Justia Securities Law Opinion Summaries

Plaintiffs filed a class action on behalf of stock purchasers, alleging that Boeing committed securities fraud under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5. The suit related to statements concerning the new 787-8 Dreamliner, which had not yet flown, and did not specify a damages figure. At argument the plaintiffs’ lawyer indicated that the class was seeking hundreds of millions of dollars. The district court dismissed the suit under Rule 12(b)(6) before deciding whether to certify a class. Plaintiffs appealed the dismissal; Boeing cross-appealed denial of sanctions on the plaintiffs’ lawyers for violating Fed. R. Civ. P. 11. The Seventh Circuit affirmed dismissal with prejudice, but remanded for consideration under 15 U.S.C. 78u-4(c)(1), (2), of Rule 11 sanctions on the plaintiffs’ lawyers. No one who made optimistic public statements about the timing of the first flight knew that their optimism was unfounded; there is no securities fraud by hindsight. Plaintiffs’ lawyers had made confident assurances in their complaints about a confidential source, their only barrier to dismissal of their suit, even though none of them had spoken to the source and their investigator had acknowledged that she could not verify what he had told her. View "City of Livonia Emps' Ret. Sys. v. Boeing Co." on Justia Law

This appeal arose out of a proceeding brought to remedy securities fraud and recover assets that were the fruits of the fraud. The issues on appeal related to enforcement of, and compliance with, an order freezing various assets. The Trust and various individuals appealed from the magistrate judge's sanctioning of certain individuals. The court dismissed the appeals of Jill Dunn and David Wojeski for lack of jurisdiction, affirmed the sanction order as to Lynn Smith, and remanded to allow the Trust to contest the court's order regarding the disposition of trust property and for the magistrate judge to give additional guidance to the receiver as to disposition of the Trust property. View "SEC v. McGinn, et al." on Justia Law

Defendant-Appellant George David Gordon was a former securities attorney convicted of multiple criminal charges relating to his alleged participation in a "pump-and-dump" scheme where he (along with others) violated the federal securities laws by artificially inflating the value of various stocks, then turning around and selling them for a substantial profit. The government restrained some of his property before the indictment was handed down and ultimately obtained criminal forfeiture of that property. On appeal, Defendant raised multiple issues relating to the validity of his conviction and sentence, and the propriety of the government’s conduct (both before and after trial) related to the forfeiture of his assets. In the end, the Tenth Circuit found no reversible error and affirmed Defendant's conviction and sentence, as well as the district court’s forfeiture orders. View "United States v. Gordon" on Justia Law

Plaintiffs, former customers of Sterling Foster, for which Bear Stearns, as a clearing broker, performed certain settlement and record-keeping functions, alleged that Bear Stearns violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), by participating in Sterling Foster's market manipulation scheme. Bear Stearns pursued this interlocutory appeal from a decision and order of the district court granting in part and denying in part plaintiffs' motion for certification of a class pursuant to Rule 23(b)(3). The court concluded that plaintiffs' allegations failed to trigger a duty of disclosure to Sterling Foster's clients such that the Affiliated Ute Citizens of Utah v. United States presumption of reliance applied. Therefore, plaintiffs failed to satisfy Rule 23(b)(3)'s predominance requirement. Accordingly, the court reversed the judgment of the district court. View "Levitt v. J.P. Morgan Securities, Inc." on Justia Law

MBIA sued as the third party beneficiary of the Pooling and Servicing Agreements (PSAs) of a failed bank. It alleged that the FDIC as conservator of the successor bank had "approved," the PSAs and then breached its "Put Back" obligations under those agreements, resulting in investor claims of MBIA-issued insurance policies. At issue was whether payments made by MBIA to investors in mortgage securitizations of a failed bank constituted "administrative expenses" entitled to priority under the Financial Institutions, Reform, Recovery, and Enforcement Act (FIRREA), 12 U.S.C. 1821(d)(11)(A). The court held that the district court properly rejected MBIA's broad interpretation of "approved" in section 1821(d)(20) and dismissed MBIA's damage claims in counts I-V and VIII as prudentially moot in light of the FDIC's No Value Determination; the district court did not err in dismissing counts VI-VII for failure to state a claim; and the court rejected MBIA's alternative theory of recovery, claiming that FDIC Corporate was obligated under 12 U.S.C. 1821(m)(13) to fund the failed bank's losses. Accordingly, the court affirmed the judgment. View "MBIA Ins. Corp. v. FDIC" on Justia Law

