Justia Securities Law Opinion Summaries

This consolidated appeal arose out of an alleged multi-billion dollar Ponzi scheme perpetrated by R. Allen Stanford through his various corporate entities. These three cases dealt with the scope of the preclusion provision of the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 78bb(f)(1)(A). All three cases sought to use state class-action devices to attempt to recover damages for losses resulting from the Ponzi scheme. Because the court found that the purchase or sale of securities (or representations about the purchase or sale of securities), was only tangentially related to the fraudulent scheme alleged by appellants, the court held that SLUSA did not preclude appellants from using state class actions to pursue their recovery and reversed the judgment. View "Roland, et al. v. Green, et al.; Troice, et al. v. Proskauer Rose, LLP, et al.; Troice, et al. v. Willis of Colorado Inc., et al." on Justia Law

This case arose as part of an industry-wide investigation into certain abuses that contributed to the recent financial crisis. The SEC moved for a stay of district court proceedings, pending resolution of its and Citigroup's interlocutory appeals and its petition for a writ of mandamus, seeking to set aside an order of the district court which refused to approve the parties' proposed consent judgment. The district court so ordered because it concluded that the proposed consent judgment was not fair, adequate, reasonable, or in the public interest because Citigroup had not admitted or denied the allegations. The court concluded that it was satisfied (1) that the SEC and Citigroup have made a strong showing of likelihood of success in setting aside the district court's rejection of their settlement, either by appeal or petition for mandamus; (2) the petitioning parties have shown serious, perhaps irreparable, harm sufficient to justify grant of a stay; (3) the stay would not substantially injure any other persons interested in the proceeding; and (4) giving due deference to the SEC's assessment of the importance of its settlement to the public interest, that interest was not disserved by the grant of a stay. Accordingly, the court granted the motion to stay the proceedings and denied the motion to expedite. View "SEC v. Citigroup Global Markets Inc." on Justia Law

The brokerage entered into agreements with customers that set a fee for handling, postage, and insurance for mailing confirmation slips after each securities trade. Plaintiff filed claims of breach of contract and unjust enrichment, seeking class certification and recovery of fees charged since 1998. The brokerage removed to federal court under the Class Action Fairness Act, 28 U.S.C. 1332(d), or the Securities Litigation Uniform Standards Act 15 U.S.C. 78p(b) and (c) and 78bb(f), and obtained dismissal. The Seventh Circuit affirmed, first holding that SLUSA did not apply because any alleged misrepresentation was not material to decisions to buy or sell securities, but CAFA's general jurisdictional requirements were met. The agreement did not suggest that the fee represents actual costs, and it was not reasonable to read this into the agreement. Nor did the brokerage have an implied duty under New York law to charge a fee reasonably proportionate to actual costs where it notified customers in advance and they were free to decide whether to continue their accounts. View "Appert v. Morgan Stanley Dean Witter, Inc." on Justia Law

Petitioner appealed from an order of the district court granting respondent's motion to quash subpoenas issued pursuant to 28 U.S.C. 1782. Petitioner sought assistance from the district court to order discovery from three non-parties for use in a securities fraud action he filed in Germany. The district court allowed the discovery and the relevant subpoenas were issued. However, before any discovery was produced, respondent moved to vacate that order and quash the subpoenas. The district court granted the motion and ruled that the requested discovery could not be "for use" in the German tribunal because it was unlikely to be admitted in the foreign jurisdiction. The court reversed the order, concluding that the "for use" requirement was not limited to the actual receipt of materials into evidence in the foreign proceeding. View "Brandi-Dohrn v. IKB Deutsche Industriebank AG" on Justia Law

Plaintiffs, nine Cayman Island hedge funds, appealed from a judgment of the district court dismissing their complaint with prejudice. At issue was whether foreign funds' purchases and sales of securities issued by U.S. companies brokered through a U.S. broker-dealer constituted "domestic transactions" pursuant to Morrison v. National Australia Bank Ltd. While the court concluded that the complaint did not sufficiently allege the existence of domestic securities transactions, the court concluded that plaintiffs should be given leave to amend the complaint to assert additional facts suggesting that the transactions at issue were domestic. Specifically, the court held that to sufficiently allege the existence of a "domestic transaction in other securities," plaintiffs must allege facts indicating that irrevocable liability was incurred or that title was transferred within the United States. Because there has been significant ambiguity as to what constituted a "domestic transaction in other securities," plaintiffs should have the opportunity to assert additional facts leading to the plausible inference that either irrevocable liability was incurred or that title passed in the United States. Accordingly, the court affirmed the judgment of the district court in part, reversed in part, and remanded the case for further proceedings. View "Absolute Activist Value Master Fund Ltd., et al. v. Ficeto, et al." on Justia Law

