Justia Securities Law Opinion Summaries

The SEC brought a civil enforcement action against defendant after he orchestrated a plan to manipulate the amount of money his company was required to set aside to safeguard customer assets. Defendant was subsequently liable for committing securities fraud and on appeal, defendant challenged the district court's holding on liability and the propriety of the resulting injunction. After reviewing the record and having the benefit of oral argument, the court agreed with defendant that the facts as found by the district court did not support securities fraud liability and the court reversed the judgment on this claim. The court held, however, that it was clear from the district court's factual findings that defendant aided and abetted violations of the Securities Exchange Act, 15 U.S.C. 78a et seq., so the court affirmed the judgment finding liability on these counts. Since the court reversed the district court's finding of securities fraud, the court vacated the portion of the injunction restraining defendant from violating section 10(b) of the Exchange Act and Rule 10b-5. The court also vacated the injunction barring defendant from the securities business for life. Defendant contended that the remaining portions of the injunctions were impermissible "obey-the-law" commands and the court agreed in part, vacating these paragraphs of the injunction. View "Securities & Exchange Comm. v. Goble" on Justia Law

Plaintiffs sued on behalf of a class of similarly-situated participants and beneficiaries of the Keycorp 401(k) Savings Plan, under the Employee Retirement Income Security Act, 29 U.S.C. 1109, 1132, alleging that defendants breached their duties by failing to prudently manage the Plan’s investment in KeyCorp securities; that defendants failed to adequately inform participants about the true risk of investing in KeyCorp stock; that certain defendants breached fiduciary duties by failing to adequately monitor the management and administration of Plan assets; that certain defendants failed to avoid impermissible conflicts of interest; and that certain defendants are liable for the breaches of fiduciary duty committed by their co-fiduciaries. The district court dismissed one plaintiff because she had benefited from the alleged breaches of fiduciary duty, which allowed her to sell the majority of her holdings at an inflated price. The court denied a motion to allow another to intervene as named plaintiff. The Sixth Circuit affirmed. View "Taylor v. KeyCorp" on Justia Law

Plaintiff appealed an order of the district court denying leave to amend its complaint alleging violations of section 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 77k, 77l(a)(2), 77o. The proposed complaint alleged that defendant was required to disclose, and failed adequately to disclose, in connection with a March 2006 secondary offering of its securities, known defects in the company's semiconductor chips. The court held that the proposed complaint stated a claim because it plausibly alleged that the defects constituted a known trend or uncertainty that the company reasonably expected would have a material unfavorable impact on revenues. Accordingly, the court vacated the judgment and remanded with instructions to permit the filing of the complaint. View "Panther Partners Inc. v. Ikanos Communications, Inc." on Justia Law

Zimmer manufactures orthopaedic reconstructive devices. One product, a replacement hip socket, was subject to a report of high failure rates. Zimmer announced preliminary findings in 2008, attributed the failures to improper surgical technique, stopped selling the product in the U.S. while preparing new instructions for implantation, and returned the item to the market. Owners of Zimmer stock sued, claiming that the problem was poor design or quality control, that Zimmer pretended otherwise to avoid hurting the price of its stock, and that Zimmer delayed revealing quality-control problems at its plant until after its 2008 quarterly report and earnings call. Zimmer had projected 10% to 11% revenue growth for the year and net earnings of $4.20 to $4.25 per share; months later it cut this projection to 8.5% to 9% growth and net earnings of $4.05 to $4.10 per share. The district court dismissed under the pleading standards of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u-4. The Seventh Circuit affirmed, holding that plaintiffs failed to establish scienter. The FDA has never concluded that the product was defectively designed or made and never issued a warning or caution; quality control issues at pharmaceutical and medical-device producers are endemic. View "Plumbers & Pipefitters Local Union 719 Pension Fund v. Zimmer Holdings Inc." on Justia Law

The SEC instituted this civil enforcement action against defendant, former CFO of a publicly-traded semiconductor company, alleging that he violated various provisions of the securities laws. Defendant subsequently appealed the district court's judgment on three grounds: (1) the district court made several evidentiary errors that required reversal; (2) the SEC's lawyers committed misconduct during the trial that required reversal; and (3) the reimbursement order pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (SOX 304), 15 U.S.C. 7243, violated his Seventh Amendment right to a jury trial in civil cases. The court found that, on appeal, defendant did not challenge his involvement in the scheme at issue in any way. He objected only to the procedures by which he was tried. Defendant, no less than anyone else, was of course entitled to be tried fairly. But, on reviewing the record, the court concluded that defendant received a full and fair civil trial in this enforcement action. A jury of his peers found against him on most counts and the district court entered judgment against him. The court affirmed. View "SEC v. Jasper" on Justia Law

