Justia Securities Law Opinion Summaries

Plaintiff filed suit against his employer, alleging a claim under the anti-retaliation provision of the Sarbanes-Oxley Act. The district court concluded that the employer's decision to fire plaintiff was not prohibited retaliation and that plaintiff did not have an objectively reasonable belief that a violation of reporting requirements had occurred. The Fifth Circuit affirmed the district court's grant of summary judgment for the employer, holding that the district court did not abuse its discretion in finding that paragraph 22 of the declaration of plaintiff's witness was impermissible expert testimony. Therefore, there was no genuine issue of material act as to whether plaintiff's purported belief that his employer was misreporting its revenue was objectively reasonable in light of the undisputed facts. View "Wallace v. Andeavor Corp." on Justia Law

Plaintiffs, 39 former employees of Infinium Capital, voluntarily converted loans they had made to their employer under the company’s Employee Capital Pool program into equity in the company. A year later their redemption rights were suspended; six months after that, they were told their investments were worthless. Plaintiffs filed suit against Infinium, the holding company that owned Infinium, and members of senior management, asserting claims for federal securities fraud and state law claims for breach of fiduciary duty and fraud. The Seventh Circuit affirmed the dismissal, with prejudice, of their fifth amended complaint for failure to state a claim. Reliance is an element of fraud and each plaintiff entered into a written agreement that contained ample cautionary language about the risks associated with the investment. Federal Rule of Civil Procedure 9(b) provides that a party alleging fraud or mistake “must state with particularity the circumstances constituting fraud or mistake,” although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Plaintiffs failed to identify the speakers of alleged misrepresentations with adequate particularity, failed to adequately plead scienter, and failed to plead a duty to speak. View "Cornielsen v. Infinium Capital Management, LLC" on Justia Law

Plaintiff filed suit on behalf of purchasers of Flotek common stock, alleging that the company and three of its officers exaggerated the usefulness of its products and made misrepresentations relating to a proprietary software the company developed to help market these products. The Fifth Circuit affirmed the district court's dismissal of the complaint, holding that plaintiffs failed to plead facts giving rise to a strong inference of fraudulent scienter. In this case, plaintiffs identified several alleged misrepresentations but each failed to raise a strong inference of scienter. View "Ho v. Flotek Industries, Inc." on Justia Law

JCB, an Indiana state-chartered bank, had an agreement with INVEST, a registered broker-dealer, to offer securities to JCB customers. In 2017, JCB assigned DuSablon to assist in identifying and establishing an investment business with a new third-party broker-dealer. DuSablon failed to do so and abruptly resigned. JCB learned that DuSablon had transferred customers’ accounts from INVEST into his own name and had started a competing business. JCB sought a preliminary injunction, asserting violations of the Indiana Uniform Trade Secrets Act, breach of contract, breach of fiduciary duty, tortious interference, unfair competition, civil conversion, and computer trespass. DuSablon moved to dismiss, arguing that JCB lacked standing and that Financial Industry Regulatory Authority (FINRA) rules barred the suit; he removed the case, asserting exclusive federal jurisdiction under 15 U.S.C. 78aa and the Securities and Exchange Act. Although JCB did not plead a federal claim, DuSablon contended that JCB’s response to his motion to dismiss “raises a federal question as all of [JCB’s] claims ... rest upon the legality of direct participation in the securities industry which is ... regulated by the [Securities] Act.” The district court remanded,, concluding that it lacked jurisdiction and that removal was untimely, ordering DuSablon to pay JCB costs and fees of $9,035.61 under 28 U.S.C. 1447(c). The Seventh Circuit dismissed an appeal. DuSablon lacked an objectively reasonable basis to remove the case to federal court. View "Jackson County Bank v. DuSablon" on Justia Law

In 7 U.S.C. 13(a)(4), a provision within the Commodity Exchange Act, "willfully" must have the traditional meaning ascribed to the term in the context of criminal prohibitions against fraud: intentionally undertaking an act that one knows to be wrongful. This appeal arose from a civil enforcement action brought by the Commission against defendant, the co-founder of the Paron investment firm.The Ninth Circuit affirmed the district court's grant of summary judgment to the Commission and, after applying the correct meaning of "willfully," held that there were no genuine issues of material fact as to whether defendant acted willfully when he made three separate false statements to the National Futures Association (NFA) during its investigation of Paron. The panel also held that the district court properly awarded restitution. However, the court vacated in part the district court's order issuing a permanent injunction against defendant and remanded for further explanation as to certain parts of the permanent injunction. View "U.S. Commodity Futures Trading Commission v. Crombie" on Justia Law

