Justia Securities Law Opinion Summaries

Defendants appealed from a judgment of the district court in favor of plaintiff on claims of Section 16(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78p(b). At issue was whether a beneficial owner's acquisition of securities directly from an issuer - at the issuer's request and with the board's approval - should be exempt from the definition of a "purchase" under Section 16(b), on the theory that such a transaction lacked the "potential for speculative abuse" that Section 16(b) was designed to curb. The court held that such transactions were covered by Section 16(b) and that defendants, who were limited partnerships, were beneficial owners for the purpose of Section 16(b) liability, notwithstanding their delegation of voting and investment control over their securities portfolios to their general partners' agents. Accordingly, the court affirmed the judgment of the district court. View "Huppe v. WPCS Int'l, Inc." on Justia Law

Former customers of RCM, a subsidiary of the now-bankrupt Refco, appealed from a dismissal of their securities fraud claims against former corporate officers of Refco and Refco's former auditor. RCM operated as a securities and foreign exchange broker that traded in over-the-counter derivatives and other financial products on behalf of its clients. Appellants, investment companies and members of the putative class, claimed that appellees, former officers and directors of Refco, breached the agreements with the RCM customers when they rehypothecated or otherwise used securities and other property held in customer brokerage accounts. The district court dismissed the claims for lack of standing and failure to allege deceptive conduct. The court held that appellants have no remedy under the securities laws because, even assuming they have standing, they failed to make sufficient allegations that their agreements with RCM misled them or that RCM did not intend to comply with those agreements at the time of contracting. View "Capital Mgmt Select Fund Ltd., et al. v. Bennett et al." on Justia Law

Defendants, four executives of Gen Re and one of AIG, appealed from convictions of conspiracy, mail fraud, securities fraud, and making false statements to the SEC. The charges arose from an allegedly fraudulent reinsurance transaction between AIG and Gen Re that was intended to cure AIG's ailing stock price. Defendants appealed on a variety of grounds, some in common and others specific to each defendant, ranging from evidentiary challenges to serious allegations of widespread prosecutorial misconduct. The court held that most of the arguments were without merit, but defendants' convictions were vacated because the district court abused its discretion by admitting the stock-price data. View "United States v. Ferguson, et al." on Justia Law

Plaintiff, a purchaser of auction rate securities (ARS), brought a purported class action lawsuit against defendants, alleging that defendants engaged in a scheme to manipulate the ARS market in violation of securities laws. Defendants moved to dismiss the complaint and the district court granted the motion on several grounds, including that defendants' disclosures of its auction practice precluded plaintiff's claim that these practices were manipulative. On appeal, plaintiff contended that this dismissal was in error. The court held that defendants' disclosures of its bidding practices precluded plaintiff's market manipulation claim. Because plaintiff had failed to satisfy the "manipulative acts" elements of his claim, the court need not address his arguments directed toward the other element of his claim or defendants' arguments that the court should affirm on alternative grounds. Accordingly, the district court's judgment was affirmed. View "In Re: Merrill Lynch Auction ." on Justia Law

Appellants brought various claims before Financial Industry Regulatory Authority (FINRA) arbitrators against Ameriprise, a financial-services company, for, inter alia, breach of fiduciary duty, breach of contract, fraud, and negligent misrepresentation related to the decline in value of various financial assets owned by appellants and managed by Ameriprise. Ameriprise answered appellants' FINRA complaint by asserting, principally, that appellants released their claims by operation of a settlement agreement in a class-action agreement suit that had proceeded between 2004 and 2007 in the United States District Court for the Southern District of New York. After FINRA arbitrators denied Ameriprise's motion to stay appellants' arbitration, Ameriprise moved in the district court, in which the class action had been litigated and settled, for an order to enforce the settlement agreement that would enjoin appellants from pressing any of their claims before FINRA arbitrators. The district court concluded that the class settlement barred all of appellants' arbitration claims and therefore granted Ameriprise's motion and ordered appellants to dismiss their FINRA complaint with prejudice. The court held that the district court had the power to enter such an order and that several of appellants' arbitration claims were barred by the 2007 class-action settlement. Therefore, the court affirmed in part. But because the court concluded that appellants' arbitration complaint plead claims that were not, and could not have been, released by the class settlement, the court vacated in part the district court's judgment, and remanded the case for the entry of an order permitting the non-Released claims to proceed in FINRA arbitration. The court dismissed as moot appellants' appeal from the district court's denial of their motion for reconsideration. View "In Re: American Express Finance Advisors Securities Litigation" on Justia Law

