Justia Securities Law Opinion SummariesArticles Posted in US Court of Appeals for the First Circuit
Wheeling & Lake Erie Railway Co. v. Keach
In this case, a byproduct of litigation stemming from the derailment of a Montreal, Maine & Atlantic Railway, Ltd. (MMA) freight train carrying crude oil in Lac-Megantic, Quebec, the First Circuit affirmed the district court's entry of judgment in favor of Robert Keath, the estate representative of MMA, and against creditor Wheeling & Lake Erie Railway Company, holding that, giving due deference to the fact-finder's resolution of the burden of proof, the judgment must be affirmed. One month after the derailment, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. Wheeling instituted an adversary proceeding in the bankruptcy court against MMA and the estate representative, seeking a declaratory judgment regarding the existence and priority of its security interest in certain property of the MMA estate. The case involved intricate questions concerning secured transactions, carriage of goods, and corporate reorganization. After a settlement, the bankruptcy court ruled in favor of the estate representative. The First Circuit affirmed, holding (1) ultimately, this case turned on principals relating to the allocation of the burden of proof and the deference due to the finder of fact; and (2) giving due deference to the fact-finder's resolution of the burden of proof issue, the district court's judgment must be affirmed. View "Wheeling & Lake Erie Railway Co. v. Keach" on Justia Law
In re Ocular Therapeutix Inc.
In this complaint alleging that Defendants intentionally or recklessly misled investors about Ocular Therapeutix, Inc.'s manufacturing problems the First Circuit affirmed the judgment of the district court dismissing Plaintiffs' complaint for failure to state a claim, holding that Plaintiffs failed to allege facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4, 78u-5. In 2015, Ocular submitted a new drug application to the FDA for approval of Dextenza. In 2017, the FDA published its observations of issues at Ocular's manufacturing facility, which resulted in a drop in the company's stock price. Plaintiffs, several shareholders, brought this securities fraud action on behalf of themselves and a putative class of investors alleging violations of section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b) and section 20(a) of the Exchange Act, 15 U.S.C. 78t(a). The district court dismissed the complaint pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6), the Exchange Act, and the PSLRA. The district court granted the motion and dismissed the complaint with prejudice. The First Circuit affirmed, holding that Plaintiffs did not allege facts giving rise to a strong inference of scienter as required by the PSLRA. View "In re Ocular Therapeutix Inc." on Justia Law
Jalbert v. Zurich Services Corp.
In this insurance dispute, the First Circuit affirmed the judgment of the district court granting summary judgment in favor of Defendants and dismissing Plaintiff's suit to recover unreimbursed defense costs that a former investment advisory firm (Firm) incurred in connection with a Securities and Exchange Commission (SEC) investigation of the Firm, holding that the Firm was not entitled to coverage. Plaintiff, in his capacity as trustee of a trust established during the bankruptcy proceedings of the Firm, filed this suit against Defendants, two of the Firm's excess insurers, seeking to recover defense costs that the Firm incurred in connection with the SEC investigation. The district court granted summary judgment for Defendants, concluding that an SEC order issued before the start of Defendants' coverage period initiated the investigation of the Firm, and this order triggered the policy's "deemed-made" clause, meaning that the claim was deemed first made prior to Defendants' policy taking effect. The First Circuit affirmed, holding (1) the SEC investigation was a claim that was deemed to have been made when the SEC order issued prior to the inception of Defendants' policies; and (2) accordingly and the claim was outside of the policies' coverage period, and Defendants were not obligated to reimburse the Firm for its defense costs. View "Jalbert v. Zurich Services Corp." on Justia Law
Employees Retirement System v. Andalusian Global Designated, Employees Retirement System
The First Circuit affirmed the judgment of the Title III court granting summary judgment against Bondholders, who owned bonds issued in 2008 by the Employees Retirement System of the Government of the Commonwealth of Puerto Rico (the System), and in favor of the Financial Oversight and Management Board for Puerto Rico (the Board), holding that the Bondholders did not have security interest in certain of the System's assets. In 2016, the System filed Title III petitions for bankruptcy protections offered under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 48 U.S.C. 2101-2241, and PROMESA's Title III, 2161-2177. The System subsequently filed two lawsuits against the Bondholders seeking declaratory relief on the validity, priority, extent and enforceability of the Bondholders' asserted security interest in the System's postpetition assets, including employer contributions to the System received postpetition. The Title III court granted summary judgment against the Bondholders. The First Circuit affirmed, holding (1) 11 U.S.C. 552(a) prevents the Bondholders' security interest from attaching to postpetition employers' contributions; (2) the Bondholders did not have special revenue bonds under 11 U.S.C. 902(2)(A) or (D); and (3) Congress intended section 552 to apply retroactively. View "Employees Retirement System v. Andalusian Global Designated, Employees Retirement System" on Justia Law
Jalbert v. U.S. Securities & Exchange Commission
The First Circuit affirmed the judgment of the district court granting the Securities and Exchange Commission's (SEC) motion to dismiss Plaintiff's complaint for lack of subject matter jurisdiction and failure to state a claim, holding that Plaintiff's claims were not entitled to judicial review. Plaintiff, in his capacity as trustee for the F2 Liquidating Trust, filed a complaint against the SEC asserting two claims under the Administrative Procedure Act (APA), 5 U.S.C. 551 et seq. The district court dismissed the case, determining (1) the right to judicial review of the SEC order at issue had been waived as part of a settlement between the SEC and F-Squared Investments, Inc., a former investment advisory firm; and (2) in any event, the court lacked subject matter jurisdiction because Congress vested the courts of appeals with exclusive jurisdiction over challenges to SEC orders. The First Circuit affirmed, holding that the district court correctly decided that the complaint failed to state a claim inasmuch as F-Squared waived judicial review by any court. View "Jalbert v. U.S. Securities & Exchange Commission" on Justia Law
