Justia Securities Law Opinion Summaries

Plaintiff appealed the district court's grant of insider defendants' motion to dismiss her short-swing trading complaint. The court agreed with the district court that the requirements of a claim under section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78p(b), mandating disgorgement of short-swing profits by statutory insiders, had not been satisfied. The prepaid variable forward contracts in this case were properly analyzed under traditional, and not hybrid, derivative analysis. When that was done, it became evidence that no "purchase" occurred against which a "sale could be matched for section 16(b) purposes. View "Chechele v. Sperling" on Justia Law

At issue in this case was whether alleged misrepresentations made by Defendants were made “in connection with” a transaction in covered securities under the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Plaintiffs, investors in a licensed non-diversified investment company, filed a putative class action in Puerto Rico court against the Fund and others alleging fraud or misrepresentation in violation of Puerto Rico law after the Fund invested the majority of its assets in notes sold by Lehman Brothers, resulting in the Fund adopting a plan of liquidation. Defendants removed the action to the federal district court, asserting that it fell within the ambit of the SLUSA. Plaintiffs unsuccessfully sought remand on jurisdictional grounds. Ultimately, the district court granted Defendants’ motions to dismiss premised on SLUSA preclusion. The First Circuit vacated the judgment of dismissal and remitted with instructions to return the case to the Puerto Rico Court, holding that the link between the misrepresentations alleged and the covered securities in the Fund’s portfolio was too fragile to support a finding of SLUSA preclusion under Chadbourne & Parke LLP v. Troice. View "Hidalgo-Velez v. San Juan Asset Mgmt., Inc." on Justia Law

Plaintiffs filed this complaint on behalf of a class of all persons and entities who purchased or otherwise acquired Chesapeake common stock from 2009 to 2012, and who were damaged from those purchases/acquisitions. The complaint alleged that Defendants materially misled the public through false statements and omissions regarding two different types of financial obligations: (1) Volumetric Production Payment transactions (under which Chesapeake received immediate cash in exchange for the promise to produce and deliver gas over time); and (2) the Founder Well Participation Program (under which Chesapeake CEO Aubrey McClendon was allowed to purchase up to a 2.5% interest in the new gas wells drilled in a given year). With respect to the "VPP program," Plaintiffs alleged Defendants touted the more than $6.3 billion raised through these transactions but failed to disclose that the VPPs would require Chesapeake to incur future production costs totaling approximately $1.4 billion. Plaintiffs contended the failure to disclose these future production costs was a material omission that misled investors into believing there would be no substantial costs associated with Chesapeake’s obligations to produce and deliver gas over time. The district court granted Defendants’ motion to dismiss the complaint, holding that Plaintiffs had failed to plead with particularity facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act of 1995. Viewing all of the allegations in the complaint collectively, the Tenth Circuit was not persuaded they gave rise to a cogent and compelling inference of scienter. Accordingly, the Court affirmed the district court's dismissal of the case. View "Weinstein, et al v. McClendon, et al" on Justia Law

Plaintiff filed suit against SLI alleging violations of section 10(b) of the Securities Exchange Act of 1934 and accompanying Rule 10b-5, 15 U.S.C. 78j and 17 C.F.R. 240.10b-5. Plaintiff alleged that SLI withheld material information about preliminary merger negotiations that it was obliged to disclose. The jury returned a verdict in favor of plaintiff and SLI subsequently renewed a motion for judgment as a matter of law and, alternatively, a motion for a new trial. The district court denied the motions. The court concluded that there was sufficient evidence of actionable omissions where SLI's August 2007 statements that it "will continue to be privately held, and that the Stiefel family will retain and continue to hold a majority-share ownership of the company" gave rise to a duty to update when SLI considered itself to be a serious acquisition target; there was sufficient evidence that the omitted information was material; the district court did not err by refusing to give SLI's proposed jury instruction where SLI has demonstrated no prejudice from the district court's refusal to give the instruction; and the court rejected SLI's remaining arguments. Accordingly, the court affirmed the judgment of the district court. View "Finnerty v. Stiefel Laboratories, Inc., et al." on Justia Law

