Justia Securities Law Opinion Summaries

The issue raised on appeal to the Delaware Supreme Court centered on the validity of a provision in several Delaware corporations’ charters requiring actions arising under the federal Securities Act of 1933 (the “Securities Act” or “1933 Act”) to be filed in a federal court. Blue Apron Holdings, Inc., Roku, Inc., and Stitch Fix, Inc. were all Delaware corporations that launched initial public offerings in 2017. Before filing their registration statements with the United States Securities and Exchange Commission (the “SEC”), each company adopted a federal-forum provision. Appellee Matthew Sciabacucchi bought shares of each company in its initial public offering or a short time later. He then sought a declaratory judgment in the Court of Chancery that the FFPs were invalid under Delaware law. The Court of Chancery held that the FFPs were indeed invalid because the “constitutive documents of a Delaware corporation cannot bind a plaintiff to a particular forum when the claim does not involve rights or relationships that were established by or under Delaware’s corporate law.” The Supreme Court disagreed and reversed, finding that such a provision could survive a facial challenge under Delaware law. View "Salzberg v. Sciabacucchi" on Justia Law

A married couple, Beverly Bien and David Wellman, invested money with Mid Atlantic Capital Corporation (“Mid Atlantic”). Their investments performed poorly. Stung by the losses, Ms. Bien and Mr. Wellman initiated arbitration proceedings against Mid Atlantic. The arbitration panel awarded damages, fees and costs to the couple. The panel also ordered Ms. Bien and Mr. Wellman to reassign their ownership interests in their investments to Mid Atlantic. Mid Atlantic moved the federal district court to modify the arbitration award to correct “an evident material miscalculation of figures.” The district court denied the motion because the alleged error that Mid Atlantic sought to remedy did not appear on the face of the arbitration award. In the amended final judgment, in addition to ordering Mid Atlantic to pay Ms. Bien and Mr. Wellman certain damages, the court ordered that prejudgment interest would accrue on the damages portion of the award and that postjudgment interest would accrue at the federal rate specified in 28 U.S.C. 1961. Both parties appealed the district court’s order. Mid Atlantic specifically challenged the court’s denial of its motion to modify the arbitration award; the couple cross-appealed to challenge the court’s rulings with respect to prejudgment interest and the reassignment of distributions they received since the arbitration award due to their ownership interests in the investments. Finding no abuse of discretion or other reversible error, the Tenth Circuit affirmed the district court. View "Mid Atlantic Capital v. Bien" on Justia Law

Investors who purchase Target Corporation stock filed suit against Target and its executives, alleging that Target misled investors about problems in its Canadian stores. Investors' claims stemmed from Target's efforts to open stores in Canada.The Eighth Circuit affirmed the district court's dismissal, and denial of investors' motion for reconsideration and leave to amend. The court held that the district court did not err in determining that investors failed to plead fraud with particularity under the Private Securities Litigation Reform Act of 1995 (PSLRA). In this case, none of the investors' allegations satisfied the PSLRA's mental state requirement and, for one allegation, its falsity requirement. The court also held that the district court did not abuse its discretion in denying leave to amend, because investors failed to allege that Target's executives knew they were making false or misleading statements to investors. Finally, the court held that, because investors' section 10(b) of the Securities and Exchange Act of 1934 claim failed, dismissal of their section 20(a) claim was also appropriate. View "Carpenters' Pension Fund of Illinois v. Target Corp." on Justia Law

In this case, a byproduct of litigation stemming from the derailment of a Montreal, Maine & Atlantic Railway, Ltd. (MMA) freight train carrying crude oil in Lac-Megantic, Quebec, the First Circuit affirmed the district court's entry of judgment in favor of Robert Keath, the estate representative of MMA, and against creditor Wheeling & Lake Erie Railway Company, holding that, giving due deference to the fact-finder's resolution of the burden of proof, the judgment must be affirmed.One month after the derailment, MMA filed a voluntary petition for protection under Chapter 11 of the Bankruptcy Code. Wheeling instituted an adversary proceeding in the bankruptcy court against MMA and the estate representative, seeking a declaratory judgment regarding the existence and priority of its security interest in certain property of the MMA estate. The case involved intricate questions concerning secured transactions, carriage of goods, and corporate reorganization. After a settlement, the bankruptcy court ruled in favor of the estate representative. The First Circuit affirmed, holding (1) ultimately, this case turned on principals relating to the allocation of the burden of proof and the deference due to the finder of fact; and (2) giving due deference to the fact-finder's resolution of the burden of proof issue, the district court's judgment must be affirmed. View "Wheeling & Lake Erie Railway Co. v. Keach" on Justia Law

In this complaint alleging that Defendants intentionally or recklessly misled investors about Ocular Therapeutix, Inc.'s manufacturing problems the First Circuit affirmed the judgment of the district court dismissing Plaintiffs' complaint for failure to state a claim, holding that Plaintiffs failed to allege facts giving rise to a strong inference of scienter as required by the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4, 78u-5.In 2015, Ocular submitted a new drug application to the FDA for approval of Dextenza. In 2017, the FDA published its observations of issues at Ocular's manufacturing facility, which resulted in a drop in the company's stock price. Plaintiffs, several shareholders, brought this securities fraud action on behalf of themselves and a putative class of investors alleging violations of section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b) and section 20(a) of the Exchange Act, 15 U.S.C. 78t(a). The district court dismissed the complaint pursuant to Fed. R. Civ. P. 9(b) and 12(b)(6), the Exchange Act, and the PSLRA. The district court granted the motion and dismissed the complaint with prejudice. The First Circuit affirmed, holding that Plaintiffs did not allege facts giving rise to a strong inference of scienter as required by the PSLRA. View "In re Ocular Therapeutix Inc." on Justia Law

