Justia Securities Law Opinion SummariesArticles Posted in U.S. 11th Circuit Court of Appeals
Miyahira, et al. v. Vitacost.com, Inc., et al.
Appellants, purchasers of stock, alleged that appellees made material misstatements and omissions in an IPO Registration Statement and prospectus for a September 2009 public offering of the stock in violation of sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 78a et seq. Because appellants failed to plausibly allege a material misstatement or omission in the prospectus, each of their claims failed. Accordingly, the court affirmed the district court's grant of appellees' motion to dismiss for failure to state a claim under the Act. View "Miyahira, et al. v. Vitacost.com, Inc., et al." on Justia Law
City of Southfield Fire & Police Retirement System v. Greene, et al
Southfield appealed the dismissal of its consolidated class-action securities fraud complaint against St. Joe and St. Joe's current and former officers for alleged violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Securities and Exchange Commission (SEC) Rule 10b-5, 17 C.F.R. 240.10b-5. Southfield argued that the district court erred in holding that they failed to adequately plead loss causation, actionable misrepresentation, or scienter, and also by denying their post-judgment motion to alter or amend. The court held that the complaint as framed by Southfield failed to adequately allege loss causation and the district court was therefore correct to dismiss Southfield's complaint for failure to state a claim. Accordingly, the court affirmed the judgment. View "City of Southfield Fire & Police Retirement System v. Greene, et al" on Justia Law
Calloway v. Commissioner of IRS
Petitioners, husband and wife, sought review of a judgment of the Tax Court sustaining the Commissioner's determination of a deficiency, an accuracy-related penalty, and a penalty for filing a delinquent tax return. Husband worked for IBM and acquired IBM stock by exercising his employee stock options. Husband subsequently participated in a program operated by Derivium, whereby it would "lend" a client ninety percent of the value of securities that the client pledged to it as collateral. The court concluded that a combination of factors pointed decidedly to the conclusion that husband disposed of his stock by signing a Master Agreement and addenda and retained no real interest in his collateral or the "loan" after Derivium had transferred the proceeds to him. The court also concluded that plaintiffs have not shown that they acted with reasonable cause and in good faith when they declared their income from the sale of IBM shares to Derivium. Consequently, the court affirmed the Tax Court's imposition of an accuracy-related penalty. Further, plaintiffs have not carried their burden of establishing reasonable cause for failing to timely file their return and therefore, the Commissioner's assessment of a late-filing penalty was appropriate. View "Calloway v. Commissioner of IRS" on Justia Law
Hemispherx Biopharma, Inc. v. Mid-South Capital, Inc.
During an eight-month period, Plaintiff and Counterclaim-Defendant Hemispherx Biopharma, Inc. (“Hemispherx”) hired three different investment brokers to raise capital for it. Hemispherx hired the first two brokers at a time when it was difficult to sell Hemispherx’s stock. Months later, when market forces made Hemispherx’s stock much more attractive, Hemispherx hired a third broker was able very quickly to raise $31 million in capital for Hemispherx through stock sales. All three brokers focused their capital-raising efforts on several of the same prospective investors and, when several of those investors eventually purchased Hemispherx stock, a dispute arose as to which of the three brokers was entitled to a commission on the stock sales. The first investment broker Hemispherx hired, Defendant and Counterclaimant Mid-South Capital, Inc. (“Mid-South”), sought to recover a commission for its efforts in identifying investors and introducing them to Hemispherx. Hemispherx contendsed that Mid-South and its employees, Defendants Robert Rosenstein and Adam Cabibi, tortiously interfered with Hemispherx’s business relationship with its investors and with the third investment broker who ultimately closed the stock deals at issue here. The district court denied each party relief, granting judgment on the pleadings to Hemispherx on Mid-South’s breach-of-contract claim, and summary judgment to Hemispherx on Mid-South’s remaining claims and to Mid-South on Hemispherx’s intentional interference with business relationships claim. After review of the matter, the Eleventh Circuit affirmed the district court in granting summary judgment to Mid-South on the tortious interference claim; reversed the judgment on the pleadings on Mid-South's breach-of-contract claim; and reversed the grant of summary judgment for Hemispherx on Mid-South's promissory estoppel, quantum meruit and unjust enrichment claims. The case was remanded for further proceedings. View "Hemispherx Biopharma, Inc. v. Mid-South Capital, Inc." on Justia Law
State-Boston Retirement System v. BankAtlantic Bancorp, Inc.
