering and later purchased Orrstown stock on the open market. In 2011-2012 Orrstown made disclosures concerning its financial health. Orrstown’s stock price dropped following each disclosure falling to $8.20 by April 2012.SEPTA filed a purported class action in May 2012, on behalf of a “Securities Act Class" of investors who purchased Orrstown stock “in connection with, or traceable to,” Orrstown’s 2010 Registration Statement, and the “Exchange Act Class” of investors who later purchased Orrstown stock on the open market. A first amended complaint added the Underwriters and the Auditor. The district court dismissed the amended complaint without prejudice for failure to meet pleading requirements. SEPTA filed its Second Amended Complaint in February 2016. The court dismissed all Securities Act claims against Orrstown but did not dismiss the Exchange Act claims except for some individual Orrstown officers. The court dismissed all claims against the Underwriters and the Auditor. The parties began discovery, which triggered a lengthy process in which the parties sought to have federal and state regulators review the relevant documents. In April 2019, SEPTA moved for leave to file a Third Amended Complaint, arguing it had identified evidence to support previously-dismissed claims through discovery.The court granted SEPTA’s motion despite the expiration of the three-year (Securities Act) and five-year (Exchange Act) repose periods. The Third Circuit affirmed. Federal Rule of Civil Procedure 15(c), which provides an exception more commonly applied to statutes of limitations, also allows amendment of a pleading after the expiration of a repose period here because the Rule’s “relation-back” doctrine leaves the legislatively-mandated deadline intact and does not disturb any of the defendants’ vested rights. View "Southeastern Pennsylvania Transportation Authority v. Orrstown Financial Services Inc." on Justia Law

Shareholders of Goldman filed a class action alleging that Goldman and several of its executives committed securities fraud by misrepresenting Goldman's freedom from, or ability to combat, conflicts of interest in its business practices. The district court certified a shareholder class, but the Second Circuit vacated the order in 2018. On remand, the district court certified the class once more. The Second Circuit affirmed and then the Supreme Court vacated and remanded because it was uncertain that the court properly considered the generic nature of Goldman's alleged misrepresentations in reviewing the district court's decision.The Second Circuit vacated the class certification order and remanded for further proceedings because it is unclear whether the district court considered the generic nature of Goldman's alleged misrepresentations in its evaluation of the evidence relevant to price impact and in light of the Supreme Court's clarifications of the legal standard. View "Arkansas Teacher Retirement System v. Goldman Sachs Group, Inc." on Justia Law

Three pension funds filed a putative securities class action on behalf of themselves and all others who purchased Danske Bank American Depositary Receipts (ADRs), alleging that Danske Bank and several of its corporate officers made materially misleading statements about a money laundering scandal that was perpetrated through the Bank's branch in Estonia.The Second Circuit affirmed the district court's dismissal of the Funds' claims for failure to plead actionable misstatements or omissions under Federal Rule of Civil Procedure 12(b)(6). In this case, none of the misstatements or omissions identified by the Funds are actionable and the allegations do not move the claims outside the realm of corporate mismanagement and into the realm of securities fraud. View "Plumbers & Steamfitters Local 773 Pension Fund v. Danske Bank" on Justia Law

Retirement System contends that Zebra defrauded investors by making bad predictions during a corporate consolidation with a division of Motorola. The consolidation proved more onerous than anticipated, leading to expenditure of an additional $200 million and a decline in Zebra’s share price. A purported class action under the Securities Exchange Act, 15 U.S.C. 78j(b), asserted that Zebra CEO Gustafsson and CFO Smiley duped investors by knowingly issuing false statements.The Seventh Circuit affirmed the dismissal of the complaint. Retirement System failed to state an adequate section 10(b) claim and did not satisfy the pleading requirements of the Private Securities Litigation Reform Act (PSLRA). The Securities Act does not impose a duty of total corporate transparency; nor does the Act demand perfection from forecasts, which are inevitably inaccurate. Some cited statements were non-specific puffery. The PSLRA requires plaintiffs to “state with particularity facts giving rise to a strong inference” that defendants spoke with intent to deceive (scienter), 15 U.S.C. 78u–4(b)(2)(A). Executives possess only limited information about the internal operations of other corporations. Gustafsson and Smiley would have known comparatively little about Motorola’s operations until consolidation was underway. While retrospective statements are held to a higher standard Retirement System challenged only statements made before or during integration. View "City of Taylor Police and Fire v. Zebra Technologies Corp." on Justia Law

