Justia Securities Law Opinion Summaries

This case stemmed from continuing disputes between Argentina and its various private creditors. Argentina and its Brady bondholders entered into a Continuation of Collateral Pledge Agreement that extended the security interest in the tendered bonds' collateral during its transfer and liquidation. Capital Ventures International (CVI) held certain non-Brady bonds on which Argentina also defaulted and chose to sue Argentina to collect on the defaulted bonds it held, seeking to attach Argentina's reversionary interest in the Brady collateral. At issue was whether the attachments blocked the proposed exchange and whether the district court properly modified the attachments to allow the exchange. The court held that CVI was entitled to maintain its attachments even though a quirk of the bonds' Collateral Pledge Agreement meant that the attachments would effectively block the proposed exchange between Argentina and the Brady bondholders. Therefore, the court reversed the district court's orders that modified the attachments to permit the exchange. View "Capital Ventures Int'l v. Republic of Argentina" on Justia Law

This case stemmed from a contractual arrangement known as a "cash-settled total return equity swap agreement" between the parties. The parties appealed the judgment of the district court finding defendants in violation of section 13(d) of the Williams Act, 15 U.S.C. 78m(d), and permanently enjoining them from future violations. The court considered only whether a section 13(d) violation occurred with respect to CSX shares owned outright by defendants acting as a group. Because the district court did not make findings sufficient to permit appellate review of a group violation of section 13(d) with respect to outright ownership of CSX shares, the court remanded for further consideration. An earlier order affirmed the denial of an injunction against the voting of shares acquired by defendants while they were not in compliance with section 13(d). The court explained that ruling on the ground that injunctive "sterilization" of shares was not available when shareholders had adequate time to consider the belated Williams Act disclosures before the relevant shareholder's vote. Accordingly, the court affirmed in part, vacated in part, and remanded in part. View "CSX Corp. v. The Children's Inv. Fund Mgmt., et al." on Justia Law

This insurance coverage dispute raised issues arising out of financial regulators' investigations in alleged accounting misstatements by MBIA, Inc. (MBIA) and related litigation. Based on these events, MBIA made claims under two $15 million director and officer (D&O) insurance policies it had purchased from Federal Insurance Co. (Federal) and ACE American Insurance Co. (ACE), seeking coverage for costs associated with these claims as losses under the policies. The district court granted summary judgment in favor of MBIA on two of its three coverage claims but granted summary judgment in favor of Federal and ACE on one of MBIA's coverage claims. The parties subsequently appealed the district court's judgments. The court affirmed the district court with respect to coverage for all costs except those related to the independent consultant where the independent consultant's investigation was a covered cost under the policies. Therefore, the judgment of the district court was affirmed in part and reversed in part. The court remanded the case to the district court for entry of judgment in favor of MBIA on its claim for coverage of the independent consultant's costs. View "MBIA Inc. v. Federal Ins. Co." on Justia Law

Enron Creditors Recovery Corp. (Enron) sought to avoid and recover payments it made to redeem its commercial paper prior to maturity from appellees, whose notes were redeemed by Enron. On appeal, Enron challenged the district court's conclusion that 11 U.S.C. 546(e)'s safe harbor, which shielded "settlement payments" from avoidance actions in bankruptcy, protected Enron's redemption payments whether or not they were made to retire debt or were unusual. The court affirmed the district court's decision and order, holding that Enron's proposed exclusions from the reach of section 546(e) have no basis in the Bankruptcy Code where the payments at issue were made to redeem commercial paper, which the Bankruptcy Code defined as security. Therefore, the payments at issue constituted the "transfer of cash ... made to complete [a] securities transaction" and were settlement payments within the meaning of 11 U.S.C. 741(8). The court declined to address Enron's arguments regarding legislative history because the court reached its conclusion based on the statute's plain language. View "In Re: Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., et al." on Justia Law

After a bench trial, the district court entered a judgment for plaintiffs concluding that on seventeen occasions, defendant had infringed plaintiffs' copyrights in their research reports, and that by collecting and disseminating to its own subscribers the summary recommendations with respect to securities trading contained in plaintiffs' reports, defendant had committed the New York state law tort of "hot news" misappropriation. Defendant appealed the judgment and injunction against it on the "hot news" misappropriation claim. The court held that plaintiffs' claim against defendant for "hot news" misappropriation of the plaintiff financial firms' recommendations to clients and prospective clients as to trading in corporate securities was preempted by federal copyright law. Based upon principles explained and applied in National Basketball Association v. Motorola ("NBA"), the court held that because plaintiffs' claim fell within the "general scope" of copyright, 17 U.S.C. 106, and involved the type of works protected by the Copyright Act, 17 U.S.C. 102 and 103, and because defendant's acts at issue did not meet the exceptions for a "hot news" misappropriation claim as recognized by NBA, the claim was preempted. Accordingly, the court reversed the judgment of the district court with respect to that claim.

