Justia Securities Law Opinion Summaries

Articles Posted in U.S. 2nd Circuit Court of Appeals

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Plaintiffs appeal from the district court's order denying their motion for remand to state courts. This is an interlocutory appeal of a question certified by the district court, calling for interpretation of the jurisdictional provisions of the Edge Act, 12 U.S.C. 632. Whether the district court's denial of remand was proper turns on whether the dispute falls within section 632. The court concluded that the dispute did not fall within section 632's grant of jurisdiction so that removal from state to federal court was not authorized by the statute. Therefore, the court vacated the district court's order denying remand. View "AIG v. Bank of America" on Justia Law

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Plaintiffs appealed from the district court's grant of the United States' motion to dismiss plaintiffs' complaints against the SEC for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). Plaintiffs also appealed from the district court's denial of plaintiffs' motion for relief from judgment under Rule 60(b). Plaintiffs sought to hold the United States liable for SEC employees' failure to detect Bernard Madoff's Ponzi scheme and for the financial losses that plaintiffs claimed they suffered as a result. The court affirmed the district court's dismissal of plaintiffs' claims, finding that the SEC's actions, along with its regrettable inaction, were shielded by the Discretionary Function Exception to the Federal Tort Claims Act (FTCA), 28 U.S.C. 2680(a). View "Molchatsky, et al. v. United States" on Justia Law

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Plaintiff brought a derivative suit on behalf of Goldman Sachs under Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78p(b), seeking to require defendant to disgorge all profits from short-swing transactions in Goldman Sachs shares. On appeal, plaintiff challenged the district court's orders and judgment granting defendant's motion to dismiss pursuant to Rule 12(b)(6). The court agreed with the district court that plaintiff failed to plead that defendant was a beneficial owner under Section 16(b) and Rule 16a-1, 17, C.F.R. 240, 16a-1. The court also declined to extend the term "beneficial owner" to encompass, perforce, "tippers" who provided insider information, in exchange for payment, to another party who engaged in the short-swing trading of shares. Accordingly, the court affirmed the orders and judgment of the district court. View "Mercer v. Gupta" on Justia Law

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FHFA, as conservator of Fannie Mae and Freddie Mac, sued UBS for fraud and misrepresentation in connection with the marketing and sale of mortgage-backed securities. The district court denied UBS's motion to dismiss and certified its decision for interlocutory appeal. The court held that the "extender statute" in section 4617(b)(12) of the Housing and Economic Recovery Act of 2008 (HERA), Pub. L. No. 110-289, 122 Stat. 2654, applied to this action, and thus concluded that the district court correctly denied UBS's motion to dismiss for untimeliness. The court further held that FHFA had standing to bring this action and the district court correctly denied UBS's motion to dismiss for lack of standing. View "Federal Housing Fin. Agency v. UBS Americas Inc." on Justia Law

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Plaintiff appealed from the district court's judgment dismissing her claims against her ex-husband and his brother for failure to state a claim and untimeliness. Plaintiff alleged that, in representing a certain investment as worthless and concealing the $5.5 million received on its account, defendants conspired in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d), committed common law fraud, and breached fiduciary duties, and that her ex-husband was unjustly enriched. The court held that the district court's reasons for dismissing the fraud-based claims were erroneous and that the district court erred in ruling on the existing record that the RICO, common law fraud, and breach of fiduciary duty claims were time-barred. The court sustained the dismissal of the unjust enrichment claim as untimely. Accordingly, the court affirmed in part and vacated and remanded in part. View "Cohen v. Cohen" on Justia Law

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In these two civil enforcement actions for securities fraud, various entities that were defrauded by defendants appealed from the district court's order approving initial pro rata distributions recovered from defendants and associated entities by the Receiver in accordance with the Plan proposed by the Receiver. Interested parties, 3M Group, contended principally that the district court should have rejected the proposed pro rata distributions because under the Plan, fraud victims who chose allegedly safer investments fare no better than victims whose investments were riskier. Interested party, KCERA, contended that the district court should have rejected the proposed Plan because it did not provide an adjustment for inflation to compensate for longer-term investors. The court considered all of the contentions of the 3M Group and KCERA in support of their respective appeals and found them to be without merit. Accordingly, the court affirmed the order. View "CFTC v. 3M Employee Welfare Benefit Assoc. Trust I, et al." on Justia Law

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Saint Vincent's alleged that Morgan Stanley - the fiduciary manager of the fixed-income portfolio of Saint Vincent Catholic Medical Centers Retirement Plan - violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Saint Vincent's alleged that Morgan Stanley disproportionately invested the portfolio's assets in mortgaged-backed securities, including the purportedly riskier subcategory of "nonagency" mortgage-backed securities, despite warning signs that these investments were unsound. Although Saint Vincent's, as the fiduciary administrator of an ERISA-governed plan, was in a position to plead its claims with greater factual detail than was typically accessible to plaintiffs prior to discovery, and although it received two opportunities to amend its complaint, the Amended Complaint failed to plead sufficient, nonconclusory factual allegations to show that Morgan Stanley failed to meet its fiduciary responsibilities under ERISA. Accordingly, the court affirmed the district court's dismissal of the Amended Complaint. View "Pension Benefit Guaranty Corp. v. Morgan Stanley Inv. Mgmt. Inc." on Justia Law

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Willow Creek sued UBS, claiming a violation of Rule 10(b)-16 of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), because UBS failed to fully disclose its generally applicable margin rules until after it demanded that Willow Creek provide additional collateral for its margin account. Willow Creek also alleged that UBS failed to provide adequate notice before it revised those rules. The district court granted UBS's motion for judgment on the pleadings, concluding that the initial disclosure statement provided by UBS satisfied Rule 10b-16's disclosure requirements. The court concluded that, in this instance, where a broker disclosed its margin policies regarding the circumstances that could lead it to reevaluate the adequacy of the collateral in a customer's account and also indicated that more specific information about its margin policies was available to the customer, it need not disclose the precise, complex formulas it used to calculate its collateral requirements. Nor did Rule 10b-16(b) require UBS to provide advance notice to Willow Creek before it changed its margin rules. Accordingly, the court affirmed the judgment. View "WC Capital Mgmt. v. UBS Sec., LLC" on Justia Law

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This appeal arose out of a proceeding brought to remedy securities fraud and recover assets that were the fruits of the fraud. The issues on appeal related to enforcement of, and compliance with, an order freezing various assets. The Trust and various individuals appealed from the magistrate judge's sanctioning of certain individuals. The court dismissed the appeals of Jill Dunn and David Wojeski for lack of jurisdiction, affirmed the sanction order as to Lynn Smith, and remanded to allow the Trust to contest the court's order regarding the disposition of trust property and for the magistrate judge to give additional guidance to the receiver as to disposition of the Trust property. View "SEC v. McGinn, et al." on Justia Law

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Plaintiffs, former customers of Sterling Foster, for which Bear Stearns, as a clearing broker, performed certain settlement and record-keeping functions, alleged that Bear Stearns violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), by participating in Sterling Foster's market manipulation scheme. Bear Stearns pursued this interlocutory appeal from a decision and order of the district court granting in part and denying in part plaintiffs' motion for certification of a class pursuant to Rule 23(b)(3). The court concluded that plaintiffs' allegations failed to trigger a duty of disclosure to Sterling Foster's clients such that the Affiliated Ute Citizens of Utah v. United States presumption of reliance applied. Therefore, plaintiffs failed to satisfy Rule 23(b)(3)'s predominance requirement. Accordingly, the court reversed the judgment of the district court. View "Levitt v. J.P. Morgan Securities, Inc." on Justia Law