Plaintiff-Appellants were shareholders in a major mutual fund complex through their employer-sponsored retirement plans. They alleged the complex’s investment adviser, Great-West Capital Management LLC (“GWCM”), and affiliate recordkeeper, Great-West Life & Annuity Insurance Co. (“GWL&A”), breached their fiduciary duties by collecting excessive compensation from fund assets. After holding an eleven-day bench trial in January 2020, the district court adopted and incorporated by reference, with few changes, Defendants’ Proposed Findings of Fact and Conclusions of Law. It also found for Defendants on every element of every issue, concluding “even though they did not have the burden to do so, Defendants presented persuasive and credible evidence that overwhelmingly proved that their fees were reasonable and that they did not breach their fiduciary duties.” Plaintiffs appealed, but finding no reversible error, the Tenth Circuit affirmed. View "Obeslo, et al. v. Great-Western Life & Annuity, et al." on Justia Law

The Ninth Circuit granted in part a petition for a writ of mandamus and ordered the district court to vacate its order appointing an individual as lead plaintiff in a consolidated securities fraud action against Nikola and related defendants. In the underlying action, plaintiffs alleged that they suffered losses from buying Nikola securities after a non-party report described apparent false statements made by the founder and contained in company advertising materials. Petitioners Mersho, Chau, and Karczynski moved to be lead plaintiff as a group under the name Nikola Investor Group II (Group II).In a securities fraud class action, the Private Securities Litigation Reform Act (PSLRA) requires the district court to identify the presumptive lead plaintiff, who is the movant with the largest financial interest and who has made a prima facie showing of adequacy and typicality. Once the presumption is established, competing movants can rebut the presumption by showing that the presumptive lead plaintiff will not fairly or adequately represent the class.The panel granted the petition to the extent it seeks to vacate the district court's order appointing Plaintiff Baio as lead plaintiff. The panel concluded that four of the five Bauman factors weigh in favor of mandamus relief and thus a writ of mandamus is appropriate. In regards to the third Bauman factor, the panel explained that the district court clearly erred by finding that the presumption had been rebutted. In this case, the district court failed to point to evidence supporting its decision, instead relying on the absence of proof by Group II regarding a prelitigation relationship and its misgivings. Therefore, the district court did not comport with the burden-shifting process Congress established in the PSLRA. The panel also concluded that the first, second, and fifth Bauman factors weigh in favor of granting the writ. However, the panel declined to instruct the district court to appoint Group II as lead plaintiff, remanding for the district court to redetermine the issue. View "Mersho v. United States District Court for the District of Arizona" on Justia Law

In this action brought by EdgePoint Capital Holdings, LLC (EPCH) arising out of the sale of Apothecare Pharmacy, LLC, the First Circuit affirmed the district court's grant of summary judgment in Apothecare's favor, holding that EPCH could not recover because Apothecare's securities law defense was valid.This breach of contract suit was based on a provision of the contract stating that if the agreement was terminated by either party, Apothecare was obligated to pay EPCH a fee. In granting summary judgment in favor of Apothecare, the district court (1) rejected Apothecare's federal securities law defense that the contract was void under section 29(b) of the Securities Exchange Act of 1984; but (2) concluded that, as a matter of Massachusetts contract interpretation law, EPCH was not entitled to the fee it sought. The First Circuit affirmed, holding (1) Apothecare's federal securities law defense was valid; and (2) because the contract was unenforceable, EPCH could not recover. View "EdgePoint Capital Holdings, LLC v. Apothecare Pharmacy, LLC" on Justia Law