The issue before the Eleventh Circuit concerned a private securities fraud class action suit brought against a bank holding company and its management. State-Boston Retirement System, a shareholder and lead plaintiff, sought to prove that the holding company had misrepresented the level of risk associated with commercial real estate loans held by its subsidiary. After the trial, the District Court submitted the case to the jury on a verdict form seeking general verdicts and answers to special interrogatories. When the jury returned a verdict partially in favor of State-Boston, the holding company moved for judgment as a matter of law. Perceiving an inconsistency between two of the jury's interrogatory answers, the District Court discarded one of them and granted the motion on the basis of the remaining findings. The Eleventh Circuit concluded that was error: "[w]hen a court considers a motion for judgment as a matter of law -even after the jury has rendered a verdict- only the sufficiency of the evidence matters. . . .The jury’s findings are irrelevant." Despite the District Court’s error, the Eleventh Circuit concluded that the evidence was insufficient to support a finding of loss causation, an element required to make out a securities fraud claim. The Court therefore affirmed. View "State-Boston Retirement System v. BankAtlantic Bancorp, Inc." on Justia Law
Securities & Exchange Comm. v. Goble
The SEC brought a civil enforcement action against defendant after he orchestrated a plan to manipulate the amount of money his company was required to set aside to safeguard customer assets. Defendant was subsequently liable for committing securities fraud and on appeal, defendant challenged the district court's holding on liability and the propriety of the resulting injunction. After reviewing the record and having the benefit of oral argument, the court agreed with defendant that the facts as found by the district court did not support securities fraud liability and the court reversed the judgment on this claim. The court held, however, that it was clear from the district court's factual findings that defendant aided and abetted violations of the Securities Exchange Act, 15 U.S.C. 78a et seq., so the court affirmed the judgment finding liability on these counts. Since the court reversed the district court's finding of securities fraud, the court vacated the portion of the injunction restraining defendant from violating section 10(b) of the Exchange Act and Rule 10b-5. The court also vacated the injunction barring defendant from the securities business for life. Defendant contended that the remaining portions of the injunctions were impermissible "obey-the-law" commands and the court agreed in part, vacating these paragraphs of the injunction. View "Securities & Exchange Comm. v. Goble" on Justia Law
Securities & Exchange Comm. v. Morgan Keegan & Co., Inc.
In this civil enforcement action, the SEC sued Morgan Keegan, alleging that, in the critical time period of late 2007 and early 2008, Morgan Keegan's brokers (1) misrepresented that auction rate securities (ARS) were safe cash-equivalents with no liquidity risk and (2) despite myriad auction failures and significant trouble in the ARS market, continued to recommend ARS as short-term, liquid investments and failed to disclose the known liquidity risk. The court concluded that the district court erred in granting summary judgment for Morgan Keegan based on the "materiality" element of the securities violations charged. The court's holding was narrow and limited to materiality and did not address whether the SEC had met any other element of its claims or whether the SEC would ultimately prevail in the litigation. Accordingly, the court vacated and remanded. View "Securities & Exchange Comm. v. Morgan Keegan & Co., Inc." on Justia Law
Akanthos Capital Mgmt., LLC, et al. v. CompuCredit Holdings Corp., et al.
This case concerned the applicability of a standard "no-action clause" in a trust indenture governing a company's notes. The clause at issue stated that a noteholder could not "pursue any remedy with respect to this Indenture or the Securities" unless the noteholder fell within one of two exceptions. At issue was whether noteholders who did not fall within a stated exception to the clause could nonetheless bring fraudulent transfer claims against the issuer of the securities and its directors and officers. Although the district court found the no-action clause inapplicable to the claims, the court disagreed and held that the language of the no-action clause controlled, barring noteholders from bringing suit. View "Akanthos Capital Mgmt., LLC, et al. v. CompuCredit Holdings Corp., et al." on Justia Law
Findwhat Investor Group, et al. v. Findwhat.com, et al.
In this securities fraud class action, the investor plaintiffs sued the defendant company and three of its principal officers, alleging that they had made a series of eleven false or misleading statements to the public, in violation of section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, 15 U.S.C. 78a et seq. Plaintiffs claimed that the false statements had the effect of artificially inflating the price of defendant's stock until the truth belatedly came out, at which time the stock price dropped and plaintiffs suffered substantial financial losses. The court held that the district court properly dismissed plaintiffs' claims arising from the alleged misstatements made on March 5, 2004 and July 26, 2004, because plaintiffs have inadequately pled scienter and falsity. However, as for plaintiffs' claims arising out of defendant's February 23, 2005 and March 16, 2005 statements, the court vacated the district court's entry of summary judgment. The court held that the securities laws prohibited corporate representatives from knowingly peddling material misrepresentations to the public, regardless of whether the statements introduced a new falsehood to the market or merely confirmed misinformation already in the marketplace. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings. View "Findwhat Investor Group, et al. v. Findwhat.com, et al." on Justia Law
Posted in: Business Law, Corporate Compliance, Professional Malpractice & Ethics, Securities Law, U.S. 11th Circuit Court of Appeals
Quail Cruises Ship Mgmt v. Agencia De Viagens CVC Tur Limitada, et al.
These cases stemmed from plaintiff's complaint that defendants conspired to induce plaintiff to purchase the "M/V Pacific" (vessel) - better known as the eponymous "Love Boat" from its television days of the 1970s and 1980s - by fraudulently misrepresenting the vessel's deterioration and defective condition. Plaintiffs brought claims for securities fraud under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission (SEC) Rule 10b-5, 17 C.F.R. 240.10b-5; maritime torts of fraud in the inducement, recklessness, and negligence/negligent misrepresentation; and common law claims. At issue was whether the district court properly dismissed plaintiff's complaint for lack of subject matter jurisdiction. The court vacated the district court's order dismissing the complaint and remanded for further proceedings where the court could not conclude at that stage in the proceedings that the alleged transfer of title to the shares in the United States was beyond section 10(b)'s territorial reach in light of Morrison v. Nat'l Australia Bank Ltd. Accordingly, the district court erred by dismissing plaintiff's claim on that basis.