Justia Securities Law Opinion Summaries

Following an announcement that overstated the positive interim results from clinical trials for an experimental drug combination intended to treat a fatal lung disease, Vertex Pharmaceuticals, Inc.’s stock price rose from $37.41 per share to $64.85 three weeks later. After Vertex corrected the initial release’s overstatement, the stock price dropped to $57.80. Local No. 8 IBEW Retirement Plan & Trust filed a class action complaint against Vertex and six past and current Vertex employees on behalf of those who acquired Vertex stock during the period in which the overstatement stood uncorrected, charging Defendants with securities fraud under the Securities Exchange Act of 1934. Defendants moved to dismiss for failure to state a claim. The district court dismissed the complaint, concluding that it failed to create a strong inference that Defendants acted with the mental state required to render them liable under the Act. The First Circuit affirmed, holding that the allegations in the complaint that Defendants acted with scienter fell short of what Congress demands in the securities fraud context. View "Local No. 8 IBEW Retirement Plan & Trust v. Vertex Pharm., Inc." on Justia Law

Plaintiffs, investors in Vivendi's stock during the relevant time period, filed a class action suit against Vivendi, alleging that Vivendi’s persistently optimistic representations during the relevant period constituted securities fraud under section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78j(b), as well as the Securities Exchange Commission’s (SEC) Rule 10b–5 (Rule 10b–5) promulgated thereunder, 17 C.F.R. 240.10b–5. The court affirmed as to Vivendi's claims on appeal, concluding that: (1) plaintiffs relied on specifically identified false or misleading statements at trial and thus, contrary to Vivendi’s argument on appeal, did not fail to present an actionable claim of securities fraud; (2) Vivendi’s claim that certain statements constituted non‐actionable statements of opinion is not preserved for appellate review; (3) Vivendi’s claims that certain statements constituted non‐actionable puffery and that others fall under the Private Securities Law Reform Act’s safe harbor provision for “forward‐looking statements,” see 15 U.S.C. 78u‐5(c), is without merit; (4) the evidence was sufficient to support the jury’s determination that the fifty‐six statements at issue here were materially false or misleading with respect to Vivendi’s liquidity risk; (5) the district court did not abuse its discretion in admitting the testimony of plaintiffs’ expert, Dr. Blaine Nye; and (6) the evidence was sufficient to support the jury’s finding as to loss causation. As to plaintiffs' cross-appeal, the court affirmed and concluded that the district court did not abuse its discretion in excluding certain foreign shareholders from the class at the class certification stage; and did not err in dismissing claims by American purchasers of ordinary shares under Morrison v. Nat’l Austl. Bank Ltd. View "In re Vivendi, S.A. Secs. Litig." on Justia Law

This appeal stems from the same set of underlying facts as those in In re Vivendi S.A. Securities Litigation, Nos. 15‐180‐cv(L), 15‐208‐cv(XAP), in which the court today issued a separate opinion. GAMCO, so-called "value investors," filed a securities fraud action against Vivendi under section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78j(b), as well as the Securities Exchange Commission’s (SEC) Rule 10b–5 (Rule 10b–5) promulgated thereunder, 17 C.F.R. 240.10b–5. The district court subsequently entered judgment for Vivendi. The court concluded that the record supports the district court’s conclusion that, if GAMCO had known of the liquidity problems and their concealment, GAMCO would still have believed Vivendi’s PMV to be “materially higher” than the public market price. The court also concluded that it was also not clearly erroneous for the district court to conclude that knowledge of Vivendi’s liquidity problems would not have changed GAMCO’s belief that a catalyst was likely — i.e., its belief that the market price would rise towards the PMV, if not immediately, then over the course of the next several years. In this case, the record at the trial simply does not establish that it was clearly erroneous for the district court to find that GAMCO, had it known of the liquidity problems at Vivendi, would have made the choice to buy the same securities it purchased. Accordingly, the court affirmed the judgment. View "GAMCO v. Vivendi" on Justia Law

