Justia Securities Law Opinion SummariesArticles Posted in Supreme Court of Illinois
Walworth Investments-LG, LLC v. Mu Sigma, Inc.
Walworth, a former stockholder, sued Mu Sigma, a privately held data analytics company, and Rajaram, the company’s founder, CEO, and board chairman, alleging that after reaping the benefits of Walworth’s $1.5 million investment and reputational capital, the defendants embarked on a fraudulent scheme to oust Walworth of its substantial ownership interest in the company.The Cook County circuit court dismissed the complaint, citing the stock repurchase agreement (SRA), which included anti-reliance and general release provisions. The appellate court reversed, holding that the anti-reliance language was ambiguous. The Illinois Supreme Court reinstated the dismissal, stating that “the broad and comprehensive release agreed to by [Walworth], a sophisticated party represented by experienced counsel, unambiguously encompasses” the unjust enrichment and breach of contract claims. The bargained-for anti-reliance provisions reflected the understanding that there may be undisclosed information but that Walworth was satisfied by the information provided. Walworth had direct access to Rajaram to negotiate the arm’s-length transaction at issue and Rajaram was not acting as a fiduciary for Walworth. A corporation owes no fiduciary duty to its shareholder and Delaware law does not impose “an affirmative fiduciary duty of disclosure for individual transactions.” View "Walworth Investments-LG, LLC v. Mu Sigma, Inc." on Justia Law
Van Dyke v. White
Van Dyke is a licensed insurance producer, 215 ILCS 5/1, and registered with the Secretary of State Securities Department as an investment adviser, 815 ILCS 5/1. The Department received a complaint from the adult children of one of Van Dyke’s deceased clients, investigated, and held a hearing to determine whether Van Dyke’s registration should be retroactively revoked or suspended, alleging that Van Dyke had defrauded over 21 clients, all senior citizens. Van Dyke effectuated 31 purchase transactions involving the liquidation of the clients’ previously owned indexed annuities to purchase new indexed annuities. Van Dyke earned $316,278.56 in commissions; his clients lost $263,822.13 in surrender charges, penalties, and other fees. The Secretary of State found that Van Dyke had violated the Act, revoked his investment adviser registration, and ordered him to pay fines and costs. The appellate court reversed, holding that the Department had failed to prove that Van Dyke violated the Act. The Illinois Supreme Court agreed. Annuity contracts issued by authorized insurers are insurance products, not securities, because they fall within the exclusion from face amount certificates and are not investment contracts under section 2.1; Van Dyke’s recommendation that his clients purchase the indexed annuities cannot form the basis of a violation of sections 12(A), (F), (G), or (I) of the Act. The evidence failed to establish that Van Dyke violated the Act or perpetrated a fraud on his clients with regard to the replacement transactions at issue. View "Van Dyke v. White" on Justia Law