Plaintiffs appealed from a decision granting defendants' motion to dismiss plaintiffs' complaints for failure to state a claim upon which relief could be granted. Plaintiffs, participants in two retirement plans offered by defendants, brought suit alleging breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Plaintiff alleged that defendants acted imprudently by including employer stock as an investment option in the retirement plans and that defendants failed to provide adequate and truthful information to participants regarding the status of employer stock. The court held that the facts alleged by plaintiffs were, even if proven, insufficient to establish that defendants abused their discretion by continuing to offer plan participants the opportunity to invest in McGraw-Hill stock. The court also held that plaintiffs have not alleged facts sufficient to prove that defendants made any statements, while acting in a fiduciary capacity, that they knew to be false. Accordingly, the judgment was affirmed. View "Gearren, et al. v. The McGraw-Hill Companies, Inc., et al." on Justia Law

Plaintiffs, participants in retirement plans offered by defendants and covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., appealed from a judgment dismissing their ERISA class action complaint. Plan documents required that a stock fund consisting primarily of Citigroup common stock be offered among the plan's investment options. Plaintiffs argued that because Citigroup stock became an imprudent investment, defendants should have limited plan participants' ability to invest in it. The court held that plan fiduciaries' decision to continue offering participants the opportunity to invest in Citigroup stock should be reviewed for an abuse of discretion and the court found that they did not abuse their discretion here. The court also held that defendants did not have an affirmative duty to disclose to plan participants nonpublic information regarding the expected performance of Citigroup stock and that the complaint did not sufficiently allege that defendants, in their fiduciary capacities, made any knowing misstatements regarding Citigroup stock. Accordingly, the court affirmed the judgment. View "Gray, et al. v. Citigroup, Inc., et al." on Justia Law

Plaintiffs appealed from a dismissal of their complaint, which sought a declaratory judgment that, inter alia, the Financial Industry Regulatory Authority, Inc. (FINRA) lacked the authority to bring court actions to collect disciplinary fines as imposed. The court held that the heavy weight of evidence suggested that Congress did not intend to empower FINRA to bring court proceedings to enforce its fines and that the 1990 Rule Change did not authorize FINRA to judicially enforce the collection of its disciplinary fines. View "John J. Fiero and Fiero Brothers, Inc. v. FINRA" on Justia Law

UBS appealed the denial of their motion for a preliminary injunction enjoining defendants from proceeding with an arbitration before the Financial Industry Regulatory Authority (FINRA), and alternatively requiring that the arbitration proceed in New York County. In the arbitration, defendants sought damages for UBS's alleged fraud in connection with defendants' issuances of auction rate securities. The court held that defendants were entitled to arbitration because they became UBS's "customer" under FINRA's rules when they undertook to purchase auction services from UBS. The court also held that the enforceability of the forum selection clause was a procedural issue for FINRA arbitrators to address and that the district court lacked jurisdiction to resolve it. View "UBS Financial Servs, Inc. v. West Virginia University Hosp." on Justia Law

This case arose out of the attempts of two federal agencies to disgorge funds from Janet Schaberg, the ex-wife of alleged Ponzi-scheme artist Stephen Walsh. Schaberg subsequently appealed from a memorandum decision and orders of the district court granting preliminary injunctions freezing Schaberg's assets. In response to certified questions, the New York Court of Appeals held that (a) proceeds of a fraud could constitute marital property, and (b) when part or all of the marital estate consisted of the proceeds of fraud, that fact did not, as a matter of law, preclude a determination that a spouse paid fair consideration according to the terms of New York's Debtor and Creditor Law section 272. The court held that because those rulings undermined the key legal assumptions supporting the preliminary injunctions, the court vacated those orders, without prejudice to further proceedings applying the legal principles pronounced by the New York Court of Appeals. View "Commodity Futures Trading Comm'n v. Walsh, et al.; SEC v. WG Trading Investors, L.P., et al." on Justia Law