Metzler Asset Management GMBH v. Kingsley
The First Circuit affirmed the judgment of the district court dismissing this federal securities class action under the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78a-4, for failing adequately to plead scienter, holding that Plaintiffs failed to plead facts such that one could draw the "strong inference" of scienter required by the PSLRA. Plaintiffs brought this suit against Biogen Inc. and three Biogen executives alleging that Defendants committed fraud in violation of regulations promulgated by the Securities and Exchange Commission pursuant to the Securities and Exchange Act, 15 U.S.C. 78a et seq., by falsely stating that Tecfidera, Biogen's product, was safer and more widely used than it was. The district court granted Defendants' motion to dismiss for failing to plead facts "giving rise to a strong inference" of scienter, 15 U.S.C. 78a-4(b)(2)(A). The First Circuit affirmed, holding that the district court properly ruled that, under the PSLRA, Plaintiffs failed adequately to plead scienter for purposes of surviving a motion to dismiss for failure to state a claim. View "Metzler Asset Management GMBH v. Kingsley" on Justia Law
Alvarez-Mauras v. Banco Popular of Puerto Rico
In this case brought under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962, 1964, the First Circuit affirmed the district court's ruling dismissing Plaintiff's claims against all defendants, holding that Plaintiff's claims against his securities broker may only be resolved through arbitration, the claims against the broker's wife and the couple's conjugal partnership were also subject to the arbitration agreement, and Plaintiff's claims against a bank were out of time. Plaintiff, a building contractor in Puerto Rico, argued that his securities broken, in collusion with the investment firm and affiliated bank, fraudulently stole more than $400,000 from his investment account. Plaintiff also named as defendants his broker's wife and their conjugal partnership . The district court dismissed all claims against all defendants. The First Circuit affirmed, holding (1) subject to the binding agreement between the parties, Plaintiff's claims against the broker may only be resolved through arbitration; (2) the claims against the broker's wife and the conjugal partnership were derivative of the claims against the broker and therefore also subject to the arbitration agreement; and (3) Plaintiff's claims against the bank were time-barred under 18 U.S.C. 1964. View "Alvarez-Mauras v. Banco Popular of Puerto Rico" on Justia Law
Altair Global Credit Opportunities Fund v. Employees Retirement System
In these appeals involving bonds issued in 2008 by the Employees Retirement System (the System) of the Government of the Commonwealth of Puerto Rico, which were purchased by bondholders (the Bondholders), the First Circuit held that the Bondholders satisfied the filing requirements for perfection of their security interest as of December 17, 2016, thus reversing the district court’s ruling that the Bondholders’ interest was not perfected and so could be avoided. The bond documentation here offered as security certain property belonging or owed to the System. When the Bondholders claimed a perfected security interest in that property, the System filed suit seeking declaratory judgments relating to the Bondholders’ asserted security interest. The Bondholders counterclaimed. The district court granted summary judgment in favor of the System, concluding that the Bondholders’ interest was not perfected. The First Circuit disagreed, holding that while financing statements filed in 2008 did not perfect the Bondholders’ security interest in the pledged property, financing statement amendments filed in 2015 and 2016 satisfied the filing requirements for perfection when read in conjunction with the 2008 financing statements. View "Altair Global Credit Opportunities Fund v. Employees Retirement System" on Justia Law
United States v. Weed
The First Circuit affirmed Appellant’s convictions of securities fraud, wire fraud, and conspiracy to commit both. The convictions arose from Appellant’s writing of false opinion letters so that his two co-conspirators could sell stock to the public in a “pump and dump” scheme. On appeal, Appellant argued that the evidence was insufficient to support his convictions in light of his interpretation of section 3(a)(9) of the Securities Act and that the district court constructively amended the indictment in its instructions to the jury. The First Circuit held (1) even if Appellant’s interpretation of section 3(a)(9) was correct, the evidence was sufficient to support his convictions; and (2) Appellant’s constructive amendment claim was without merit. View "United States v. Weed" on Justia Law
Corban v. Sarepta Therapeutics, Inc.
The First Circuit affirmed the district court’s finding, in this securities fraud class action against Sarepta Therapeutics, Inc. and former and current Sarepta executives, that Plaintiffs, several shareholders, failed to allege facts creating a strong inference that Defendants intentionally or recklessly deceived the investing public in the months before the Food and Drug Administration deemed premature Sarepta’s application for approval of a novel gene therapy. The price of the publicly traded securities issued by Sarepta dropped sixty-four percent after the FDA judged Sarepta’s filing premature. Plaintiffs allegedly that Defendants overstated the significance of certain data and exaggerated the likelihood that the FDA would accept a new drug application for filing, thereby deceiving the investing public and causing the purchase of Sarepta securities at inflated prices. The First Circuit affirmed the district court’s dismissal of this action, holding that Plaintiffs failed to satisfy the requisite pleadings standards. View "Corban v. Sarepta Therapeutics, Inc." on Justia Law