Plaintiff sued several defendants in the Delaware Court of Chancery for alleged wrongdoing related to notes purchased by Plaintiff and issued by one of the defendants. Defendants moved to dismiss, claiming that Plaintiff’s claims were barred by a no-action clause contained in the indenture agreement governing Plaintiff’s notes. The Delaware Supreme Court remanded the case for the Court of Chancery for consideration of the issues under New York law. On remand, the Court of Chancery concluded that the majority of Plaintiff’s claims were not barred under the no-action clause and that dismissal and partial dismissal were warranted with respect to the remaining claims because only those claims arose under the indenture. In response to certified questions from the Delaware Supreme Court, the Court of Appeals concluded (1) a trust indenture’s no-action clause that specifically precludes enforcement of contractual claims arising under the indenture, but omits reference to “the Securities,” does not bar a securityholder’s independent common law or statutory claims; and (2) the Court of Chancery correctly found that the no-action clause in this case, which referred only to “this Indenture,” precluded enforcement only of contractual claims arising under the Indenture. View "Quadrant Structured Prods. Co., Ltd. v. Vertin" on Justia Law

Institutional investors brought a private securities fraud class action under the Private Securities Litigation Reform Act of 1995 (PSLRA), claiming that Wyeth, a pharmaceutical company and its executives made materially false and misleading statements in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission (SEC) Rule 10b-5, regarding interim clinical trial data related to the development of an experimental Alzheimer’s drug. The district court dismissed for failure to state a claim. The Third Circuit affirmed, concluding that, in context, the defendants’ statements were not false or misleading. The court noted that this is not the first case in which the federal courts have adjudicated securities fraud allegations arising out the development of the drug bapineuzumab and concluding that the plaintiffs failed to adequately allege defendants did not honestly believe their interpretation of the interim results or that it lacked a reasonable basis. View "City of Edinburgh Council v. Pfizer Inc." on Justia Law

Plaintiffs, a class of investors, brought a securities fraud action against Genzyme Corporation, an international pharmaceutical company, and several of Genzyme’s executives, alleging that Defendants violated the Securities Exchange Act by making false or misleading statements to investors. The district court dismissed the complaint for failure to state a claim upon which relief could be granted and subsequently denied Plaintiffs’ post-judgment motion to amend the complaint. The First Circuit affirmed, holding (1) the district court did not err in concluding that the complaint failed to meet the formidable pleading standard for securities fraud claims; and (2) the district court did not abuse its discretion in denying Plaintiffs’ post-judgment motion to amend the complaint. View "Deka Int'l S.A. Luxembourg v. Genzyme Corp." on Justia Law

Defendant challenged his conviction and sentence for conspiracy to commit securities fraud in violation of 18 U.S.C. 371. This case arose out of a complex scheme designed to defraud investors through a group of hedge funds called the Lancer Fund. The court affirmed defendant's conviction; affirmed the denial of defendant's motion for a new trial; but vacated defendant's sentence because the district court erred when it enhanced defendant's sentence and ordered restitution based on the losses from Morgan Stanley's investment. The court remanded for resentencing. View "United States v. Isaacson" on Justia Law

Plaintiffs, former Carlyle Capital investors, filed suit alleging that Carlyle Capital made material misstatements and omissions in its June 2007 sale of securities and thereby violated the federal securities laws. Plaintiffs also alleged violations of Dutch law. The court concluded that, given the accurate disclosure in the initial June 19 Offering Memorandum and the additional accurate disclosure in the June 29 Supplemental Memorandum, plaintiffs have not sufficiently alleged any material misstatements or omission. Carlyle Capital had no duty under federal securities laws to make further disclosures in the Offering Memorandum or to the press release accompanying the Supplemental Memorandum. Therefore, the district court properly dismissed plaintiffs' federal claims. Applying the choice-of-law rules for the District of Columbia, not Dutch law, the court concluded that plaintiffs failed to sufficiently allege common-law fraud or misrepresentation. View "Wu, et al. v. Stomber, et al." on Justia Law

The SEC filed a civil enforcement action against defendant, alleging that defendant failed to follow directives issued by the mutual funds and his employer to cease his market timing, and that he used different "financial advisor numbers" when mutual funds blocked trading from the ones he customarily used. The jury found that defendant engaged in no intentional misconduct but that he violated Section 17 of the Securities Act of 1933, 15 U.S.C. 77q, which has no scienter element, with respect to six out of sixty mutual funds. The court concluded that the evidence established without contradiction that the funds were inconsistent in their proscriptions on market timing and that the employer supported defendant's practices - and the jury could not find negligence in these circumstances without evidence as to an appropriate standard of care. Accordingly, the court reversed and remanded for the district court to dismiss the complaint against defendant. View "SEC v. O'Meally" on Justia Law