Justia Securities Law Opinion Summaries

The Eleventh Circuit vacated a cease and desist order issued by the FTC against LabMD. The FTC brought an enforcement action against LabMD, alleging that LabMD's data-security program was inadequate and thus constituted an "unfair act or practice" under Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a). The court agreed with LabMD that the order was not enforceable because it did not direct LabMD to cease committing an unfair act or practice within the meaning of Section 5(a). Assuming arguendo that LabMD's negligent failure to design and maintain a reasonable data-security program invaded consumers' right of privacy and thus constituted an unfair act or practice, the court held nonetheless that the cease and desist order was not enforceable where it contained no prohibitions, but rather commanded LabMD to overhaul and replace its data-security program to meet an indeterminable standard of reasonableness. View "LabMD, Inc. v. Federal Trade Commission" on Justia Law

Defendant Williams Companies, Inc. (Williams) was an energy company; its president and chief executive officer (CEO) was Defendant Alan Armstrong and its chief financial officer (CFO) was Defendant Donald Chappel. Armstrong also served on its board of directors. Defendant Williams Partners GP LLC (Williams Partners GP) was a limited-liability company owned by Williams. Armstrong was chairman of the board and CEO; and Chappel was CFO and a director. Defendant Williams Partners L.P. (WPZ) was a master limited partnership, whose general partner was Williams Partners GP. Williams owned 60% of WPZ’s limited-partnership units. Plaintiff’s case centered on merger discussions between Williams and Energy Transfer Equity L.P. (ETE), a competing energy firm. The members of the putative class purchased units of WPZ between May 13, 2015 (when Williams announced that it planned to merge with WPZ) and June 19, 2015 (when ETE announced that, despite having been rebuffed by Williams, it would seek to merge with Williams and that such a merger would preclude the merger with WPZ). The value of the units dropped significantly after this announcement. Ultimately, ETE merged with Williams and the proposed WPZ merger was not consummated. The Complaint alleged the class members paid an excessive price for WPZ units because Williams had not disclosed during the class period its merger discussions with ETE. Employees’ Retirement System of the State of Rhode Island (Plaintiff) appealed the dismissal of its amended complaint in a putative class-action suit, alleging violations of federal securities law because of the failure to disclose merger discussions that affected the value of its investment. The Tenth Circuit concluded the complaint failed to adequately allege facts establishing a duty to disclose the discussions, the materiality of the discussions, or the requisite scienter in failing to disclose the discussions. View "Employees' Retirement System v. Williams Companies" on Justia Law

Plaintiffs filed separate class action complaints against TD Ameritrade, alleging that the company breached its duty of best execution when it routed client orders to buy and sell securities to trading venues that paid TD Ameritrade top dollar for its order flow. The Eighth Circuit affirmed the district court's dismissal of the complaint because the state law claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA). In this case, the gravamen of plaintiffs' claims involved a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security. View "Zola v. TD Ameritrade, Inc." on Justia Law

Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law

Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law

In “Citadel” the Seventh Circuit held that “the district court did not abuse its discretion in dismissing [the] case [of certain securities firms] for failure to exhaust administrative remedies.” After that decision, Securities Firms filed a petition before the Securities and Exchange Commission (SEC) seeking damages, claiming the Exchanges improperly imposed fees under Payment for Order Flow programs. The SEC dismissed that petition for lack of jurisdiction. The Exchanges, citing CitadeI, maintained the SEC had jurisdiction under Section 19(h)(1) of the Securities Exchange Act because the petition sought a determination that the Exchanges had violated their own rules. The SEC reasoned that Section 19(d), which authorizes it to review allegations that a national exchange has unduly “prohibit[ed] or limit[ed] … access to services,” 15 U.S.C. 78s(d)(1), did not apply; the petition did not allege that the Exchanges had denied or limited access to any service. The SEC further stated that seeking damages was “incongruous with” the SEC’s Section 19(d) remedial authority and that section 78s(h)(1) does not authorize claims by private parties. The Seventh Circuit affirmed, “the Petition alleges, in effect, a billing dispute” between two private parties, and requests the SEC order the Exchanges to pay damages for improperly charging fees under their PFOF programs. View "Chicago Board Options Exchange v. Securities and Exchange Commission" on Justia Law

Stacy Ryan filed suit against Streck, Inc. and Connie Ryan, alleging violations of section 10(b) of the Securities Exchange Act of 1934, Securities and Exchange Commission Rule 10b-5, and multiple violations of Nebraska law in connection with Streck's redemption of Stacy's stock. The Eighth Circuit held that the district court did not err in granting defendants' motion to dismiss because Stacy did not plausibly plea that defendants' wrongful actions caused her loss. Furthermore, the district court did not abuse its discretion in denying the motion to alter or amend the judgment. However, the district court erred in denying Stacy's Federal Rule of Civil Procedure 59(e) motion. Therefore, the court remanded for further consideration of the motion to alter or amend presented newly discovered evidence warranting alteration of the order dismissing her breach of contract claim. View "Ryan v. Ryan" on Justia Law

Plaintiffs filed suit for damages resulting from defendants' manipulation of natural gas trading at four regional hubs in the western part of the United States. The Second Circuit held that plaintiffs had Article III standing, but they failed to plausibly allege injury under any of their claims. In this case, plaintiffs failed to state a claim under the Commodities Exchange Act (CEA) because it was not plausible on the record that they were injured by the manipulations West Desk perpetrated. For similar reasons, plaintiffs failed to establish antitrust standing. Accordingly, the court modified the order and judgment to remove the dismissal for lack of standing and affirmed the judgment as modified. View "Harry v. Total Gas & Power North America, Inc." on Justia Law

Petitioners challenged the Commission's issuance of an order approving Rule 2030, a regulation governing the political contributions of FINRA members who solicit government officials for investment advisory services contracts. The Eleventh Circuit held that it could not consider the petition on the merits because the Georgia party did not have standing to challenge the Rule and this court was not the proper venue for either the New York Committee or the Tennessee Party. Accordingly, the court dismissed the Georgia Party for lack of jurisdiction, and transferred the appeal of the remaining two parties to the United States Court of Appeals for the District of Columbia Circuit. View "The Georgia Republican Party v. Securities and Exchange Commission" on Justia Law

Plaintiff, on behalf of former Emulex shareholders, appealed the district court's dismissal of his putative securities class action. The Ninth Circuit held that claims under Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(e), require a showing of negligence, not scienter. Therefore, the panel reversed the dismissal of the complaint and remanded to the district court for it to reconsider defendants' motion to dismiss under a negligence standard. Because plaintiff's Section 14(e) claim survived, his claim under Section 20(a) of the Exchange Act also remained. Furthermore, the panel affirmed the district court's conclusion that Section 14(d)(4) of the Exchange Act did not create a private right of action and dismissal of the complaint as to Emerald Merger Sub because it was not a proper defendant. View "Varjabedian v. Emulex Corp." on Justia Law