Justia Securities Law Opinion Summaries

Shareholders of Defendant-Appellant Goldman Sachs Group, Inc. brought this class action lawsuit against Goldman and several of its former executives, claiming defendants committed securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5 promulgated thereunder by misrepresenting Goldman’s ability to manage conflicts of interest in its business practices. After a number of appeals and subsequent remand, including an appeal to the Supreme Court, the district court once again certified a shareholder class under Federal Rule of Civil Procedure 23(b)(3).   The Second Circuit reversed the district court’s class certification decision with instructions to decertify the class. The court held that the district court clearly erred in finding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence and, therefore, abused its discretion by certifying the shareholder class. The court explained that there is an insufficient link between the corrective disclosures and the alleged misrepresentations. Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price and, by doing so, rebutted Basic’s presumption of reliance. Thus, the district court clearly erred in concluding otherwise and therefore abused its discretion in certifying the shareholder class. View "Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc." on Justia Law

Defendant defrauded his former employer and its investors of some $65 million. He was indicted on unrelated insider trading charges, and a subsequent internal investigation revealed the full breadth of his wrongdoing. The Securities and Exchange Commission (“SEC”) brought a civil enforcement action against Defendant. To secure a potential disgorgement judgment, the SEC joined Defendant’s family and related entities as Relief Defendants, and the district court froze Defendant’s and the Relief Defendants’ assets. Defendant is currently a fugitive from justice, so the district court excluded him from discovery of the SEC’s investigative file. The district court granted the SEC’s motion for summary judgment and awarded disgorgement, supplemental enrichment, and civil penalties against Defendant. The district court also adopted the SEC’s theory that Defendant is the equitable owner of assets held in the name of the Relief Defendants as “nominees.” On appeal, Defendant and the Relief Defendants challenged the district court’s judgment and calculation of disgorgement.   The Second Circuit affirmed in part and vacated and remanded in part. The court affirmed the district court’s (1) exclusion of Defendant from discovery and denial of his access to frozen funds to hire counsel; (2) calculation of Defendant’s disgorgement obligation; and (3) retroactive application of the 2021 amendments to the Securities Exchange Act of 1934 to Defendant’s disgorgement obligation. However, the court held that the district court (4) failed to assess whether actual gains on the frozen assets were unduly remote from Defendant’s fraud and (5) should have applied an asset-by-asset approach to determine whether the Relief Defendants are, in fact, only nominal owners of their frozen assets. View "SEC v. Ahmed" on Justia Law

Plaintiffs – issuers of collateralized debt obligations secured by certificates in residential-mortgage-backed securities trusts – appealed from three separate judgments dismissing actions brought against The Bank of New York Mellon, Deutsche Bank National Trust Company, and Deutsche Bank Trust Company Americas. In each case, the district courts assumed that Plaintiffs had Article III standing but found that Plaintiffs were precluded from relitigating the issue of prudential standing due to a prior case Plaintiffs had brought against U.S. Bank National Association.   The Second Circuit affirmed the district court’s orders. The court explained that it joined the Ninth Circuit in concluding that the district courts permissibly bypassed the question of Article III standing to address issue preclusion, which offered a threshold, non-merits basis for dismissal. The court also concluded that the district courts’ application of issue preclusion was correct. The court wrote that it fully agreed with the district courts that Plaintiffs were not entitled to a second bite at the prudential-standing apple after the U.S. Bank Action. The district courts, therefore, did not err in taking this straightforward, if not “textbook,” path to dismissal. View "Phx. Light SF Ltd. v. Bank of N.Y. Mellon; Phx. Light SF DAC v. Bank of N." on Justia Law

