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

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A New Mexico county board filed a lawsuit in state court against its securities broker and registered agent. The board refrained, however, from serving process while it determined whether arbitration was available. The securities broker and agent nonetheless removed the case to federal court and moved to dismiss the suit. Four days after briefing was complete and about three months after the board had filed suit, the board voluntarily dismissed the case and filed for arbitration. The securities broker and agent then filed this action to enjoin arbitration, arguing the board waived its right to demand arbitration when it filed the state court action. The district court disagreed and instead granted the board’s counterclaim to compel arbitration. The broker and registered agent appealed the waiver issue. Finding no reversible error, the Tenth Circuit affirmed. View "BOSC v. Board of County Commissioners" on Justia Law

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The Securities and Exchange Commission (SEC) filed suit against American Pension Services ("APS"), a third-party administrator of self-directed individual retirement and 401(k) accounts (collectively "IRA Accounts"), and its President and CEO, Curtis DeYoung. The SEC alleged that DeYoung misappropriated $24 million in APS customer funds that APS had commingled in a Master Trust Account at First Utah Bank, custodian of the funds. The district court appointed a Receiver, who ultimately entered into a Settlement Agreement with First Utah. The settlement included a Claims Bar Order, which barred all other claims against First Utah relating to any IRA Accounts established with APS. Three of the approximately 5,500 APS clients who had a financial stake in the receivership entity intervened and contended that the court could not bar them from filing their own claims against First Utah. The district court disagreed and approved the settlement. The intervenors appealed, but finding no reversible error, the Tenth Circuit affirmed. View "SEC v. American Pension Services" on Justia Law

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The complaint and referenced documents show that Quiznos fast-food franchise had borrowed heavily before its business sharply declined. From 2007 to 2011, Quiznos lost roughly 3,000 franchise restaurants and profitability plunged. With this plunge, Quiznos could no longer satisfy its loan covenants. As a result, Avenue Capital Management II, L.P., “Fortress” (a collective of investment entities) and others could foreclose on collateral, call in debt, or accelerate payments. To avoid a calamity, Quiznos restructured its debt. This securities-fraud matter arose out of the attempt to restructure that debt. Multiple investment funds purchased equity in Quiznos, and despite efforts, Avenue and Fortress sued former Quiznos managers and officers, claiming they had fraudulently misrepresented Quiznos’ financial condition. The district court dismissed the causes of action based on securities fraud based on a failure to state a valid claim. Finding no reversible error in that dismissal, the Tenth Circuit affirmed the district court’s decision. View "Avenue Capital Management II, v. Schaden" on Justia Law

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The Securities and Exchange Commission (SEC) brought an enforcement action against Defendant Charles Kokesh for misappropriating funds from four SEC-registered business development companies (BDCs) in violation of federal securities laws. After a jury returned a verdict in favor of the SEC, the district court entered a final judgment permanently enjoining Defendant from violating certain provisions of federal securities laws, ordering disgorgement of $34.9 million plus prejudgment interest of $18.1 million, and imposing a civil penalty of $2.4 million. Defendant appealed, arguing that the court’s imposition of the disgorgement and permanent injunction was barred by 28 U.S.C. 2462, which set a five-year limitations period for suits “for the enforcement of any civil fine, penalty, or forfeiture.” He also argued that the district court erred by precluding him from presenting evidence of attorney and accountant participation to show his lack of knowledge of the misconduct. After review, the Tenth Circuit held that both the permanent injunction and the disgorgement order were remedial and not subject to section 2462. The Court rejected the evidentiary claim. View "SEC v. Kokesh" on Justia Law

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Spirit AeroSystems, Inc. agreed to supply parts for three types of aircraft manufactured by Gulfstream Aerospace Corporation and The Boeing Company. For these aircraft, Spirit managed production of the parts through three projects. Each project encountered production delays and cost overruns, and Spirit periodically reported to the public about the projects’ progress. In these reports, Spirit acknowledged risks but expressed confidence about its ability to meet production deadlines and ultimately break even on the projects. Eventually, however, Spirit announced that it expected to lose hundreds of millions of dollars on the three projects. Spirit’s stock price fell roughly 30 percent following the announcement. The plaintiffs brought this action on behalf of a class of individuals and organizations that had owned or obtained Spirit stock between November 3, 2011, and October 24, 2012. The named defendants were Spirit and four of its executives, whom plaintiffs alleged misrepresented and failed to disclose the projects' cost overruns and production delays, violated section 10(b) of the Securities Exchange Act of 1934, and the Securities and Exchange Commission's Rule 10b-5. The trial court granted defendants' motion to dismiss, concluding in part that plaintiffs failed to allege facts showing scienter. Finding no reversible error in the trial court's order, the Tenth Circuit affirmed. View "Anderson v. Spirit AeroSystems Holdings" on Justia Law

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Plaintiffs, shareholders of ZAGG Inc., a publicly held Nevada corporation, filed a shareholder-derivative action seeking damages, restitution, and other relief for ZAGG. They alleged that past and present officers and directors of ZAGG violated section 14(a) of the Securities Exchange Act of 1934, breached their fiduciary duties to ZAGG, wasted corporate assets, and were unjustly enriched. The district court dismissed the suit on two alternative grounds: (1) Plaintiffs filed suit before presenting the ZAGG Board of Directors (the Board) with a demand to bring suit and they failed to adequately allege that such demand would have been futile; and (2) the complaint failed to state a claim. Plaintiffs appealed the dismissal on both of the district court's alternative grounds. Because the Tenth Circuit denied the challenge to the first ground, it did not address the second. View "Pikk v. Pedersen" on Justia Law

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American Fidelity Assurance Company sued the Bank of New York Mellon (“BNYM”) for claims arising from BNYM’s conduct as Trustee of a trust holding mortgage-backed securities owned by American Fidelity. BNYM did not assert a personal jurisdiction defense in its first two motions to dismiss or in its answer. In its third motion to dismiss, BNYM argued it was not subject to general jurisdiction in Oklahoma. The district court denied the motion, concluding BNYM had waived the defense by failing to raise it in prior filings. BNYM challenges that decision in an interlocutory appeal. Finding no reversible error, the Tenth Circuit affirmed. View "American Fidelity Assurance v. Bank of New York Mellon" on Justia Law