Justia Securities Law Opinion Summaries

Plaintiff, on behalf of Leap, filed suit against Goldman, seeking to hold Goldman liable under Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78p(b), and Rule 16b-6(d), 17 C.F.R. 240.16b-6(d), for Goldman's failure to disgorge "short-swing profits" derived from writing call options on Leap stock. The court concluded that for the purposes of Section 16(b), the expiration of a call option within six months of its writing was to be deemed a "purchase" by the option writer to be matched against the "sale" deemed to occur when that option was written. The court also concluded that Section 16(b) required statutory insider status at the time of both purchase and sale, and so Goldman was not required to disgorge profits where it was a statutory insider only when the options were written, but not when they expired. Accordingly, the court affirmed the district court's dismissal of the action for failure to state a claim. View "Roth v. The Goldman Sachs Group, Inc., et al." on Justia Law

Plaintiff, a former minority shareholder of Xcelera, filed securities fraud claims alleging that Xcelera insiders purchased Xcelera stock by making a tender offer through a shell corporation without disclosing any information about Xcelera's financial state. The district court dismissed plaintiff's claims and she appealed. The court held that the duty of corporate insiders to either disclose material nonpublic information or abstain from trading was defined by federal common law and applied to unregistered securities. Accordingly, the district court erred in dismissing plaintiff's insider trading claims under sections 10(b), 20(a), and 20A(a) of the Securities Exchange Act, 15 U.S.C. 78a et seq. The court vacated the dismissal of those claims and remanded for further proceedings. The court affirmed as to the dismissal of plaintiff's market manipulation claims and her section 14(e) insider trading claims. View "Steginsky v. Xcelera Inc." on Justia Law

World Trade petitioned for review of the Commission's Order Sustaining Disciplinary Action Taken by FINRA, which upheld a variety of fines and sanctions against petitioners for their violations of Sections 5(a) and 5(c) of the Securities Act of 1933, 15 U.S.C. 77e(a), 77(e)(a), 77e(c), which prohibited the sale or offer of sale of a security without filing a registration statement. The court concluded that substantial evidence supported the Commission's finding that World Trade violated Sections 5(a) and 5(c) of the Act, and the court held that World Trade did not meet their duty of inquiry necessary to claim the Section 4(4) broker's exemption; and the court deferred to the Commission's discretionary determination as to the appropriate fines and sanctions because they were within FINRA's guidelines and were supported by evidence in the record. Accordingly, the court denied the petition for review. View "WTFC v. SEC" on Justia Law

The Attorney General (AG) sued two of the former officers of American International Group, Inc. (AIG), alleging that Defendants violated the Martin Act and committed common law fraud. Specifically, the AG claimed that Defendants helped cause AIG to enter into a sham transaction with General Reinsurance Corporation (GenRe) in which AIG purported to reinsure GenRe on certain insurance contracts. The AG withdrew his claims for damages and now sought only equitable relief. The Appellate Division denied Defendants' motion for summary judgment. The Court of Appeals affirmed, holding (1) the evidence of Defendants' knowledge of the fraudulent nature of the transaction was sufficient to raise a triable issue of fact; and (2) the AG was not barred as a matter of law from obtaining equitable relief.View "People v. Greenberg" on Justia Law

Legacy Resources, Inc. brought several claims against Liberty Pioneer Energy Source, Inc. The district court dismissed Legacy's breach of contract and trade secret claims on summary judgment, determining (1) Legacy violated the securities laws by acting as an unlicensed broker in recruiting investors on behalf of Liberty; and (2) Legacy's securities violations rendered its contract unenforceable under Utah Code 61-1-22(8). The Supreme Court affirmed in part and reversed in part, holding (1) the undisputed facts sustained the conclusion that Legacy acted as an unlicensed broker, which violation foreclosed the enforcement of one of its contracts; but (2) another of Legacy's contracts was not implicated by the securities violation, and thus the district court erred by granting summary judgment on Legacy's claim under that contract, along with its trade secret claim. View "Legacy Res., Inc. v. Liberty Pioneer Energy Source, Inc." on Justia Law