Plaintiffs are participants in the physical and derivatives markets for platinum and palladium and seek monetary and injunctive relief for violations of the antitrust laws and the Commodities Exchange Act (“CEA”). According to Plaintiffs, Defendants—mostly foreign companies engaged in trading these metals—manipulated the benchmark prices for platinum and palladium by collusively trading on the futures market to depress the price of these metals and by abusing the process for setting the benchmark prices. Defendants allegedly benefited from this conduct via trading in the physical markets and holding short positions in the futures market. The district court held that it had personal jurisdiction over two of the foreign Defendants, but it dismissed Plaintiffs’ antitrust claims for lack of antitrust standing and the Plaintiffs’ CEA claims for being impermissibly extraterritorial. Plaintiffs appealed the dismissal of these claims.   The Second Circuit reversed in part, vacated in part, and affirmed in part. The court reversed the district court’s holding that the “Exchange Plaintiffs” lacked antitrust standing to sue for the manipulation of the New York Mercantile Exchange futures market in platinum and palladium. The court explained that as traders in that market, the Exchange Plaintiffs are the most efficient enforcers of the antitrust laws for that injury. But the court affirmed the district court’s conclusion that KPFF Investment, Inc. did not have antitrust standing. Additionally, the court vacated the district court’s dismissal of Plaintiffs’ CEA claims. View "In re Platinum and Palladium Antitrust Litigation" on Justia Law

International Flavors & Fragrances Inc. (“IFF”), a U.S.-based seller of flavoring and fragrance products, acquired Frutarom Industries Ltd. (“Frutarom”), an Israeli firm in the same industry. Leading up to the merger, Frutarom allegedly made material misstatements about its compliance with anti-bribery laws and the source of its business growth. Plaintiffs, who bought stock in IFF, sued Frutarom, alleging that those misstatements violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.   The Second Circuit affirmed. The court held that Plaintiffs here lack standing to sue based on alleged misstatements about Frutarom because they never bought or sold shares of Frutarom. The court explained that Section 10(b) standing does not depend on the significance or directness of the relationship between two companies. Rather, the question is whether Plaintiff bought or sold the securities about which the misstatements were made. Here, Plaintiffs did not purchase the securities about which misstatements were made, so they did not have standing to sue under Section 10(b) or Rule 10b-5. View "Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd." on Justia Law

International Flavors & Fragrances Inc. (“IFF”), a U.S.-based seller of flavoring and fragrance products, acquired Frutarom Industries Ltd. (“Frutarom”), an Israeli firm in the same industry. Leading up to the merger, Frutarom allegedly made material misstatements about its compliance with anti-bribery laws and the source of its business growth. Plaintiffs, who bought stock in IFF, sued Frutarom, alleging that those misstatements violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder.   The Second Circuit affirmed the district court’s dismissal of Plaintiffs’ complaint. The court concluded that Plaintiffs lack statutory standing to sue. Under the purchaser-seller rule, standing to bring a claim under Section 10(b) is limited to purchasers or sellers of securities issued by the company about which a misstatement was made. Plaintiffs here lack standing to sue based on alleged misstatements that Frutarom made about itself because they never bought or sold shares of Frutarom. View "Menora Mivtachim Ins. Ltd. v. Frutarom Indus. Ltd." on Justia Law

Defendants JABA Associates LP and its general partners appealed the district court’s judgment granting summary judgment to Plaintiff, (“Trustee”), pursuant to the Securities Investor Protection Act of 1970 (“SIPA”). JABA was a good faith customer of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and held BLMIS Account Number 1EM357 (the “JABA Account”). The Trustee brought this action to recover the allegedly fictitious profits transferred from BLMIS to Defendants in the two years prior to BLMIS’s filing for bankruptcy. The district court granted recovery of $2,925,000 that BLMIS transferred to Defendants in the two years prior to BLMIS’s filing for bankruptcy, which made it recoverable property under SIPA.Defendants appealed the district court’s grant of summary judgment. The Second Appellate District affirmed reasoning that because is no genuine dispute of material fact that Bernard L. Madoff transferred the assets of his business to Defendants, which made it recoverable property under SIPA, the district court properly granted summary judgment to Plaintiff. The court reasoned that here Here, Defendants argue that the Bankruptcy Code does not authorize an award of prejudgment interest because the statute is silent. Yet Defendants do not make any argument that this silence is dispositive. Further, the court wrote that prejudgment interest has been awarded against other similarly situated defendants in related SIPA litigation. Thus, the district court appropriately balanced the equities between the parties. Given this, the district court did not abuse its discretion in granting an award of 4 percent prejudgment interest to the Trustee. View "In re: Bernard L. Madoff Investment Securities LLC" on Justia Law