Plaintiff subscribes to data feeds through which the Exchanges provide information about securities traded on the Exchanges to an exclusive securities information processor pursuant to a plan approved by the SEC. The Processor consolidates the data and makes it available to subscribers. Plaintiff filed three materially identical suits alleging that the Exchanges had breached their contracts with him by providing preferentially fast access to the so‐called “Preferred Customers,” who purchase data and receive it from an Exchange directly via its proprietary feed. The court concluded that the district court erred in holding that it lacked subject matter jurisdiction to consider plaintiff's breach of contract claims, but affirmed the dismissal of the complaints for failure to state a claim. In this case, plaintiff has not plausibly alleged that the Exchanges violated any contractual obligation by simultaneously sending data to both the Processor and the Preferred Customers that is received earlier by the Preferred Customers; to the extent that plaintiff alleges that such a contractual obligation arises from the incorporation of SEC regulations into the contracts, his claims are preempted because his interpretation conflicts with the SEC’s interpretation and stands as an obstacle to the accomplishment of congressional purposes; to the extent that plaintiff alleges that the Exchanges undertook self‐imposed contractual obligations, distinct from their regulatory obligations, to ensure that market data is not received by any customer before it is received by the Processor, that claim fails because it has no basis in the text of the contracts; and to the extent that plaintiff argues that the SEC has interpreted the Exchanges’ obligations under the Exchange Act or SEC regulations incorrectly, any such argument must first be administratively exhausted before the SEC before it can be considered by this Court. View "Lanier v. Bats Exchange, Inc." on Justia Law

This case concerns employee benefits plans sponsored by AIG or its affiliates under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. At issue is whether the Plans are "affiliates" of AIG for the purposes of a class action settlement agreement. The district court held that appellants are "affiliates" of AIG and thus ineligible for their own portion of a class settlement agreement with AIG. The court held that appellants have standing to appeal the district court's denial of the motion to direct and dismissed appellants' appeal as to the denial of their motion to intervene as moot. On the merits, the court held that because ERISA imposes important statutory limits on an employer’s control over the management and policies of an employee benefit plan, those plans do not fall within the ordinary meaning of "affiliate." Therefore, the court concluded that appellants are entitled to their own portion of the settlement and appellees will have a somewhat smaller portion. The court vacated the denial of the Plans' motion to direct. View "In re AIG Securities Litig." on Justia Law

The SEC filed suit against Peter Jensen and Thomas Tekulve, the former Chief Executive Officer and Chief Financial Officer of the now-defunct Basin Water, Inc., alleging that they had participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized. On appeal, the SEC challenged the district court's judgment in favor of defendants. The court reversed the district court’s rulings interpreting Rule 13a–14 of the Securities Exchange Act (Exchange Act), 17 C.F.R. 240.13a-14, and Section 304 of the Sarbanes-Oxley Act (SOX 304),15 U.S.C. 7201 et seq. The court concluded that Rule 13a–14 provides the SEC with a cause of action not only against CEOs and CFOs who do not file the required certifications, but also against CEOs and CFOs who certify false or misleading statements. The court also concluded that the disgorgement remedy authorized under SOX 304 applies regardless of whether a restatement was caused by the personal misconduct of an issuer’s CEO and CFO or by other issuer misconduct. The court reversed the district court’s bench trial order, vacated the judgment, and remanded for a jury trial, concluding that the SEC was entitled to a jury trial and did not consent to Jensen and Tekulve’s withdrawal of their jury demand. Nor did the SEC waive its right to a jury trial when it objected consistently and repeatedly before trial to the district court’s decision to hold a bench trial. The court approved the district court’s grant of defendants’ motion in limine to exclude evidence about the injunction against Basin’s Director of Finance. Accordingly, the court vacated and remanded. View "SEC v. Jensen" on Justia Law

