Justia Securities Law Opinion Summaries

In 2006, Respondent Cordillera Fund, LP, purchased shares in Appellant American Ethanol for $3 per share. In 2007, shareholders of American Ethanol sought to merge with AE Biofuels, and notified their shareholders of its intent. Respondent notified American Ethanol of its intent to dissent, and demanded payment for its shares. The merger was approved by the shareholders. When the merged company refused to pay, Respondent filed suit at the district court. Ultimately the issue for the district court to resolve involved the fair value of Respondentâs shares at the time of the merger. Appellants offered respondent $0.15 per share; Respondent maintained the fair value was $3 per share. The parties went to court because neither could agree on the value. The court entered a judgment in favor of Respondent, determining that $3 per share was the fair value. On appeal, Appellants contended that the district court abused its discretion in determining the fair value of the shares. The Supreme Court concluded that appellants did not demonstrate that the district court abused its discretion, and affirmed the courtâs ruling in favor of Respondent.

The Montana Department of Revenue ("Department") appealed a judgment reversing the State Tax Appeal Board's ("STAB") conclusion that the Department had applied a "commonly accepted" method to assess the value of PacificCorp's Montana properties. At issue was whether substantial evidence demonstrated common acceptance of the Department's direct capitalization method that derived earnings-to-price ratios from an industry-wide analysis. Also at issue was whether substantial evidence supported STAB's conclusion that additional obsolescence did not exist to warrant consideration of further adjustments to PacifiCorp's taxable value. The court held that substantial evidence supported the Department's use of earnings-to-price ratios in its direct capitalization approach; that additional depreciation deductions were not warranted; and that the Department did not overvalue PacifiCorp's property. The court also held that MCA 15-8-111(2)(b) did not require the Department to conduct a separate, additional obsolescence study when no evidence suggested that obsolescence existed that has not been accounted for in the taxpayer's Federal Energy Regulatory Commission ("FERC") Form 1 filing. The court further held that STAB correctly determined that the actual $9.4 billion sales price of PacifiCorp verified that the Department's $7.1 billion assessment had not overvalued PacifiCorp's properties.

The Secretary of the United States Department of Labor ("DOL") petitioned the district court to enforce administrative document subpoenas after a DOL investigation into the management of respondents (collectively, "Funds"), which arose out of a $10.1 million loss of Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1134(a)(1), plan assets, as a result of the Funds' investments in entities related to Bernard L. Madoff. At issue was whether the attorney-client and work product privileges protected some of the materials requested by the Secretary from disclosure and whether the district court erred in applying the fiduciary exception to override these privileges. The court affirmed the district court's order granting the Secretary's petition and held that the fiduciary exception applied to the Funds' claims of attorney-client privilege and no good cause showing was required in the ERISA context. The court also held that the Funds have failed to carry their burden to demonstrate the applicability of the work product doctrine.

Purchasers of common stock brought a class action alleging violations of federal securities laws; the case settled for $190,000,000. The same underlying facts resulted in an action by employees and former employees under ERISA; the company's 401(k) profit-sharing plan claimed a share of the settlement. The district court rejected the claim and the Seventh Circuit affirmed. Although individual plan participants did not purchase publicly-traded stock, the plan itself did so and is not excluded from the class definition of persons who purchased publicly traded common stock. The definition does, however, exclude any âaffiliateâ of the company and the plan is an affiliate. Plan administrators are either directors of the company or appointed by directors.

Plaintiff appealed the district court's grant of defendant's, Ernst & Young, LLP, motion to dismiss for claims stemming from a securities class action complaint against Broadcom Corporation for a fraudulent $2.2 billion stock options backdating scheme. At issue was whether the complaint adequately plead scienter where any of the allegations alone were sufficient to create a strong inference of scienter or, in the alternate, where a holistic view of the same allegations combine to create a strong inference of intentional conduct or deliberate recklessness. The court held that the complaint adequately plead scienter where the complaint was loaded with specific allegations of how and why defendant should have investigated deficient or missing documentation and where there was no doubt that the allegations, considering the totality of the circumstances, presented at least as strong an inference of scienter as any competing innocent inference.

Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra ("Winklevosses") sought to intervene after a district court entered judgment enforcing the Term Sheet and Settlement Agreement ("Settlement Agreement") signed by Facebook, the Winklevosses, and the Winklevosses' competing social network site, ConnectU, where the Settlement Agreement envisioned that Facebook would acquire all of ConnectU's shares in exchange for cash and a percentage of Facebook's common stock. At issue was whether the Settlement Agreement was enforceable where the Winklevosses claimed that they did not discover the facts that gave rise to their Rule 10b-5 claims under the Securities and Exchange Act of 1934 ("Act") until after they signed the Settlement Agreement's release of claims and whether the releases foreclosed their challenge to the Settlement Agreement where section 29(a) of the Act precluded a mutual release of unknown securities fraud claims arising out of negotiations to settle a pending lawsuit. The court held that the district court correctly concluded that the Settlement Agreement was enforceable and intended to release claims arising out of the settlement negotiations where the release was valid under section 29(a) when the Settlement Agreement was meant to end a dispute between sophisticated parties acting in an adversarial setting that was characteristic of litigation and could not be interpreted as leaving open the door to litigation about the settlement process.

Purchasers of Parmalat Capital Finance Limited ("Parmalat") debt and equity securities filed class action lawsuits against Parmalat and others for securities fraud ("Appellants"). At issue was whether the district court erred in exercising jurisdiction over plaintiffs' claims pursuant 28 U.S.C. 1334(b) and whether the district court properly declined to abstain from exercising that jurisdiction pursuant to 28 U.S.C. 1334(c)(2). The court held that the district court properly exercised removal jurisdiction where the estate at issue in a 11 U.S.C. 304 proceeding, wherever located, could conceivably be affected by the state law actions. The court also held that the district court erred in determining that appellants failed to file motions for abstention where the district court should have focused on the timely administration of the estate, not the section 304 proceeding.

Defendant, former Enron Corporation CEO, appealed a conviction of conspiracy, securities fraud, making false representations to auditors, and insider trading. At issue was whether the error committed by the district court in submitting the honest-services theory to the jury was harmless as to any of defendant's convictions. The court held that the error was harmless and thus concluded beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory errors where the jury was presented with overwhelming evidence that defendant conspired to commit securities fraud.

Shareholders of Abercrombie & Fitch claimed that false statements by officers and directors in 2005 caused the price of the stock to rise and fall. The company formed a special litigation committee to investigate, as permitted under Delaware law. The district court dismissed the derivative action, based on the committee's findings. The Sixth Circuit conducted de novo review and reversed. The corporation had the burden of proving that the committee was independent, carried out its investigation in good faith, and reached a reasonable conclusion. One member of the committee, a board member subsequently named as a defendant, recused himself from consideration of certain allegations, but had relationships with the accused such that partial recusal was ineffective and he could not be considered independent. The recusal also left only one member able to consider certain accusations, where the company intended a two-member committee. The remaining member was a named defendant, a member of the audit committee, and played a role in the challenged actions.

The defendant was convicted of counts relating to securities fraud in connection with an improper revenue recognition scheme. The Tenth Circuit affirmed denial of a post-trial motion based on the statute of limitations because the defendant had signed a waiver. The waiver was valid, despite not being executed in open court and not mentioning specific constitutional rights being waived; the limitations period is statutory, not constitutional. The court remanded a claim of ineffective assistance of counsel; the district court should not have ruled on the merits because the record was not sufficiently developed for determination of whether the claim could be raised on direct appeal.