Justia Securities Law Opinion Summaries

Amyris is a publicly traded biotechnology company that operates out of California. John Doerr is a member of the Amyris board of directors. Doerr and his wife, Ann Doerr, are also trustees of Vallejo Ventures Trust (Vallejo), which is a member of Foris Ventures, LLC (Foris). Doerr indirectly owns all membership interests in Foris. Foris and Amyris entered into several transactions involving Amyris stock, warrants, and debt between April 2019 and January 2020. The Amyris board of directors approved each of those transactions. The following year, Andrew Roth, an Amyris shareholder, filed a derivative lawsuit on behalf of Amyris against the Doerrs, Foris, and Vallejo, alleging that those transactions violated Section 16(b) and seeking disgorgement of profits. Defendants moved to dismiss. The district court denied the motion. The district court subsequently granted a certificate of interlocutory appealability on the sole issue of whether Rule 16b-3 requires a board of directors to explicitly approve transactions for the purpose of exempting them under the Rule.   The NInth Circuit affirmed in part and reversed in part the district court’s order denying defendants’ motion to dismiss. The panel held that the district court erred by imposing a purpose-specific approval requirement. However, the district court did not err in finding that the Amyris board was aware that defendant John Doerr had an indirect pecuniary interest in the challenged transactions when it approved them. The panel left it for the district court on remand to address whether defendant Foris Ventures, LLC, a beneficial owner of Amyris, was a director by deputation and thus eligible for the Rule 16b-3(d)(1) exemption. View "ANDREW ROTH V. FORIS VENTURES, LLC, ET AL" on Justia Law

Johnson, a Wisconsin company, merged with Tyco, an Irish company. The combined entity, Johnson International, is domiciled in Ireland. The merger's terms were disclosed in a joint proxy statement/prospectus filed with the SEC, along with the opinions of financial advisors that the merger was overall “fair.” The statement stated that the market price of the shares would fluctuate. Each share of Johnson’s common stock would be, at the election of the shareholder, either converted into an ordinary share of International or cashed out; either would be a taxable transaction. Johnson shareholders were expected to own approximately 56% of International to prevent triggering 26 U.S.C. 7874: when a domestic corporation is acquired by a foreign entity, but its former shareholders retain at least 60% of the stock, the expatriated entity must pay “inversion gain” taxes. The Treasury Department had announced proposed regulations that affected how Johnson’s equity would be calculated, eliminating the tax benefits of the “reverse merger.” The proxy statement warned that if those regulations were finalized, the tax benefits would not be realized. Johnson shareholders voted in favor of the merger.The Seventh Circuit affirmed the dismissal of a putative class action, alleging that the defendants breached their fiduciary duties and wrongfully structured the merger as taxable for Johnson’s former shareholders. “Although plaintiffs allege that they are not challenging the business and financial merits of the merger, their arguments boil down to a demand for a better deal;” they failed to allege any materially misleading statements or omissions. View "Smykla v. Molinaroli" on Justia Law

The Securities and Exchange Commission (“SEC”) adopted a rule requiring issuers to report day-to-day share repurchase data once a quarter and to disclose the reason why the issuer repurchased shares of its own stock. Despite Petitioners’ comments, however, the SEC maintained that many of the effects of the daily disclosure requirement could not be quantified. Petitioners filed a petition for review of the final rule.   The Fifth Circuit granted the petition for review and remanded with direction to the SEC to correct the defects in the rule within 30 days of this opinion. The court found that the e SEC’s notice and comment period satisfies the APA’s requirements. However, the court held that the SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to Petitioners’ comments and failed to conduct a proper cost-benefit analysis. The court explained that almost every part of the SEC’s justification and explanation of the rule reflects the agency’s concern about opportunistic or improperly motivated buybacks. That error permeates—and therefore infects—the entire rule. The court explained that short of vacating the rule, it affords the agency limited time to remedy the deficiencies in the rule. View "Chamber of Com of the USA v. SEC" on Justia Law

