Justia Securities Law Opinion Summaries

Articles Posted in U.S. Court of Appeals for the Second Circuit

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SRM, a registered private investment fund, filed suit against Bear Stearns, its officers, and its auditor, Deloitte, after the collapse of the Bear Stearns companies. The district court dismissed SRM's claims. The court held that the class action tolling rule set forth in American Pipe & Construction Co. v. Utah does not apply to 28 U.S.C. 1658(b)(2), the five‐year statute of repose that limits the time in which plaintiffs may bring claims under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC 15 Rule 10b‐5, 17 C.F.R. 240.10b‐5. The court also concluded that SRM failed adequately to allege that it relied on any misrepresentations in making investment decisions, an element of its common law fraud claims. Accordingly, the court affirmed the district court's dismissal of the claims. View "SRM Global Master Fund v. Bear Stearns" on Justia Law

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After the SEC commenced an administrative proceeding conducted by an ALJ against appellants, appellants contend that the SEC's administrative proceeding is unconstitutional because the presiding ALJ's appointment violated Article II's Appointments Clause. Appellants filed suit in district court asserting their Appointments Clause claim and seeking an injunction against the ALJ's adjudication based on its alleged unconstitutionality. The district court dismissed the suit for lack of subject matter jurisdiction, concluding that appellants' Appointments Clause challenge fell within the exclusive scope of the SEC's administrative review scheme and could reach a federal court only on petition for review of a final decision by the Commission. The court agreed and concluded that, by enacting the SEC's comprehensive scheme of administrative and judicial review, Congress implicitly precluded federal district court jurisdiction over appellants' constitutional challenge. Accordingly, the court affirmed the judgment. View "Tilton v. SEC" on Justia Law

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The FDIC filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., as receiver for Colonial. The complaint was timely under the terms of the FDIC Extender Statute, 12 U.S.C. 1821(d)(14)(A), because it was filed less than three years after the FDIC was appointed receiver. However, because the complaint was filed more than three years after the securities at issue were offered to the public, it would be untimely under the terms of the Securities Act’s statute of repose, 15 U.S.C. 77m.  In Federal Housing Finance Agency v. UBS Americas Inc., the court held that a materially identical extender statute for actions brought by the FHFA did displace the Securities Act’s statute of repose. The court concluded that UBS remains good law and that, under UBS, the FDIC's complaint was timely. Therefore, the court vacated the district court's judgment and remanded for further proceedings. View "FDIC v. First Horizon Asset Securities, Inc." on Justia Law

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Plaintiffs filed suit against Pfizer and others, alleging violations of federal securities laws because Pfizer made fraudulent misrepresentations and fraudulently omitted to disclose information regarding the safety of two of its drugs, Celebrex (celecoxib) and Bextra (valdecoxib). On appeal, plaintiffs argued that the district court abused its discretion in excluding the testimony of plaintiffs' expert regarding loss causation and damages. The court concluded that the district court abused its discretion by excluding the expert's testimony in its entirety; the district court erred in concluding that the expert needed to disaggregate the effects of Pfizer’s allegedly fraudulent conduct from Searle’s or Pharmacia’s, regardless of whether Pfizer is ultimately found liable for the latters’ statements; the testimony could have been helpful to the jury even without such disaggregation; as to the expert's adjustment to the price increases, the district court did not abuse its discretion in concluding that this change was not sufficiently reliable to be presented to a jury; the expert's error did not render the remainder of his testimony unreliable and the district court should have prevented him from testifying about the adjustment, but otherwise allowed him to present his findings on loss causation and damages; the district court erred in concluding, as a matter of law, that Pfizer had insufficient authority over certain Searle and Pharmacia statements as to have “made” them; but, however, the court's finding that the district court abused its discretion in excluding the expert's testimony does not turn on the question of Pfizer’s ultimate liability for these statements. Accordingly, the court vacated the district court's grant of summary judgment for Pfizer and remanded. View "In re Pfizer Inc. Securities Litigation" on Justia Law

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Plaintiffs filed suit against defendants, alleging securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), Section 20(a) of the Exchange Act, 15 U.S.C. 78t(a), and Securities and Exchange Commission Rule 10b‐5, 17 C.F.R. 240.10b‐5. Plaintiffs alleged material misstatements and omissions in SAIC’s public filings regarding its exposure to liability for employee fraud in connection with SAIC’s contract work for New York City’s CityTime project. On appeal, plaintiffs challenged the district court's denial of their motion to vacate the judgment and to amend the complaint. The court disagreed with the district court’s conclusion that amending the complaint to include the Financial Accounting Standard No. 5 (FAS 5) and Item 303 of the SEC Regulation S-K claims based on the March 2011 10‐K would be futile. Because the district court improperly denied plaintiffs' postjudgment motion to amend their FAS 5 and Item 303 claims, the court vacated the district court's order as to those claims and remanded for further proceedings. The court affirmed as to the remaining claims. View "Indiana. Pub. Ret. Sys. v. SAIC, Inc." on Justia Law