Defendants, individual investors, sought to arbitrate claims against plaintiff that arose when the investors purchased allegedly fraudulent securities directly from Inofin. Defendants contended that they were plaintiff's customers because they purchased Inofin securities on the advice of an attorney who, though lacking any formal affiliation with plaintiff, was a business and personal acquaintance of a registered representative of plaintiff. The court held that defendants were not "customers" of plaintiff within the meaning of the Financial Industry Regulatory Authority (FINRA) arbitration provisions. To compel arbitration here would be to expand the scope of the arbitration agreement beyond what the text permitted and the parties intended. Therefore, the court affirmed the judgment of the district court. View "Raymond James Financial Services v. Cary" on Justia Law

Plaintiffs in this consolidated action sought relief on behalf of two large putative classes - one whose members bought auction rate securities and one whose members issued them - alleging that defendants triggered the market's collapse by conspiring with each other to simultaneously stop buying auction rate securities for their own proprietary accounts. The district court dismissed plaintiffs' complaints pursuant to Rule 12(b)(6). The court affirmed, holding that plaintiffs' complaints did not successfully allege a violation of Section 1 of the Sherman Act, 15 U.S.C. 1. Although the court did not reach the district court's implied-repeal analysis under Credit Suisse Securities (USC) LLC v. Billing, the district court was ultimately correct that the complaints failed to state a claim upon which relief could be granted. View "Mayor and City Council of Baltimore v. Citigroup, Inc." on Justia Law

Defendants Michael Nouri, Eric Nouri, and Anthony Martin appealed convictions stemming from their involvement with a market manipulation scheme with Smart Online, Inc. stock. On appeal, defendants contended that the district court erred in instructing the jury on fraud by deprivation of honest services, especially in the context of securities fraud, and that there was insufficient evidence to sustain convictions for securities fraud. Martin also contended that there was insufficient evidence to convict him of honest-services wire fraud, that the district court erroneously limited his examination of a witness, and that his sentence was unreasonable. The court affirmed the judgment, finding no merit in defendants' arguments. View "United States v. Nouri" on Justia Law

Plaintiff appealed the district court's dismissal of its complaint for failure to state a claim. At issue was whether plaintiff had stated plausible claims under sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that allegations in the complaint stated a plausible claim that the offering documents for the security misstated the applicable underwriting standards in violation of sections 11, 12(a)(2), and 15. The court also held that the alleged misstatements were not immaterial as a matter of law. Finally, the court vacated the district court's holding that plaintiff, even as the representative of a proposed class, lacked standing to pursue claims based on securities in which it had not invested. Rather than addressing this issue, the court instructed the district court to reconsider it in light of the court's intervening opinion in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co. Accordingly, the court reversed in part, vacated in part, and remanded for further proceedings. View "New Jersey Carpenters Health Fund v. The Royal Bank of Scotland" on Justia Law

In 2000 the SEC charged violation of securities law. The court appointed a receiver to distribute assets among victims of the $31 million fraud. The receiver found that assets had been used to acquire oil and gas leases. SonCo claimed an interest in the leases. In 2010, the district court issued an “agreed order,” requiring SonCo to pay $600,000 for quitclaim assignment of the leases and release of claims in Canadian litigation. Alco operated the wells and had posted a $250,000 cash bond with the Texas Railroad Commission. Alco could get its $250,000 back if replaced by new operator that posted an equivalent bond. The $250,000 had come, in part, from defrauded investors. Alco was incurring environmental liabilities, with little prospect of offsetting revenues. SonCo was to replace Alco, but failed to so, after multiple extensions. The district judge held SonCo in civil contempt, ordered it to return the leases, and allowed the receiver to keep the $600,000. The Seventh Circuit upheld the finding of civil contempt. Following remand, the Seventh Circuit affirmed the sanction; considering additional environmental compliance costs and receivership fees, a plausible estimate of the harm would be $2 million. ”SonCo will be courting additional sanctions, of increasing severity, if it does not desist forthwith from its obstructionist tactics.” View "Sec. & Exch. Comm'n v. First Choice Mgmt Servs., Inc." on Justia Law