Justia Securities Law Opinion Summaries

If a LaSalle Bank custodial account had a cash balance at the end of a day, the cash would be invested in (swept into) a mutual fund chosen by the client. The Trust had a custodial account with a sweeps feature. After LaSalle was acquired by Bank of America, clients were notified that a particular fee was being eliminated. The trustee, who had not known about the fee, brought a putative class action in state court, claiming breach of the contract (which did not mention this fee) and violation of fiduciary duties. The bank removed the suit to federal court, relying on the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which authorizes removal of any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” The statute requires that such state‑law claims be dismissed. The district court held that the suit fit the standards for removal and dismissal. The Seventh Circuit affirmed. The complaint alleged a material omission in connection with sweeps to mutual funds that are covered securities; no more is needed. The Trust may have had a good claim under federal securities law, but chose not to pursue it; the Act prohibits use of a state-law theory. View "Goldberg v. Bank of America, N.A." on Justia Law

HP shareholders filed a putative class action alleging violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. At issue is whether shareholders may bring a claim for securities fraud when a CEO and Chairman violates the corporate code of ethics after publicly touting the business’s high standards for ethics and compliance. The court held that Retail Wholesale, lead plaintiff in the putative class action, has failed to state a claim under the Act. The court explained that Retail Wholesale's fraud allegations must satisfy the particularity standard of Federal Rule of Civil Procedure 9(b), as well as the heightened pleading standard for securities fraud created by the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u–4. In this case, the court concluded that there were no material misrepresentations or actionable material omissions. Further, even if the complaint adequately alleged the existence of a misrepresentation or a misleading omission, it would not have been actionable, as it was immaterial. Accordingly, the court affirmed the district court's dismissal of the action. View "Retail Wholesale Union v. Hewlett-Packard Co." on Justia Law

EDMC challenges the district court's holding that a series of transactions meant to restructure EDMC’s debt over the objections of certain noteholders violated Section 316(b) of the Trust Indenture Act of 1939, 15 U.S.C. 77ppp(b). The district court ordered EDMC to continue to guarantee Marblegate's notes and pay them in full. The court agreed with EDMC that EDMC complied with Section 316(b) because the transactions did not formally amend the payment terms of the indenture that governed the notes. The court concluded that Section 316(b) prohibits only non‐consensual amendments to an indenture’s core payment terms. Accordingly, the court vacated the district court's judgment and remanded for further proceedings. View "Marblegate Asset Management v. Education Management Finance Corp." on Justia Law

After petitioner was convicted of conspiracy, selling unregistered securities, and mail fraud, the SEC barred petitioner from associating with six classes of securities market participants. The court agreed with petitioner's argument that the Commissioner's imposition of Dodd-Frank’s collateral ban constitutes an impermissibly retroactive penalty because it is premised on pre-Dodd-Frank misconduct. See Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111–203, 124 Stat. 1376 (2010). Therefore, the Commission abused its discretion in barring petitioner from associating with the investment adviser, municipal securities dealer and transfer agent classes because those bars are impermissibly retroactive, and the court granted that portion of the petition. The court rejected petitioner's "unclean hands" argument and denied the remainder of the petition. View "Bartko v. SEC" on Justia Law

After the share price of a corporation’s common stock dropped, investors filed suit against the corporation and its former CEO, alleging securities fraud. The lead plaintiff, on behalf of himself and a putative class of shareholders, alleged that Defendants inflated the value of the corporation’s common stock by issuing false or materially misleading press releases concerning the approval of human clinical trials for a new medical device the company was developing. The district court granted Defendants’ motion to dismiss the complaint. The First Circuit affirmed, holding that Plaintiff failed to allege false or misleading statements sufficient to state a claim and that Plaintiff’s control person claim against the CEO was also properly dismissed. View "Ganem v. InVivo Therapeutics Holdings Corp." on Justia Law