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Plaintiffs filed suit on behalf of a putative class of former participants in an employee stock ownership plan (ESOP) invested exclusively in Lehman’s common stock, alleging that the Plan Committee Defendants, who were fiduciaries of the ESOP, breached their duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. Specifically, plaintiffs alleged that the Plan Committee Defendants breached ERISA by continuing to permit investment in Lehman stock in the face of circumstances arguably foreshadowing its eventual bankruptcy. Plaintiffs also filed claims against Lehman's former directors, including Richard S. Fuld. The district court dismissed plaintiff's consolidated amended complaint (CAC) and second consolidated amended complaint (SAC) for failure to state a claim. The court affirmed. The Supreme Court subsequently held in Fifth Third Bancorp v. Dudenhoeffer that ESOP fiduciaries are not entitled to any special presumption of prudence. After remand, the district court dismissed plaintiffs' third amended complaint (TAC). The court agreed with the district court that, even without the presumption of prudence rejected in Fifth Third, plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman’s collapse. The court concluded as it had before, that plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees’ retirement savings. Accordingly, the court affirmed the judgment. View "Rinehart v. Lehman Brothers Holdings" on Justia Law

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DeKalb filed suit against defendants, alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(a), 78t(a), and SEC Rule 14a‐9, 17 C.F.R. 240.14a‐9. The court held that Sections 9(f) and 18(a) provide “private right[s] of action that involve[ ] a claim of fraud, deceit, manipulation, or contrivance,” to which a five‐year statute of repose now applies under section 1658(b), but Section 14(a) does not provide such a private right of action; the same three‐year statutes of repose that applied to Sections 9(f) and 18(a) before the passage of the Sarbanes‐Oxley Act of 2002 (SOX), Pub. L., No. 107‐204, 116 Stat. 745, which the court borrowed and applied to Section 14 in Ceres Partners v. GEL Associates, still apply to Section 14(a) today; the statutes of repose applicable to Section 14(a) begin to run on the date of the defendant’s last culpable act or omission; DeKalb’s lead‐plaintiff motion does not “relate back” under Rule 17(a)(3) to Bricklayers’ filing of the original class‐action complaint; the Private Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. No. 104‐67, 109 Stat. 737, does not toll the statutes of repose applicable to Section 14(a); and the tolling rule in American Pipe & Construction Co. v. Utah does not extend to the statutes of repose applicable to Section 14(a). Accordingly, the court affirmed the district court's dismissal of DeKalb's s Section 14(a) claim as time‐barred by the applicable three‐year statutes of repose and its Section 20 claim for failure to state a claim upon which relief can be granted. View "DeKalb Cty. Pension Fund v. Transocean Ltd." on Justia Law

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Plaintiffs filed suit under federal securities laws and state blue sky laws, alleging that Sanofi made materially false or misleading statements regarding its breakthrough drug, Lemtrada, designed to treat multiple sclerosis. The district court granted defendants' motion to dismiss for failure to state a claim. The court agreed with the district court's reasoning and holding. The court writes principally to examine the impact of the Supreme Court’s decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, decided after the district court rendered its decision. Given the sophistication of the investors here, the FDA’s public preference for double‐blind studies, and the absence of a conflict between defendants’ statements and the FDA’s comments, the court concluded that no reasonable investor would have been misled by defendants’ optimistic statements regarding the approval and launch of Lemtrada. Issuers must be forthright with their investors, but securities law does not impose on them an obligation to disclose every piece of information in their possession. As Omnicare instructs, issuers need not disclose a piece of information merely because it cuts against their projections. Accordingly, the court affirmed the judgment. View "In re Sanofi Sec. Litig." on Justia Law

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Five former employees of Credit Suisse began arbitration proceedings before FINRA concerning employment-related disputes. The employees had entered into employment agreements with Credit Suisse that included provisions to resolve all employment‐related disputes by arbitration before a private arbitration provider.Credit Suisse sought to compel the employees to dismiss the FINRA arbitration and pursue their claims in a non‐FINRA arbitral forum. The district court granted Credit Suisse's petition and entered judgment ordering the employees to pursue their claims in a non‐FINRA arbitral forum. The court concluded that FINRA Rule 13200 does not prohibit the enforcement of pre‐dispute waivers of a FINRA arbitral forum. Accordingly, the court affirmed the district court's judgment. View "Credit Suisse Secs. LLC v. Tracy" on Justia Law

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The SEC brought a civil enforcement proceeding against defendants and a jury subsequently found defendants liable for multiple claims of securities fraud. At issue is the district court's asset freeze order. The court held that the entry of the asset freeze order did not violate the Bankruptcy Code’s automatic stay; the order fell within the “governmental unit” exception to the automatic stay provision, did not constitute impermissible “enforcement of a money judgment,” and did not run afoul of SEC v. Brennan; and it was properly supported by a showing of ill‐gotten gains. Because the court is unable to determine whether sufficient evidence supports imposition of the order against the remaining seven Relief Defendants, the cause is remanded to the district court with instructions. View "SEC v. Miller" on Justia Law