Defendant sells brokerage and investment products and services, typically to registered broker-dealers and investment advisers that trade securities for clients. One of its services, NetExchange Pro, an interface for research and managing brokerage accounts via the Internet, can be used for remote access to market dynamics and customer accounts. A firm may make its clients' personal information, including social security numbers and taxpayer identification numbers, accessible to end-users in NetExchange Pro. Some of defendant's employees also have access to this information. Plaintiff, a brokerage customer with NPC, which made its customer account information accessible in NetExchange Pro, received notice of the company's policy and filed a putative class action, alleging breach of contract, breach of implied contract, negligent breach of contractual duties, and violations of Massachusetts consumer protection laws. The district court dismissed. The First Circuit affirmed. Despite "dire forebodings" about access to personal information, plaintiff failed to state any contractual claim for relief and lacks constitutional standing to assert a violation of any arguably applicable consumer protection law. View "Katz v. Pershing, LLC" on Justia Law

The Bank of New York Mellon, acting in its capacity as trustee of trusts established to hold residential mortgage-backed securities, settled claims that the originator and servicer breached obligations owed to the trusts. Then, as a condition precedent to the settlement, the Bank initiated an Article 77 proceeding in New York Supreme Court to confirm that it had the authority to enter into the settlement under the governing trust documents and that entry into the settlement did not violate its duties under the governing trust agreements. On appeal from an order of the district court denying petitioners' motion to remand the proceeding to New York Supreme Court, the court considered the application of 28 U.S.C. 1453(d)(3) and 1332(d)(9)(C), exceptions to the federal jurisdiction conferred by the Class Action Fairness Act of 2005 (CAFA), Pub.L. No. 109-2, 119 Stat. 4. The court held that the case fell within CAFA's securities exception as one that solely involved a claim that "related to the rights, duties (including fiduciary duties), and obligations relating to or created by or pursuant to" a security. Accordingly, the court dismissed the petition for lack of jurisdiction, reversed the order of the district court, and instructed it to vacate its decision and order and remanded the matter to state court. View "The Bank of New York Mellon v. Walnut Place LLC" on Justia Law

GM offered separate defined-contribution 401(k) plans. Benefits were based on the amount of contributions and investment performance of an individual's separate account. The plans offered several investment options, including mutual funds, non-mutual fund investments, and the General Motors Common Stock Fund. Participants could change the allocation in any investment on any business day. The plans invested, by default, in the Pyramis Fund, not the GM Fund. In 2008, the fiduciary suspended purchases of GM and began selling the stock. Plaintiffs filed suit under the Employee Retirement Income Security Act, 29 U.S.C. 1109(a), alleging breach of fiduciary duty in allowing investment in GM after its financial trouble was the subject of reliable public information. The district court dismissed. The Sixth Circuit reversed, holding that plaintiffs sufficiently pleaded that "a prudent fiduciary acting under similar circumstances would have made a different investment decision." The fiduciary cannot escape its duty simply by asserting that the plaintiffs caused the losses by choosing to invest in the GM Fund. Such a rule would improperly shift the duty of prudence to monitor the menu of investments to participants. The fact that a participant exercises control over assets does not automatically trigger section 404(c) safe harbor.View "Pfeil v. State Street Bank & Trust Co" on Justia Law

A class representing purchasers of securities sued the company and two high-ranking officers, alleging that the company issued false or misleading public statements about demand for its products in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and related regulations. The district court granted summary judgment to the company. The First Circuit affirmed. Once a downward trend became clear, the company explicitly acknowledged that its forecasts had been undermined. Whether it was negligent to have remained too sanguine earlier, there was no evidence of anything close to fraud. View "OK Firefighters Pension v. Smith & Wesson Holding Corp." on Justia Law

Petitioner, a registered representative and principal with various brokerage firms over the years, sought review of a final order of the Commission, which concluded that he willfully failed to disclose the existence of certain tax liens filed against him. The Commission's conclusion that petitioner acted willfully, which followed his appeal of various determinations of the Financial Industry Regulatory Authority (FINRA) and its predecessor, the National Association of Securities Dealers (NASD), subjected him to statutory disqualification from the securities industry. The court concluded that there was substantial evidence supporting the SEC's factual finding that petitioner failed to disclose the liens on his Forms U-4 and that the liens were material. Moreover, the SEC did not abuse its discretion when it determined that petitioner's conduct constituted a willful violation of the securities provisions relating to applications and registration. Therefore, the court denied the petition and affirmed the Commission's order. View "Mathis v. U.S. Securities & Exchange Commission" on Justia Law