Plaintiffs suing individually and on behalf of others similarly situated, appealed from an August 2020 judgment of the United States District Court for the Southern District of New York, on the ground of forum non conveniens, their amended complaint against defendants E‐Commerce China Dangdang Inc. (ʺDangdangʺ), its controlling shareholders, and others, alleging negligent misrepresentation, breach of fiduciary duty, and violations of Sections 10(b), 13(e), and 20(a) of the Securities Exchange Act of 1934 (ʺExchange Actʺ) and rules promulgated thereunder, in connection with Dangdangʹs 2016 ʺgoing‐privateʺ merger and the purchase by its controlling shareholders of its outstanding publicly‐traded shares, listed as American Depositary Shares (or ʺADSsʺ) on the New York Stock Exchange (or ʺNYSEʺ).On appeal, plaintiffs argue principally that the district court erred in concluding that the forum selection clause was not applicable to all of the defendants and to all of plaintiffsʹ claims, and in according unwarranted weight to public‐interest factors pointing toward dismissal.The Second Circuit vacated and remanded the district court’s judgment concluding that the forum selection clause was not applicable to all of defendants and to all of plaintiffsʹ claims. The court held the district court principally misinterpreted the scope of the forum selection clause. View "Fasano v. Guoqing Li" on Justia Law

Plaintiff claimed that UBS Securities, LLC and UBS AG (together “UBS”) fired him in retaliation for reporting alleged fraud on shareholders to his supervisor. Plaintiff sued UBS under the whistleblower protection provision of the Sarbanes-Oxley Act (“SOX”), 18 U.S.C. Section 1514A, and he ultimately prevailed at trial.   The Second Circuit vacated the jury’s verdict and remanded to the district court for a new trial. The court explained that the district court did not instruct the jury that a SOX anti-retaliation claim requires a showing of the employer’s retaliatory intent. Section 1514A prohibits publicly traded companies from taking adverse employment actions to “discriminate against an employee . . . because of” any lawful whistleblowing act. 18 U.S.C. Section 1514A(a). Accordingly, the court held that this provision requires a whistleblower-employee, like Plaintiff, to prove by a preponderance of the evidence that the employer took the adverse employment action against the whistleblower-employee with retaliatory intent—i.e., an intent to “discriminate against an employee . . . because of” lawful whistleblowing activity. The district court’s legal error was not harmless. View "Murray v. UBS Securities" on Justia Law

Petitioner worked at a subsidiary of the Royal Bank of Scotland Group PLC (“RBS” or “the Bank”) for six weeks in the fall of 2007 before resigning, prompted by what he believed to be unlawful practices engaged in by the Bank in connection with its portfolio of residential mortgage-backed securities (“RMBS”).   Petitioner later formally submitted information to the SEC about the Bank’s misconduct. The SEC itself took no action against the Bank but gave the information to the Department of  Justice (“DOJ”) and the Federal Housing Finance Agency (“FHFA”), each of which had already begun RMBS-related investigations into the Bank.   Petitioner n applied to the SEC for an award under its whistleblower program (the “Program”), established in 2010 by Section 21F of the Securities Exchange Act. The SEC denied his claim. Petitioner petitioned for judicial review.   The Second Circuit denied the petition holding that it found no error in the SEC’s construction of Section 21F to require an action “brought by the Commission” to support a whistleblower award. The court further decided that, contrary to Petitioner’s arguments, investigative and information-sharing activities engaged in by the SEC are not “covered judicial or administrative action[s]  brought by the Commission under the securities laws” or “actions” as to which the DOJ  and FHFA settlements can be considered “related.” Thus, the court adopted the Commission’s determination that Petitioner was not entitled to an award under the Program because the Commission did not bring a covered action. View "Hong v. Securities and Exchange Commission" on Justia Law