Shareholders of Goldman filed a class action alleging that Goldman and several of its executives committed securities fraud by misrepresenting Goldman's freedom from, or ability to combat, conflicts of interest in its business practices. The district court certified a shareholder class, but the Second Circuit vacated the order in 2018. On remand, the district court certified the class once more.The court affirmed the district court's order on remand, holding that the district court correctly applied the inflation-maintenance theory. The court explained that the inflation-maintenance theory did not require proof of fraud-induced inflation, and that the district court applied the correct standard in concluding that Goldman's share price was inflated. The court also held that the district court did not abuse its discretion by holding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence. View "Arkansas Teacher Retirement System v. Goldman Sachs Group, Inc." on Justia Law

The Second Circuit affirmed the SEC's finding that petitioner violated section 17(a)(1) of the Securities Act of 1933, section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5(a) and (c) promulgated thereunder, and that he aided and abetted his employer's violations of its books and records requirements under the Exchange Act and associated regulations. This case stemmed from a series of trades that petitioner executed to avoid Barclays's aged-inventory policy.The court held that the Commission's actions were proper and the evidence was sufficient to support the Commission's findings. In this case, petitioner forfeited his constitutional challenge by not raising it during the administrative proceedings; the SEC's cooperation agreement did not violate petitioner's right to due process; the ALJ did not engage in impermissible fact-finding; there was sufficient evidence supporting the Commission's findings; and the Commission did not improperly sanction petitioner. Accordingly, the court denied the petition for review. View "Gonnella v. Securities and Exchange Commission" on Justia Law

The plaintiffs are shareholders in mutual funds. JPMIM is paid a fee for managing the Funds’ securities portfolio and researching potential investments. The plaintiffs sued under the Investment Company Act (ICA), 15 U.S.C. 80a-1, which allows mutual fund shareholders to bring a derivative suit against their fund’s investment adviser on behalf of their fund. The plaintiffs claimed that JPMIM charged excessive fees in violation of section 36(b), which imposes a fiduciary duty on advisers with respect to compensation for services.The Sixth Circuit affirmed summary judgment in favor of JPMIM. Under section 36(b), a shareholder must prove that the challenged fee “is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.” The district court considered the relevant factors in making its determination: the nature, extent, and quality of the services provided by the adviser to the shareholders; the profitability of the mutual fund to the adviser; “fallout” benefits, such as indirect profits to the adviser; economies of scale achieved by the adviser as a result of growth in assets under the fund’s management and whether savings generated from the economies of scale are shared with shareholders; comparative fee structures used by other similar funds; and the level of expertise, conscientiousness, independence, and information with which the board acts. View "Campbell Family Trust v. J.P. Morgan Investment Management, Inc." on Justia Law

4tdd.com, Inc. ("4tdd"), Thomas Todd Martin III, and Martin & Associates Consulting Company, LLC ("MACC"), petitioned the Alabama Supreme Court for a writ of mandamus to instruct the Mobile Circuit Court ("the trial court") to dismiss a derivative shareholder action filed against them by Sheila Hale, individually and on behalf of the shareholders of Bay Area Nutrition, Inc., on the ground, inter alia, that Hale did not satisfy the requirement of Rule 23.1, Ala. R. Civ. P., that she allege with particularity in her complaint the efforts she had made to obtain the requested relief from the corporate directors of Bay Area Nutrition, Inc. ("BAN"), before filing an action against them. The Supreme Court determined, after careful consideration, that Hale indeed failed to comply with Rule 23.1, and directed the trial court to direct 4tdd.com, Martin and MACC's motion to dismiss. View "Ex parte 4tdd.com, Inc., et al." on Justia Law

In this case concerning the scope of the Expedited Declaratory Judgment Act (EDJA), the Supreme Court held that the EDJA gives the trial court jurisdiction to declare whether the execution of contracts entered into by the San Jacinto River Authority to sell water to cities and other customers was legal and valid but not whether the Authority complied with the contracts in setting specific rates.The Authority, which used the revenue from the contracts to pay off its bonds, sought declarations regarding the contract and the specific water rates set forth pursuant to the contracts. Several cities filed pleas to the jurisdiction, arguing that the trial court lacked subject matter jurisdiction to adjudicate SJRA's claims under the EDJA. The trial court denied the pleas to the jurisdiction. On appeal, the court of appeals held primarily for the Authority. The Supreme Court reversed in part, holding (1) the trial court may exercise jurisdiction over the Authority's execution of the contracts - which met the statutory definition of "public security authorization" - but may not exercise jurisdiction over whether the Authority complied with the contracts in setting the water rates; and (2) the Cities' governmental immunity did not bar this EDJA suit, which was brought in rem to adjudicate interests in property. View "City of Conroe, Texas v. San Jacinto River Authority" on Justia Law