Two law firms that represented Plaintiffs in this litigation, Schlichter Bogard & Denton LLP (“SBD”) and Schneider Wallace Cottrell Konecky LLP (“SWCK”), appealed the district court’s order imposing sanctions against them under 28 U.S.C. § 1927. Plaintiffs’ counsel represented individual shareholders and an employee retirement plan in a lawsuit claiming that the investment company, investment adviser, and recordkeeper (collectively “Empower”) servicing their mutual funds charged excessive fees in violation of its fiduciary duties under § 36(b) of the Investment Company Act. Following denial of Empower’s summary judgment and Daubert motions, the case proceeded to a bench trial where the district court ruled in favor of Empower. Thereafter, the court sanctioned Plaintiffs’ counsel for “recklessly pursu[ing] their claims through trial despite the fact that they were lacking in merit” and held SWCK and SBD jointly and severally liable for $1.5 million in Empower’s trial costs, expenses, and attorneys’ fees. After review, the Tenth Circuit concluded the district court abused its discretion and therefore reversed the order imposing sanctions. Accordingly, the Court did not reach the issues of SWCK and SBD’s joint and several liability or the court’s denial of SWCK’s motion to amend the judgment. View "Obeslo, et al. v. Empower Capital, et al." on Justia Law

Defendant-Appellant Aron Govil engaged in several fraudulent securities offerings through his company, Cemtrex. Pursuant to a settlement agreement with Cemtrex, Govil agreed to pay back the proceeds of his fraud in part by surrendering his Cemtrex securities to the company. The district court later granted a motion by the SEC for additional disgorgement. The district court concluded that disgorgement was authorized and that the value of the securities Govil surrendered to Cemtrex should not offset the disgorgement award. Govil argues that neither U.S.C. Section 78u(d)(5) nor 15 U.S.C. § 78u(d)(7) authorize disgorgement here.   The Second Circuit vacated the judgment of the district court and remanded with instructions to determine whether the defrauded investors suffered pecuniary harm. The court explained that the Second Circuit recently held that the disgorgement remedies under Section 78u(d)(5) and Section 78u(d)(7) are subject to the “traditional equitable limitations” that the Supreme Court recognized in Liu v. SEC, 140 S. Ct. 1936 (2020). SEC v. Ahmed, 72 F.4th 379, 396 (2d Cir. 2023). One of those equitable limitations is that disgorgement must be “awarded for victims.” Liu, 140 S. Ct. at 1940. Further, the court wrote that a wrongdoer makes a payment in satisfaction of a disgorgement remedy when he returns the property to a wronged party. Accordingly, if on remand, the district court decides that disgorgement is authorized, it must value the surrendered securities and credit that value against the overall disgorgement award. View "SEC v. Govil" on Justia Law

Pacilio and Bases were senior traders on the precious metals trading desk at Bank of America. While working together in 2010-2011, and at times separately before and after that period, they engaged in “spoofing” to manipulate the prices of precious metals using an electronic trading platform, that allows traders to place buy or sell orders on certain numbers of futures contracts at a set price. It is assumed that every order is bona fide and placed with “intent to transact.” Spoofing consists of placing a (typically) large order, on one side of the market with intent to trade, and placing a spoof order, fully visible but not intended to be traded, on the other side. The spoof order pushes the market price to benefit the other order, allowing the trader to get the desired price. The spoof order is canceled before it can be filled.Pacilio and Bases challenged the constitutionality of their convictions for wire fraud affecting a financial institution and related charges, the sufficiency of the evidence, and evidentiary rulings relating to testimony about the Exchange’s and bank prohibitions on spoofing to support the government’s implied misrepresentation theory. The Seventh Circuit affirmed. The defendants had sufficient notice that their spoofing scheme was prohibited by law. View "United States v. Bases" on Justia Law

The Nasdaq Stock Market, LLC (Nasdaq) proposed a rule that would require companies listed on its stock exchange to disclose information about their board members, as well as a rule that would give certain companies access to a board recruiting service. After the Securities and Exchange Commission (SEC or Commission) approved these rules, the Alliance for Fair Board Recruitment (AFBR) and the National Center for Public Policy Research (NCPPR) petitioned for review.   The Fifth Circuit denied the petitions because the SEC’s Approval Order complies with the Exchange Act and the Administrative Procedure Act (APA). The court wrote that the SEC’s point is that because the meaning of diversity varies globally, it is fair and desirable to let foreign issuers report diversity information according to nationally appropriate standards. Further, the court explained that AFBR does not explain how the SEC acted arbitrarily and capriciously in weighing burdens on competition against the purposes of the Exchange Act. Instead, AFBR argues that the SEC ignored “tremendous costs for firms that dare to defy the quotas. The court explained that the SEC did account for the costs that AFBR asserted in its comment letter. The SEC made a rational decision that those burdens on competition were “necessary or appropriate” to further the purposes of the Exchange Act. Therefore, AFBR has failed to meet its burden to show that the SEC’s Approval Order is arbitrary and capricious on this basis. View "Alliance for Fair Board Recruitment v. SEC" on Justia Law