Appellants, retirement and investments funds, challenge the district court's grant of summary judgment to Medtronic on their securities fraud class action. Appellants alleged a number of securities laws violations related to Medtronic’s INFUSE product, including making false statements and employing a scheme to defraud the market. Section 10b of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), makes illegal the use of a manipulative or deceptive device in connection with the sale or purchase of a security by any instrumentality of interstate commerce. 17 C.F.R. 240.10b-5. Scheme liability concerns the use of “any device, scheme, or artifice to defraud” and “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” 17 C.F.R. 240.10b-5(a), (c). In this case, because Appellants could not have discovered with reasonable diligence sufficient information to plead scienter with the particularity necessary to survive a motion to dismiss prior to June 27, 2011, Appellants brought their complaint within the two-year statute of limitations. The court rejected Medtronic's argument that Appellants’ scheme liability claim is barred as a matter of law by Janus Capital Group, Inc., and Stoneridge Investment Partners, LLC. Accordingly, the court affirmed the judgment. View "West Virginia Pipe Trades v. Medtronic, Inc." on Justia Law

Plaintiff filed suit against Archon, alleging breach of contract stemming from Archon's issuance of a Notice of Redemption to holders of outstanding shares of preferred stock. The court concluded that the district court properly held that it lacked federal question subject matter jurisdiction under 28 U.S.C. 1331 because plaintiff did not assert a federal claim, and the Securities Litigation Uniform Standards Act, 15 U.S.C. 77p(d)(1)(A), does not provide an independent basis for federal question jurisdiction over plaintiff's state-law claim. The court also concluded that it lacked diversity jurisdiction over the class action suit under section 1332(d)(2) because of the exception provided in section 1332(d)(9)(C). Finally, the court concluded that the district court properly held that it lacked diversity jurisdiction over plaintiff's individual claim under section 1332(a) and therefore could not exercise section 1367 supplemental jurisdiction over the class members’ claims. Accordingly, the court affirmed the district court's dismissal of the complaint. View "Rainero v. Archon Corp." on Justia Law

Scottsdale are respondents in an ongoing disciplinary proceeding before FINRA for allegedly selling unregistered securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e, and FINRA Rule 2010. Scottsdale sought an injunction in federal district court before FINRA completed its proceedings, claiming the FINRA proceeding is unauthorized because FINRA may only discipline members for violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The district court dismissed for lack of subject-matter jurisdiction. Because Scottsdale can obtain meaningful judicial review of its claim in this court following the appeal process outlined in the Exchange Act, the court held that its challenge to FINRA’s authority is the type of claim Congress intended to be reviewed within the statutory scheme. Therefore, the court concluded that the district court properly dismissed for lack of subject-matter jurisdiction and affirmed the judgment. View "Scottsdale Capital Advisors v. FINRA" on Justia Law

In 2015, the Securities and Exchange Commission instituted an administrative proceeding against Dawn Bennett and her law firm (collectively, Bennett) to determine whether Bennett had violated the anti-fraud provisions of the federal securities laws. The Commission assigned the initial stages of the proceeding to an ALJ, and the ALJ scheduled a hearing on the merits of Bennett’s case. Bennett subsequently filed suit challenging the constitutionality of the administrative enforcement proceeding. Specifically, the Complaint alleged that the SEC’s administrative enforcement proceedings violated Article II of the United States Constitution. The district court dismissed the suit on jurisdictional grounds. The Fourth Circuit affirmed, holding that Congress has impliedly divested district-court jurisdiction over the agency action. View "Bennett v. U.S. Securities & Exchange Commission" on Justia Law

In February 2014, appellant-plaintiff Glynn Hotz purchased 16,000 shares of appellee-defendant Galectin Therapeutics, Inc. (“Galectin”), a small biopharmaceutical company headquartered in Norcross, Georgia. The price for Galectin common stock was $17.90 per share. In July 2014, news outlets began to report that Galectin had paid promotional firms to write flattering articles about Galectin and to “tout” Galectin’s stock price. Days later, Galectin’s stock price crashed, losing over half its value, falling from a price of $15.91 per share to $7.10 per share in one day. After suffering stock losses, Hotz filed a consolidated class action complaint against Galectin in May 2015. Hotz appealed the district court’s Rule 12(b)(6) dismissal of his complaint for failure to state a claim. Hotz argued: (1) that Galectin made material misstatements and omissions of fact by not disclosing that it had paid the promotional firms to tout Galectin stock; and (2) that certain Galectin officers and directors were liable for the company’s actions in their personal capacity as “controlling persons” of Galectin under section 20(a) of the Exchange Act. After thorough review, and with the benefit of oral argument, the Eleventh Circuit found no reversible error and affirmed. View "Hotz v. Galectin Therapeutics, Inc." on Justia Law