Articles Posted in US Court of Appeals for the Second Circuit

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Plaintiffs filed suit for damages resulting from defendants' manipulation of natural gas trading at four regional hubs in the western part of the United States. The Second Circuit held that plaintiffs had Article III standing, but they failed to plausibly allege injury under any of their claims. In this case, plaintiffs failed to state a claim under the Commodities Exchange Act (CEA) because it was not plausible on the record that they were injured by the manipulations West Desk perpetrated. For similar reasons, plaintiffs failed to establish antitrust standing. Accordingly, the court modified the order and judgment to remove the dismissal for lack of standing and affirmed the judgment as modified. View "Harry v. Total Gas & Power North America, Inc." on Justia Law

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Plaintiff, a variable annuity policy holder, filed a putative class action in state court alleging breach of contract by an insurance company when it introduced a volatility management strategy to the policies without full compliance with state law. The case was removed to district court and then dismissed. The Second Circuit reversed and remanded, holding that a holder's passive retention of a security following a misrepresentation of which the holder is unaware lacks the "in connection with" requirement for preclusion under the Securities Litigation Uniform Standards Act (SLUSA). In this case, the alleged misrepresentation was not made in connection with the purchase or sale of a SLUSA-covered security. There was no plausible allegation in the complaint that any decision to hold a security occurred that was related in any way to AXA's disclosures to the DFS. The court remanded with instructions to remand the case to state court. View "O'Donnell v. AXA Equitable Life Ins. Co." on Justia Law

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Plaintiffs, five Korean citizens, filed suit alleging that Tower Research Capital, a New York based high‐frequency trading firm, and its founder injured them and others by engaging in manipulative "spoofing" transactions on the Korea Exchange (KRX) night market in violation of the Commodity Exchange Act (CEA), 7 U.S.C. 1 et seq., and New York law. The Second Circuit vacated the district court's dismissal of the action, holding that plaintiffs' allegations make it plausible that the trades at issue were "domestic transactions" under the court's precedent, and thus the court did not agree that application of the CEA to defendants' alleged conduct would be an impermissible extraterritorial application of the Act. Furthermore, the court held that plaintiffs have brought a claim for unjust enrichment where New York unjust enrichment claims did not require a direct relationship between the plaintiff and defendant. Accordingly, the court remanded for further proceedings. View "Choi v. Tower Research Capital LLC" on Justia Law

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Plaintiffs, five Korean citizens, filed suit alleging that Tower Research Capital, a New York based high‐frequency trading firm, and its founder injured them and others by engaging in manipulative "spoofing" transactions on the Korea Exchange (KRX) night market in violation of the Commodity Exchange Act (CEA), 7 U.S.C. 1 et seq., and New York law. The Second Circuit vacated the district court's dismissal of the action, holding that plaintiffs' allegations make it plausible that the trades at issue were "domestic transactions" under the court's precedent, and thus the court did not agree that application of the CEA to defendants' alleged conduct would be an impermissible extraterritorial application of the Act. Furthermore, the court held that plaintiffs have brought a claim for unjust enrichment where New York unjust enrichment claims did not require a direct relationship between the plaintiff and defendant. Accordingly, the court remanded for further proceedings. View "Choi v. Tower Research Capital LLC" on Justia Law

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SPV, the assignee of Optimal Strategic, filed suit against UBS and its affiliated entities and individuals (collectively, Access), alleging that UBS and Access aided and abetted the Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff by sponsoring and providing support for two European-based feeder funds. The district court subsequently denied SPV's motion to remand the matter to state court and then granted separate motions to dismiss the complaint. The Second Circuit held that it had jurisdiction over this appeal; this litigation was "related to" the Madoff/BLMIS bankruptcies; the USB defendants lacked sufficient contacts with the United States to allow the exercise of general jurisdiction; the connections between the USB Defendants, SPV's claims, and its chosen New York forum were too tenuous to support the exercise of specific jurisdiction; and the court rejected SPV's two different theories of proximate cause. View "SPV OSUS Ltd. v. UBS AG" on Justia Law

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After NASDAQ encountered a variety of technical difficulties in executing Facebook, Inc.'s initial public offering (IPO), retail investors filed suit against NASDAQ. After those claims were eventually settled, NASDAQ filed suit against insurance companies for coverage under both errors and omissions (E&O) and directors' and officers' (D&O) insurance policies. The district court granted ACE and Illinois National summary judgment. The Second Circuit held that federal securities law makes clear that retail investors in company stock are "customers" of NASDAQ within the meaning of the insurance policies at issue; the claims in the underlying complaint arose out of the provision of "professional services" as plaintiffs could not prevail without demonstrating that their losses flowed from NASDAQ's failure to properly process their trades; and thus the court affirmed the district court's grant of summary judgment on the issue of indemnification. View "Beazley Insurance Co. v. Ace American Insurance Co." on Justia Law

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After NASDAQ encountered a variety of technical difficulties in executing Facebook, Inc.'s initial public offering (IPO), retail investors filed suit against NASDAQ. After those claims were eventually settled, NASDAQ filed suit against insurance companies for coverage under both errors and omissions (E&O) and directors' and officers' (D&O) insurance policies. The district court granted ACE and Illinois National summary judgment. The Second Circuit held that federal securities law makes clear that retail investors in company stock are "customers" of NASDAQ within the meaning of the insurance policies at issue; the claims in the underlying complaint arose out of the provision of "professional services" as plaintiffs could not prevail without demonstrating that their losses flowed from NASDAQ's failure to properly process their trades; and thus the court affirmed the district court's grant of summary judgment on the issue of indemnification. View "Beazley Insurance Co. v. Ace American Insurance Co." on Justia Law

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Goldman Sachs appealed the district court's order certifying a class of plaintiffs who purchased shares of common stock in Goldman Sachs. Plaintiffs alleged that Goldman Sachs made material misstatements about its efforts to avoid conflicts of interest, and those misstatements caused the value of their shares to decline. In light of the Second Circuit's recent pronouncement that defendants bear the burden of persuasion to rebut the presumption in Basic Inc. v. Levinson, 485 U.S. 224 (1988), by a preponderance of the evidence, and for additional reasons, the court vacated plaintiffs' motion for class certification and remanded for further proceedings. The court explained that it was unclear whether the district court applied the correct standard in this case. View "Arkansas Teachers Retirement System v. Goldman Sachs Group, Inc." on Justia Law

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The Second Circuit vacated the district court's judgment in favor of defendants in a class action alleging that several national securities exchanges mislead them about certain products and services that the exchanges sold to high-frequency trading firms. The court held that it had subject matter jurisdiction over the case; the exchanges were not entitled to absolute immunity; and the district court erred in dismissing the complaint. In this case, plaintiffs have sufficiently pleaded that the exchanges engaged in manipulative or deceptive conduct in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission Rule 10b‐5, 17 C.F.R. 240.10b‐5. View "City of Providence v. BATS Global Markets, Inc." on Justia Law

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The Second Circuit affirmed the district court's order granting plaintiffs' motion for class certification in an action asserting violations of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b). The court held that the Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), presumption did not apply because plaintiffs' claims were primarily based on misstatements, not omissions; direct evidence of price impact was not always necessary to demonstrate market efficiency, as required to invoke the Basic Inc. v. Levinson, 485 U.S. 224 (1988), presumption of reliance, and was not required here; defendants seeking to rebut the Basic presumption must do so by a preponderance of the evidence, which defendants failed to do; and the district court's conclusion regarding plaintiffs' classwide damages methodology was not erroneous. View "Waggoner v. Barclays PLC" on Justia Law