Justia Securities Law Opinion Summaries

Plaintiff, the receiver for the Stanford entities, filed suit seeking to recover funds that were paid to defendants, purchasers of certificate of deposits from Standard International Bank (SIB) as part of a Ponzi scheme. The court concluded that the district court properly applied the Texas Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Com. Code 24.010, to the receiver's claims; the receiver has standing to bring the TUFTA claims on behalf of the Stanford entities; and the receiver's claims are not barred by the statute of limitations. On the merits, the court concluded that the receiver established that the Stanford principles transferred monies to the investor-defendants with fraudulent intent; unlike interest payments, it is undisputed that the principal payments were payments of an antecedent debt, namely fraud claims that the investor-defendants have as victims of the Stanford Ponzi scheme; the district court did not err in denying an exemption under Texas Property Code 42.0021(a) where investor-defendants have offered no evidence that they have a legal right to the funds despite those funds being the product of a fraudulent transfer; and the court declined to reach the investor-defendants' argument that certain factual issues remain. Accordingly, the court affirmed the district court's grant of the receiver's motion for summary judgment. View "Janvey, et al. v. Brown, et al." on Justia Law

Doolittle was a registered securities broker/dealer, and a registered investment advisor. He or his corporations held licenses, permits, or certificates to engage in real estate and insurance brokerage and tax preparation. Around 1990 his primary business became “trust deeds investments,” in which he “would arrange groups of investors together to buy those loans or to fund those transactions for different types of individuals and institutional borrowers.” After investors lost money, Doolittle was convicted and sentenced to 13 years in prison for three counts of theft by false pretenses; six counts of theft from an elder or dependent adult; nine counts of false statements or omissions in the sale of securities; selling unregistered securities; and sale of a security by willful and fraudulent use of a device, scheme, or artifice to defraud The appeals court reversed in part, holding that Doolittle’s challenge that the trial court’s implied finding of timely prosecution was not supported by substantial evidence required remand with respect to two of the charges. A further hearing may be necessary with respect to applicability of a sentence enhancement for aggregate losses over $500,000. Doolittle’s conviction for sale of unregistered securities and sale of securities by means of a fraudulent device did not rest on the same conduct as his convictions for fraud against specific victims; his sentence on the former counts therefore does not offend the proscription against duplicative punishment. View "People v. Doolittle" on Justia Law

Plaintiffs filed a class action on behalf of all persons who purchased common stock from Xerox during a certain period, alleging that Xerox violated the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. Plaintiffs alleged that Xerox and executive officers violated federal securities law by materially misrepresenting that Xerox's worldwide restructuring initiative was financially beneficial to the corporation, when, in fact, one specific component of the restructuring - the "Customer Business Organization Reorganization" - was causing significant and ongoing economic distress to the company. The court affirmed the district court's grant of summary judgment in favor of defendants because there was no genuine dispute of material fact with respect to the sufficiency of Xerox's disclosures about the successes and failures of this component of its worldwide restructuring. View "Dalberth v. Xerox Corp." on Justia Law

Plaintiff appealed the district court's judgment dismissing her claims under Rule 12(b)(6) under the Commodities Exchange Act (CEA), 7 U.S.C. 1 et seq., and declining to exercise supplemental jurisdiction over her state law claims. Applying the domestic transaction test in Morrison v. National Australia Bank Ltd., the court agreed with the district court that a private right of action brought under CEA section 22 is limited to claims alleging a commodities transaction within the United States. The court affirmed the district court's judgment because plaintiff failed to allege a domestic commodities transaction and, because the court affirmed on the basis of section 22, the court did not reach plaintiff's argument regarding the territorial reach of the antifraud provision in CEA section 4o. View "Loginovskaya v. Batratchenko" on Justia Law

Allergan, the pharmaceutical manufacturer of Botox, settled several qui tam suits concerning allegations that it had acted illegally in marketing and labeling Botox, and pled guilty in a criminal case. Plaintiffs, all Allergan shareholders, subsequently filed a derivative action alleging that Allergan's directors are liable for violations of various state and federal laws, as well as breaches of their fiduciary duties to Allergan. Plaintiffs failed to make a demand on Allergan's board requesting that Allergan bring the derivative claims in its own name. The court concluded that the district court misapplied governing Delaware law and improperly drew inferences against plaintiffs rather than in their favor when the district court dismissed the action on the ground that plaintiffs failed to allege particularized facts showing that demand was excused under Federal Rule of Civil Procedure 23.1. The court concluded that demand was excused where plaintiffs' particularized allegations established a reasonable doubt as to whether the Board faces a substantial likelihood of liability and as to whether the Board is protected by the business judgment rule. Accordingly, the court reversed the judgment of the district court. View "Rosenbloom v. Pyott" on Justia Law