Appellants, collectively “the shareholders,” purchased shares of Facebook common stock between February 3, 2017, and July 25, 2018. Soon after the first stock drop in March 2018, they filed a securities fraud action against Facebook and three of its executives. The shareholders allege that Facebook and the executives violated Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5 of the Exchange Acts. The district court dismissed for failure to state a claim.   The Ninth Circuit affirmed in part and reversed in part. The panel considered whether, under the heightened standard of the Private Securities Litigation Reform Act, the shareholders (1) adequately pleaded falsity as to the challenged risk statements, (2) adequately pleaded scienter as to the Cambridge Analytica investigation statements, and (3) adequately pleaded loss causation as to the user control statements. First, the panel held that the shareholders adequately pleaded falsity as to the statements warning that misuse of Facebook users’ data could harm Facebook’s business, reputation, and competitive position, and the district court erred by dismissing the complaint as to those statements. Second, the panel agreed with the district court that the shareholders failed to plead scienter as to Cambridge Analytica investigation statements, including ones made by a Facebook spokesperson to journalists in March 2017 that Facebook’s internal investigation into Cambridge Analytica had “not uncovered anything that suggested wrongdoing” related to Cambridge Analytica’s work on the Brexit and Trump campaigns. The panel affirmed the dismissal as to statements related to Facebook’s goals of transparency and control— statements that were not false when they were made. View "AMALGAMATED BANK, ET AL V. FACEBOOK, INC., ET AL" on Justia Law

A jury convicted United Development Funding (“UDF”) executives (collectively “Appellants”) of conspiracy to commit wire fraud affecting a financial institution, conspiracy to commit securities fraud, and eight counts of aiding and abetting securities fraud. Jurors heard evidence that Appellants were involved in what the Government deemed “a classic Ponzi-like scheme,” in which Appellants transferred money out of one fund to pay distributions to another fund’s investors without disclosing this information to their investors or the Securities Exchange Commission (“SEC”). Appellants each filed separate appeals, challenging their convictions on several grounds. Considered together, they argue that (1) the jury verdict should be vacated because the evidence at trial was insufficient to support their convictions or, alternatively, (2) they are entitled to a new trial because the jury instructions were improper. Appellants also argue that the district court erred in (3) limiting cross-examination regarding a non-testifying government informant; (4) allowing the Government to constructively amend the indictment and include certain improper statements in its closing argument; (5) imposing a time limit during.   The Fifth Circuit affirmed the jury verdict in its entirety. The court explained that considering the evidence and drawing all reasonable inferences in the light most favorable to the verdict, a reasonable juror could have determined that Appellants made material misrepresentations in UDF III and UDF V’s filings that were sufficient to uphold their convictions. The court explained that multiple witnesses testified that the industry had shifted away from affiliate transactions because they were disfavored and that a no-affiliate-transaction policy in UDF V would enable it to participate in a larger network of brokers, dealers, and investors. View "USA v. Greenlaw" on Justia Law

The First Circuit affirmed the judgment of the district court dismissing Investors' securities fraud claims, with one exception with respect to one particular statement for which the Court concluded that Investors' pleadings adequately stated a claim, holding that the district court correctly dismissed Investors' remaining fraud claims.Investors brought this class action following a significant drop in Biogen Inc.'s stock price, alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Investors specifically alleged that Defendants' statements regarding its Alzheimer's disease drug's clinical trials were misleading. The district court granted Defendants' motion to dismiss, concluding that Investors failed adequately to allege a materially false or misleading statement or omission, loss causation, and scienter. The First Circuit (1) reversed the judgment of the district court dismissing the section 10(b) and section 20(a) claims predicated upon a certain statement, holding that dismissal was not warranted as to this issue; and (2) otherwise affirmed the dismissal of the remaining fraud claims, holding that the district court did not err as to these claims. View "Shash v. Biogen Inc." on Justia Law