Defendant appealed from a judgment of conviction for securities fraud and conspiracy to commit securities fraud and wire fraud. At issue, among other things, was whether venue was proper in the Eastern District of New York. The court held that venue in the Eastern District was proper for the conspiracy counts where defendant committed overt acts in furtherance of the conspiracies in the Eastern District. Accordingly, the court did not find venue for the conspiracy charges to be unfair or prejudicial. The court held, however, that venue in the Eastern District was improper for the substantive securities fraud count where no conduct that constituted the offense took place in the Eastern District. Accordingly, nothing in United States v. Svoboda called into question the principle that preparatory acts alone were insufficient to establish venue. Therefore, the court affirmed in part and reversed in part.

Defendants entered a plea of guilty to conspiracy to commit securities fraud, based on trading on material, nonpublic information and tipping others. The SEC instituted a civil enforcement action, alleging that defendants violated section 10(b) of the Exchange Act and Rule 10b-5 and section 17(a) of the Securities Act of 1933 by engaging in insider trading. The district court imposed civil penalties under section 21(d)(3) of the Exchange Act, 15 U.S.C. 78u(d)(3): a penalty of $600,000 on one defendant for five violations and a penalty of $120,000 on another for two tips The Second Circuit vacated in part, holding that civil monetary penalties for insider trading are not available under section 21(d)(3). The section refers to penalties for violations, "other than by committing a violation subject to a penalty pursuant to section 78u-1;" the referenced section states that penalties shall not exceed three times profit gained or loss avoided. The court held that 21(d)(3) is intended to deal with violations other than insider trading. Although the defendants did not make a profit or avoid a loss and were not penalized under 78u-1, they committed insider trading and are "subject to" penalty even if the penalty was not assessed.

Defendant appealed from two judgments of conviction related to his involvement in "pump and dump" stock schemes. At issue was whether the first judgment of conviction, entered upon a jury verdict, should be overturned, either because the evidence was insufficient to permit a jury to find a fiduciary duty, or because the jury was improperly instructed about how to determine the existence of a fiduciary duty. Also at issue was whether the second judgment of conviction should be overturned because defendant's guilty plea, entered after his conviction in the first trial, was premised on the outcome of that trial. The court held that, upon reviewing the jury instructions for plain error and taking the evidence in the light most favorable to the Government, the jury was entitled to find that the brokers in this case had a duty to disclose their exorbitant commissions, just as they had a duty to refrain from making affirmative misrepresentations regarding the size of their commissions, and thus, the district court properly instructed the jury on the elements of that duty. The court also held that, because it found no principled basis on which to distinguish this case from United States v. Szur, the court concluded that there was no error in the charge, and affirmed defendant's first conviction. Therefore, the court's conclusion necessarily defeated defendant's argument challenging his subsequent guilty plea and the second judgment of conviction was also affirmed.

Petitioner filed an arbitration claim against respondent with the Financial Industry Regulatory Authority ("FINRA") raising federal claims of securities fraud under section 10(b)(5) of the Securities and Exchange Act of 1934 ("SEC"), 15 U.S.C. 78a et seq., and SEC Rule 10b-5, as well as state-law claims. When respondent lost the FINRA arbitration, respondent appealed the arbitration order asserting various improprieties and asked the district court, and now this court, to undo the award. The court upheld confirmation of the award in full after giving careful attention to respondent's arguments and found them to be without merit. The court did hold, however, that the district court's judgment should credit respondent for approximately $75 million that petitioner received in exchange for selling some of the failed auction rate securities at issue and should have reduced respondent's liability for interest accordingly. Therefore, the court vacated the district court's judgment on that point and remanded for modification in light of the partial satisfaction of the award. The court rejected, however, respondent's attempt to alter the award's scheme for distributing interest earned on the securities portfolio.

Plaintiffs appealed from judgments dismissing their class-action complaints seeking to hold defendants (collectively, "Rating Agencies") liable as underwriters or control persons for misstatements or omissions in securities offering documents in violation of sections 11 and 15 of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. 77k(a)(5), 77o(a). At issue was whether the Rating Agencies were "underwriters" as defined by 15 U.S.C. 77b(a)(11) because they helped structure securities transactions to achieve desired ratings. Also at issue was whether the Rating Agencies were "control persons" because of their alleged provision of advice and direction to primary violators regarding transaction structures under section 77o(a) of the 1933 Act. The court held that plaintiffs' section 11 claims that the Rating Agencies were "underwriters" was properly dismissed because the Rating Agencies' alleged structuring or creation of securities was insufficient to demonstrate their involvement in the requisite distributional activities. The court also held that plaintiffs' "control person" claims under section 77o(a) were properly dismissed because the Rating Agencies' provision of advice and guidance regarding transaction structures was insufficient to permit an inference that they had the power to direct the management or policies of alleged primary violators of section 11. The court further held that the district court did not abuse its discretion in denying implicitly plaintiffs' cursory requests for leave to amend.