Plaintiffs, international hedge funds, filed suit alleging violations of U.S. securities laws because defendants made various fraudulent statements and took various manipulative actions to deny and conceal Porsche's intention to take over Volkswagen AG (VW), a German corporation. The securities transactions upon which plaintiffs brought suit were so-called "securities-based swap agreements" relating to the stock of VW. The district court granted defendants' motion to dismiss the complaint because the swaps were essentially transactions in securities on foreign exchanges. The court affirmed on the basis of different reasoning, concluding that the imposition of liability under section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), on these foreign defendants with no alleged involvement in plaintiffs' transactions, on the basis of defendants' largely foreign conduct, for losses incurred by plaintiffs in securities-based swap agreements based on the price movements of foreign securities would constitute an impermissibly extraterritorial extension of the statute. The court remanded for further proceedings. View "Parkcentral v. Porsche" on Justia Law

A financial advisor with more than 20 years of experience, McGee met Maguire between 1999 and 2001 while attending Alcoholics Anonymous meetings. McGee assured Maguire that their conversations were going to remain private. Maguire never repeated information that McGee entrusted to him. In 2008, Maguire was closely involved in negotiations to sell PHLY, a publicly-traded company. During this time, Maguire experienced sporadic alcohol relapses. McGee saw Maguire after a meeting and inquired about his frequent absences. In response, Maguire “blurted out” inside information about PHLY’s imminent sale. He later testified that he expected McGee to keep this information confidential. Before the information became public, McGee borrowed $226,000 to finance the purchase of 10,750 PHLY shares. Shortly after the public announcement of PHLY’s sale, McGee sold his shares, resulting in a $292,128 profit. After an SEC investigation, McGee was convicted of securities fraud under the misappropriation theory of insider trading (15 U.S.C. 78j(b) and 78ff), and SEC Rules 10b-5 and 10b5-2(b)(2), and of perjury (18 U.S.C. 1621). The Third Circuit affirmed, rejecting arguments that Rule 10b5-2(b)(2) is invalid because it allows for misappropriation liability absent a fiduciary relationship between a misappropriator of inside information and its source; that there was insufficient evidence to sustain his convictions; and that the court erred in denying his motion for a new trial based on newly discovered evidence. View "United States v. McGee" on Justia Law

Plaintiff, a citizen and resident of Taiwan, filed suit alleging that by firing him Siemens had violated the antiretaliation provision of the Dodd-Frank Act, 15 U.S.C. 78u-6(h)(1)(A). The court concluded that the district court properly dismissed the complaint because legislation is presumed to apply only domestically unless there is evidence Congress intended otherwise; (2) there is no indication Congress intended the whistleblower protection provision to have extraterritorial application; and (3) the facts in the complaint unequivocally demonstrate that applying the statute in this case would constitute an extraterritorial application. Therefore, section 78u-6(h) does not protect a foreign worker employed abroad by a foreign corporation where all events related to the disclosures occurred abroad. View "Liu v. Siemens AG" on Justia Law

In 2008 Chesapeake Energy Corporation was one of the largest producers of natural gas in the United States, with thousands of wells in several states. By early July of that year the price of natural gas had risen and Chesapeake's stock price had risen about 50% in the prior six months. On July 9, 2008, Chesapeake sold 25 million shares of common stock in a public offering. Soon thereafter, a financial crisis rocked the global economy. The New York Stock Exchange Composite Index fell more than 30% in the three months after the Chesapeake offering. Chesapeake was hit even harder, with sharp drops in the prices of natural gas and Chesapeake's stock. Plaintiff United Food and Commercial Workers Union Local 880 Pension Fund represented the class of all persons who purchased securities in the offering, argued that Chesapeake and named individual defendants violated sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. sections 77k, 77l(a)(2), and 77o, because the Registration Statement for the offering was materially false and misleading. According to Plaintiff, Chesapeake should have disclosed: (1) that it had expanded a risky gas-price hedging strategy that made it vulnerable to a fall in natural-gas prices; and (2) that CEO Aubrey McClendon had pledged substantially all his company stock as security for margin loans and lacked the resources to meet margin calls. The district court granted summary judgment for Chesapeake. Plaintiff appealed. But finding that Chesapeake's alleged omissions were not material or misleading, the Tenth Circuit affirmed. View "United Food & Comm. Workers v. Chesapeake Energy, et al" on Justia Law

Plaintiff filed suit against AECOM and AME under the whistleblower retaliation provision created by the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A. The district court dismissed plaintiff's claim against AECOM and plaintiff appealed. The court concluded that an alleged whistleblowing employee's communications need not "definitively and specifically" relate to one of the listed categories of fraud or securities violations in section 1514A in order for that employee to claim protection under the statute; a complaint under section 1514A must, however, plausibly plead that plaintiff engaged in protected activity - that plaintiff reasonably believed the conduct he challenged constituted a violation of an enumerated provision; in this case, plaintiff did not plausibly allege that it was objectively reasonable for him to believe that there was such a violation here; and, therefore, the court affirmed the judgment of the district court. View "Nielsen v. AECOM Technology Corp." on Justia Law