In these appeals involving bonds issued in 2008 by the Employees Retirement System (the System) of the Government of the Commonwealth of Puerto Rico, which were purchased by bondholders (the Bondholders), the First Circuit held that the Bondholders satisfied the filing requirements for perfection of their security interest as of December 17, 2016, thus reversing the district court’s ruling that the Bondholders’ interest was not perfected and so could be avoided.The bond documentation here offered as security certain property belonging or owed to the System. When the Bondholders claimed a perfected security interest in that property, the System filed suit seeking declaratory judgments relating to the Bondholders’ asserted security interest. The Bondholders counterclaimed. The district court granted summary judgment in favor of the System, concluding that the Bondholders’ interest was not perfected. The First Circuit disagreed, holding that while financing statements filed in 2008 did not perfect the Bondholders’ security interest in the pledged property, financing statement amendments filed in 2015 and 2016 satisfied the filing requirements for perfection when read in conjunction with the 2008 financing statements. View "Altair Global Credit Opportunities Fund v. Employees Retirement System" on Justia Law

Stockholder-plaintiff KT4 Partners LLC appealed the Court of Chancery’s post-trial order granting in part and denying in part KT4’s request to inspect various books and records of appellee Palantir Technologies Inc., a privately held technology company. The Court of Chancery found that KT4 had shown a proper purpose of investigating suspected wrongdoing in three areas: (1) “Palantir’s serial failures to hold annual stockholder meetings”; (2) Palantir’s amendments of its Investors’ Rights Agreement in a way that “eviscerated KT4’s (and other similarly situated stockholders’) contractual information rights after KT4 sought to exercise those rights”; and (3) Palantir’s potential violation of two stockholder agreements by failing to give stockholders notice and the opportunity to exercise their rights of first refusal, co-sale rights, and rights of first offer as to certain stock transactions. The Court ordered Palantir to produce the company’s stock ledger, its list of stockholders, information about the company’s directors and officers, year-end audited financial statements, books and records relating to annual stockholder meetings, books and records relating to any cofounder's sales of Palantir stock. The Court otherwise denied KT4's requests, including a request to inspect emails related to Investors' Rights Agreement amendments. Both sides appealed, but the Delaware Supreme Court was satisfied the Court of Chancery did not abuse its discretion with respect to all but two issues: (1) denying wholesale requests to inspect email relating to the Investors' Rights Agreement; (2) and requests to temper the jurisdictional use restriction imposed by the court. "Given that the court found a credible basis to investigate potential wrongdoing related to the violation of contracts executed in California, governed by California law, and among parties living or based in California, the basis for limiting KT4’s use in litigation of the inspection materials to Delaware and specifically the Court of Chancery was tenuous in the first place, and the court lacked reasonable grounds for denying the limited modifications that KT4 requested." View "KT4 Partners LLC v. Palantir Technologies, Inc." on Justia Law

This case involved an alleged worldwide Ponzi scheme and the antifraud provisions of the federal Securities Act of 1933 and the Securities Exchange Act of 1934. Defendant Charles Scoville operated an internet traffic exchange business through his Utah company, Defendant Traffic Monsoon, LLC. The Securities and Exchange Commission (“SEC”) initiated this civil enforcement action, alleging Defendants were instead operating an unlawful online Ponzi scheme involving the fraudulent sale of securities. In this interlocutory appeal, Scoville challenged several preliminary orders the district court issued at the outset, including orders freezing Defendants’ assets, appointing a receiver, and preliminarily enjoining Defendants from continuing to operate their business. The Tenth Circuit upheld those preliminary rulings, finding the SEC asserted sufficient evidence to make it likely that the SEC would be able to prove that Defendants were operating a Ponzi scheme. View "SEC v. Traffic Monsoon" on Justia Law

Nielen-Thomas, on behalf of herself and others similarly situated, filed a complaint in Wisconsin state court alleging she and other class members were defrauded by their investment advisor. Defendants removed the case to federal court and argued the action should be dismissed because it was a “covered class action” precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 78bb(f)(1), (f)(5)(B), According to Nielen-Thomas, her lawsuit did not meet SLUSA’s “covered class action” definition because she alleged a proposed class with fewer than 50 members. The district court held that Nielen-Thomas’s suit was a “covered class action” because she brought her claims in a representative capacity, section 78bb(f)(5)(B)(i)(II), and dismissed her claims. The Seventh Circuit affirmed. The plain language of SLUSA’s “covered class action” definition includes any class action brought by a named plaintiff on a representative basis, regardless of the proposed class size, which includes Nielen-Thomas’s class action lawsuit and her complaint meets all other statutory requirements, her lawsuit is precluded by SLUSA. View "Nielen-Thomas v. Concorde Investment Services, LLC" on Justia Law

The SEC alleged that defendants violated the Securities Exchange Act because they failed to register interests in their drilling projects as securities. Williamson v. Tucker set out three factors for determining whether investors expect to profit solely from third-party efforts. The Fifth Circuit reversed the district court's grant of the SEC's motion for summary judgment, holding that defendants raised significant issues of material fact.The court applied the first factor in Williamson and held that the investors had formal powers, they used these powers, the voting structure was not necessarily coercive, the investors received information, they communicated with each other, and the number of investors was not so high that it eliminated all of their power. In regard to the second Williamson factor, the court held that there was a genuine issue about the investors' knowledge and experience. In regard to the third Williamson factor, the court held that there was a genuine issue concerning whether the managers were effectively irreplaceable. View "SEC v. Arcturus Corp." on Justia Law