Articles Posted in US Court of Appeals for the Ninth Circuit

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Plaintiff, on behalf of former Emulex shareholders, appealed the district court's dismissal of his putative securities class action. The Ninth Circuit held that claims under Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(e), require a showing of negligence, not scienter. Therefore, the panel reversed the dismissal of the complaint and remanded to the district court for it to reconsider defendants' motion to dismiss under a negligence standard. Because plaintiff's Section 14(e) claim survived, his claim under Section 20(a) of the Exchange Act also remained. Furthermore, the panel affirmed the district court's conclusion that Section 14(d)(4) of the Exchange Act did not create a private right of action and dismissal of the complaint as to Emerald Merger Sub because it was not a proper defendant. View "Varjabedian v. Emulex Corp." on Justia Law

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The Ninth Circuit affirmed the dismissal of a securities fraud action brought on behalf of a class of plaintiffs who bought SolarCity shares. Plaintiffs alleged that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 when they changed the company's accounting formula prior to the initial public offering in order to misrepresent SolarCity's profitability. The panel held that plaintiff's third amended complaint failed to adequately plead facts giving rise to a strong inference of scienter, as required by the Private Securities Litigation Reform Act. In this case, the facts did not give rise to an inference of scienter that was at least as compelling as the inference of an honest mistake. View "Webb v. SolarCity Corp." on Justia Law

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A general proximate cause test is the correct test for loss causation under the Securities Exchange Act of 1934. The Ninth Circuit affirmed the district court's denial in part of defendants' motion for summary judgment. In this case, the district court held that the evidence, if accepted by the jury, could satisfy the proximate cause loss causation test with respect to five of the six alleged stock price declines. The panel held that the district court applied the correct test in making that determination and did not reach any remaining issues. View "Mineworkers' Pension Scheme v. First Solar, Inc." on Justia Law

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A general proximate cause test is the correct test for loss causation under the Securities Exchange Act of 1934. The Ninth Circuit affirmed the district court's denial in part of defendants' motion for summary judgment. In this case, the district court held that the evidence, if accepted by the jury, could satisfy the proximate cause loss causation test with respect to five of the six alleged stock price declines. The panel held that the district court applied the correct test in making that determination and did not reach any remaining issues. View "Mineworkers' Pension Scheme v. First Solar, Inc." on Justia Law

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The Ninth Circuit affirmed the dismissal of putative class actions because the Securities Litigation Uniform Standards Act (SLUSA), Pub L. 105-353, 112 Stat. 3227, deprived the court of subject matter jurisdiction. Plaintiffs filed suit alleging a breach by a securities dealer of the "duty of best execution" in completing trades. The panel held that plaintiffs had Article III standing because they alleged overpaying for securities trades and losses from trades not executed promptly and those concrete injuries, if proven, were redressable through monetary damages. However, plaintiffs' claims were barred by SLUSA, because all of plaintiffs' pleaded causes of action allege deceptive conduct actionable under federal securities law; the challenged conduct occurred in connection with the purchase or sale of a security; the complaint plainly pleaded a manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security; and thus the claims were SLUSA-barred. View "Fleming v. Charles Schwab Corp." on Justia Law

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The Ninth Circuit affirmed the district court's dismissal of a securities fraud action brought against Yelp and others. Plaintiffs argued that the district court erred by holding that they did not adequately plead falsity, materiality, loss causation, and scienter. The panel held that the disclosure of consumer complaints, without more, in the circumstances of this case did not form a sufficient basis for a viable loss causation theory. Furthermore, allegations of suspicious insider sales of stock without allegations of historical trading data did not create a strong inference of scienter. Finally, the panel affirmed the district court's dismissal of the complaint with prejudice because amendment of the complaint as to loss causation would be futile under current precedent. View "Curry v. Yelp, Inc." on Justia Law

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The Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 77p(b)–(f), 78bb(f)), bars private class actions based on state law in cases where the plaintiff alleges a material falsehood or omission connected to the purchase or sale of most federally-regulated securities. In this case, plaintiff filed suit for breach of contract and various fiduciary duties under Massachusetts law. The district judge held that SLUSA barred his claims, and dismissed them with prejudice. The panel held that dismissals pursuant to SLUSA's class-action bar must be for lack of subject-matter jurisdiction—and therefore without prejudice—rather than on the merits. Therefore, the panel affirmed the district court's judgment to the extent it concluded that plaintiff's claims were barred. View "Hampton v. Pacific Investment Management Co." on Justia Law

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Plaintiffs appealed the district court's dismissal of their amended securities fraud class action complaint, alleging that Atossa and its Chairman and CEO, Steven Quay, made a series of public statements about Atossa's breast cancer screening products that were materially false or misleading. The district court dismissed the complaint. The Ninth Circuit held that plaintiffs have properly alleged falsity and materiality as to some, but not all, of these statements. In this case, plaintiffs have sufficiently alleged that the following were materially false or misleading: (1) Quay's statement quoted in Atossa's December 20, 2012 Form 8–K filing describing the ForeCYTE Test as "FDA-cleared"; (2) Quay's statement during his interview with NewsMedical.Net that the ForeCYTE test had "gone through all of the FDA clearance process"; (3) Atossa's Form 8–K filing on February 25, 2013, giving notice of the FDA's warning letter; and (4) Quay's statement during his interview with the Wall Street Transcript that "FDA clearance risk has been achieved." Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "Levi v. Atossa Genetics, Inc." on Justia Law

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Plaintiffs filed this would-be class action on behalf of all persons or entities who purchased or otherwise acquired the common stock of QSI, alleging that during the Class Period, QSI and its officers made false or misleading statements about the current and past state of QSI's sales "pipeline," and used those statements to support public guidance to investors about QSI's projected growth and revenue. The Ninth Circuit reversed the district court's dismissal of the complaint and remanded for further proceedings. The panel held that some of defendants' statements were mixed statements, containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings; a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5, by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings; many of defendants' non-forward-looking statements were materially false or misleading; and some of defendants' forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature. View "City of Miami Fire Fighters' and Police Officers' Retirement Trust v. Quality Systems, Inc." on Justia Law