The Securities and Exchange Commission (SEC) brought an enforcement action against Defendant Charles Kokesh for misappropriating funds from four SEC-registered business development companies (BDCs) in violation of federal securities laws. After a jury returned a verdict in favor of the SEC, the district court entered a final judgment permanently enjoining Defendant from violating certain provisions of federal securities laws, ordering disgorgement of $34.9 million plus prejudgment interest of $18.1 million, and imposing a civil penalty of $2.4 million. Defendant appealed, arguing that the court’s imposition of the disgorgement and permanent injunction was barred by 28 U.S.C. 2462, which set a five-year limitations period for suits “for the enforcement of any civil fine, penalty, or forfeiture.” He also argued that the district court erred by precluding him from presenting evidence of attorney and accountant participation to show his lack of knowledge of the misconduct. After review, the Tenth Circuit held that both the permanent injunction and the disgorgement order were remedial and not subject to section 2462. The Court rejected the evidentiary claim. View "SEC v. Kokesh" on Justia Law

The Goldmans, proceeding before an arbitration panel operating under the auspices of the Financial Industry Regulatory Authority (FINRA), alleged that their financial advisor and Citigroup had violated federal securities law in their management of the Goldmans’ brokerage accounts. The district court dismissed their motion to vacate an adverse award for lack of subject-matter jurisdiction, stating the Goldmans’ motion failed to raise a substantial federal question. The Third Circuit affirmed. Nothing about the Goldmans’ case is likely to affect the securities markets broadly. That the allegedly-misbehaving arbitration panel happened to be affiliated with a self-regulatory organization does not meaningfully distinguish this case from any other suit alleging arbitrator partiality in a securities dispute. The court noted “the flood of cases that would enter federal courts if the involvement of a self-regulatory organization were itself sufficient to support jurisdiction.” View "Goldman v. Citigroup Global Mkts., Inc" on Justia Law

After a failed merger between Cooper Tire and Apollo Tyres, OFI Asset Management, purporting to act for similarly situated investors, filed a class action against Cooper and its officers. OFI claims that, during merger negotiations, the defendants made material misrepresentations in statements to investors, in violation of federal securities laws, 15 U.S.C. 78j(b), 78n(a), and 78t(a). The Third Circuit affirmed the district court's dismissal of the case, rejecting arguments that that court improperly managed the presentation of arguments. The court upheld a finding that OFI failed to allege sufficient facts to support its claims. The court had ordered OFI to submit a letter “identifying and verbatim quoting” the five most compelling examples it could muster of false or fraudulent statements by Cooper, with three factual allegations demonstrating the falsity of each statement and three factual allegations supporting a finding of scienter as to the making of the statements. The court had subsequently determined that the statements identified as problematic by OFI were either not false or misleading, were “forward-looking” statements protected by the safe harbor established by the Private Securities Litigation Reform Act of 1995, lacked a sufficient showing of scienter, or suffered from some combination of those infirmities. View "OFI Asset Mgmt. v. Cooper Tire & Rubber" on Justia Law

The NCUA filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., against Wachovia and Nomura for making false and misleading statements in their offerings of residential mortgage-backed securities (RMBS) purchased by Wescorp. The district court dismissed the claims, ruling that 12 U.S.C. 1787(b)(14) (the Extender Statute) did not supplant the statute of repose contained within 15 U.S.C. 77m, and therefore that the NCUA’s claims were time-barred. The court concluded that the district court erred in holding that the Extender Statute does not supplant the 1933 Act's statute of repose. The court held that the Extender Statute replaces all preexisting time limitations - whether styled as a statute of limitations or a statute of repose - in any action by the NCUA as conservator or liquidating agent. The court further held that the Extender Statute’s scope - “any action brought by the [NCUA]” - includes actions such as this one, in which the NCUA asserts statutory claims rather than common law tort or contract claims. Because the court concluded that NCUA claims were timely filed, the court vacated and remanded the district court's dismissal of the claims as time-barred. View "NCU Admin. Bd. v. Nomura Home Equity Loan" on Justia Law