In 2003, the Securities and Exchange Commission (SEC) notified Bear Stearns & Co. and Bear Stearns Securities Corp. of its intention to charge Bear Stearns with violations of federal securities laws. Bear Stearns agreed to pay $160 million as a disgorgement and $90 million as a civil penalty. Bear Stearns then sought indemnification from its insurers (Insurers), requesting indemnity for the $160 million SEC disgorgement payment. Insurers denied coverage. Bear Stearns subsequently brought this breach of contract and declaratory judgment action against Insurers. Insurers unsuccessfully moved to dismiss the complaint. The Appellate Division reversed and dismissed the complaint, holding that, as a matter of public policy, Bear Stearns could not seek coverage under its policies for any of the SEC disgorgement payment. Bear Stearns appealed, arguing that, while it was reasonable to preclude an insured from obtaining indemnity for the disgorgement of its own illegal gains, Bear Stearns was not unjustly enriched by at least $140 million of the disgorgement payment, the sum attributable to the profits of its customers. The Court of Appeals reversed, holding that Insurers did not meet their burden of establishing, as a matter of law, that Bear Stearns was barred from pursuing insurance coverage under its policies.View "J.P. Morgan Sec. Inc. v. Vigilant Ins. Co." on Justia Law

To shield himself from the adverse effects of losses while speculating in high-risk securities, Joseph Caramdare exploited a perceived loophole in certain annuities issued by Appellant. Charles Buckman accepted a cash payment to identify himself as the annuitant on an application for one of these annuities, and Appellee, a Caramadre nominee and a stranger to Buckman, was designated as the prospective owner and beneficiary of the annuity. Appellant approved the application and issued an annuity (the Policy). Appellant later learned of Caramdre's scheme and sued Appellee in federal court, asserting certain tort claims and seeking rescission of the Policy and a declaration that the Policy was either void ab initio or had been properly rescinded. The court dismissed the claims. On appeal, the First Circuit Court certified to the Rhode Island Supreme Court the following questions of state law: (1) whether an annuity with a death benefit is infirm for want of an insurable interest if the owner and beneficiary of the annuity is a stranger to the annuitant; and (2) whether a clause in an annuity that purports to make the annuity incontestable from the date of its issuance precludes the maintenance of an action based on the lack of an insurable interest. View "W. Reserve Life Assurance Co. of Ohio v. ADM Assocs., LLC" on Justia Law

Deloitte and Touche (Deloitte), a public accounting firm, performed a financial audit for Global Cash Access Holdings (GCA). While performing a financial audit for another client Larry Krause, a CPA employed by Deloitte, obtained an FBI intelligence bulletin containing information about alleged illegal acts committed by GCA and members of its board of directors (Appellants). Deloitte disclosed the allegations to GCA's audit committee. A subsequent investigation revealed no evidence of misconduct on the part of GCA or Appellants. The investigation, however, resulted in a significant drop in GCA's stock price. Appellants filed a complaint for defamation and tortious interference against Deloitte and Krause (collectively, Deloitte). The district court granted Deloitte's motion for summary judgment, concluding that Deloitte's communications to the audit committee were protected by a conditional privilege. The Supreme Court affirmed on different grounds, holding (1) one who is required by law to publish defamatory matter is absolutely privileged to publish it when the communication is made pursuant to a lawful process and to a qualified person; and (2) Deloitte's statement to GCA's audit committee was therefore absolutely privileged as a matter of law because Deloitte communicated information about alleged illegal acts in accordance with federal securities law.View "Cucinotta v. Deloitte & Touche, LLP" on Justia Law

Republican Valley Biofuels (RVBF) issued a confidential private placement memorandum seeking investors in a biodiesel production facility. DMK Biodiesel (DMK) and Lanoha RVBF (Lanoha) invested $600,000 and $400,000 respectively in RVBF, which was being promoted by four individuals (Promoters). Renewable Fuels Technology (Renewable Fuels) was the manager of RVBF. DMK and Lanoha entered into and executed separate subscription agreements with RVBF. DMK and Lanoha later filed a complaint against Renewable Fuels and Promoters, alleging that Defendants fraudulently induced them to invest funds in RVBF. Defendants filed a motion to dismiss and a motion to take judicial notice, requesting the district court to take judicial notice of the confidential private placement memorandum for RVBF and the subscription agreements executed between RVBF and DMK and Lanoha. The district court granted the motions. The Supreme Court reversed, holding that because the private placement memorandum and the subscription agreements were properly considered matters outside the pleading, an evidentiary hearing was required. Remanded.View "DMK Biodiesel, LLC v. McCoy" on Justia Law

Petitioner sought review of the SEC's imposition of a civil penalty after the Commission found that petitioner failed to supervise a subordinate who violated securities laws. The court upheld the Commission's decision, concluding that the Commission did not abuse its discretion or act arbitrarily or capriciously in imposing the penalty. The court rejected petitioner's claim that the penalty violated the Excessive Fines Clause of the Eighth Amendment. View "Collins v. SEC" on Justia Law