Plaintiffs appealed from the dismissal of their amended and second amended complaints for failure to state a claim under Rule 12(b)(6). The two complaints asserted claims for relief against defendants under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and S.E.C. Rule 10b-5, 17 C.F.R. 240.10b-5. Plaintiffs claimed that CBS delayed interim impairment testing of the corporation's intangible assets despite indicia that such a test was necessary at an earlier date. The court affirmed the district court's opinion dismissing the complaints and held that the district court's conclusion was reinforced by Fait v. Regions Fin. Corp. View "City of Omaha v. CBS Corp." on Justia Law

The patent, titled "Automated Exchange for Trading Derivative Securities," discloses an invention directed to an automated exchange for trading options contracts that allocates trades among market professionals and that assures liquidity. The patent distinguishes an automated exchange from the traditional, floor-based "open-outcry" system, under which trading takes place through oral communications between market professionals at a central location in open view of other market professionals. The patent purports that it can "provide an automated system for matching previously entered orders and quotations with incoming orders and quotations on an exchange for securities, which will improve liquidity and assure the fair handling of orders." The district court held that the patent is not infringed by the trading system of Chicago Board Options Exchange. The Federal Circuit reversed in part. The district court erred in construing "system memory means," "matching," and "automated exchange." View "Chicago Bd. Options Exch., Inc. v. Int' Sec. Exch., L.L.C." on Justia Law

A corporation that wants its shares to be traded on an exchange or through broker-dealers that make national markets must register the securities under the Securities Act of 1933, 15 U.S.C. 77j. Section 13(a) of the 1934 Act, 15 U.S.C. 8m(a), requires the issuer to file periodic reports. Plaintiff registered securities and persuaded broker-dealers to make markets in them, but fell behind with its filings. After eight years, during which plaintiff fell farther behind, the SEC opened a formal proceeding. After a hearing and disclosure that plaintiff could not pay an auditor to certify recent financial statements, the SEC revoked plaintiff's registration; trading in its shares came to a halt. While judicial review was pending, plaintiff filed a new registration, which has not been revoked despite plaintiff's failure to catch up on reports. The Seventh Circuit dismissed the case as moot. To commence trading in any newly registered stock, a broker-dealer needs approval from the Financial Industry Regulatory Authority. When a potential market-maker sought approval, it noted SEC comments on plaintiff's new registration. Setting aside the SEC revocation decision would not oblige FINRA to allow trading to resume. View "Tara Gold Resources Corp. v. Sec. & Exch. Comm'n" on Justia Law

In this civil enforcement action, the SEC sued Morgan Keegan, alleging that, in the critical time period of late 2007 and early 2008, Morgan Keegan's brokers (1) misrepresented that auction rate securities (ARS) were safe cash-equivalents with no liquidity risk and (2) despite myriad auction failures and significant trouble in the ARS market, continued to recommend ARS as short-term, liquid investments and failed to disclose the known liquidity risk. The court concluded that the district court erred in granting summary judgment for Morgan Keegan based on the "materiality" element of the securities violations charged. The court's holding was narrow and limited to materiality and did not address whether the SEC had met any other element of its claims or whether the SEC would ultimately prevail in the litigation. Accordingly, the court vacated and remanded. View "Securities & Exchange Comm. v. Morgan Keegan & Co., Inc." on Justia Law

The SEC filed a complaint. The court appointed a receiver to handle defendants' assets for distribution among victims of the $31 million fraud. Assets included oil and gas leases. SonCo filed a claim. The parties came to terms; the court entered an agreed order that required SonCo to pay $580,000 for assignment of the leases. The wells were unproductive, because of freeze orders entered to prevent dissipation of assets; the lease operator, ALCO, had posted a $250,000 bond with the Texas Railroad Commission. The bond was, in part, from defrauded investors. SonCo was ordered to replace ALCO as operator and to obtain a bond. More than a year later, SonCo had not posted the bond or obtained Commission authorization to operate the wells, but had paid for the assignment. The judge held SonCo in contempt and ordered it to return the leases, allowing the receiver to keep $600,000 that SonCo had paid. SonCo returned the leases. The Seventh Circuit affirmed that SonCo willfully violated the order, but vacated the sanction. The judge on remand may: reimpose the sanction, upon demonstrating that it is a compensatory remedy for civil contempt; impose a different, or no sanction; or proceed under rules governing criminal contempt. View "SonCo Holdings, LLC v. Bradley" on Justia Law