Justia Securities Law Opinion Summaries

Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law

Karna Kornkven, Eric Molbert, and Kristi Benz ("Siblings") appeal after the district court entered judgment in favor of their brother, Lauris Molbert. The parties' father, Ralph Molbert, owned the controlling interest in the Bank of Steele and its holding company, H.O.M.E., Inc. Lauris, the oldest child, became a director of the bank in 1983 and director of the holding company in 1986 and was actively involved in the operations of both entities. Ralph and Beverly Molbert intended for Lauris Molbert to own and control the bank and holding company and pursued this intention through their estate plan. In December 1992, Ralph and Beverly Molbert gifted their children shares of H.O.M.E. stock and recorded the gift for tax purposes in 1992. It was understood that Ralph and Beverly intended to restrict these gifted shares. Following the gift of H.O.M.E. shares to the Molbert children, H.O.M.E. board minutes signed by Ralph and Beverly described the development of a shareholder agreement to restrict the gifted shares. In July 1993, the parties discussed the agreement while on a family vacation to Whitefish, Montana. The parties executed the stock purchase agreement following the Whitefish vacation. Ralph signed the agreement as H.O.M.E. president. Share certificates were issued after execution of the agreement stating the gifted shares were restricted by the stock purchase agreement. The agreement granted Lauris the right to vote the Siblings' shares. The agreement also granted him the irrevocable right to purchase the Siblings' shares at book value. Lauris sent written notice to the Siblings that he was exercising the call option set forth in Paragraph Seven of the stock purchase agreement. The Siblings refused to transfer their shares. Molbert sued the Siblings for specific performance, seeking a judgment requiring them to sell their shares to him in exchange for the book value payment. The Siblings counterclaimed, alleging the stock purchase agreement was void because Lauris engaged in fraud by failing to disclose that the agreement granted him a purchase option at book value. The Siblings also alleged the agreement lacked consideration and Lauris breached fiduciary duties owed to them. The Siblings sought relief in the form of cancellation of the agreement. Judgment was entered in Lauris' favor; finding no reversible error in that judgment, the North Dakota Supreme Court affirmed. View "Molbert v. Kornkven" on Justia Law

In “Citadel” the Seventh Circuit held that “the district court did not abuse its discretion in dismissing [the] case [of certain securities firms] for failure to exhaust administrative remedies.” After that decision, Securities Firms filed a petition before the Securities and Exchange Commission (SEC) seeking damages, claiming the Exchanges improperly imposed fees under Payment for Order Flow programs. The SEC dismissed that petition for lack of jurisdiction. The Exchanges, citing CitadeI, maintained the SEC had jurisdiction under Section 19(h)(1) of the Securities Exchange Act because the petition sought a determination that the Exchanges had violated their own rules. The SEC reasoned that Section 19(d), which authorizes it to review allegations that a national exchange has unduly “prohibit[ed] or limit[ed] … access to services,” 15 U.S.C. 78s(d)(1), did not apply; the petition did not allege that the Exchanges had denied or limited access to any service. The SEC further stated that seeking damages was “incongruous with” the SEC’s Section 19(d) remedial authority and that section 78s(h)(1) does not authorize claims by private parties. The Seventh Circuit affirmed, “the Petition alleges, in effect, a billing dispute” between two private parties, and requests the SEC order the Exchanges to pay damages for improperly charging fees under their PFOF programs. View "Chicago Board Options Exchange v. Securities and Exchange Commission" on Justia Law

Stacy Ryan filed suit against Streck, Inc. and Connie Ryan, alleging violations of section 10(b) of the Securities Exchange Act of 1934, Securities and Exchange Commission Rule 10b-5, and multiple violations of Nebraska law in connection with Streck's redemption of Stacy's stock. The Eighth Circuit held that the district court did not err in granting defendants' motion to dismiss because Stacy did not plausibly plea that defendants' wrongful actions caused her loss. Furthermore, the district court did not abuse its discretion in denying the motion to alter or amend the judgment. However, the district court erred in denying Stacy's Federal Rule of Civil Procedure 59(e) motion. Therefore, the court remanded for further consideration of the motion to alter or amend presented newly discovered evidence warranting alteration of the order dismissing her breach of contract claim. View "Ryan v. Ryan" on Justia Law

Plaintiffs filed suit for damages resulting from defendants' manipulation of natural gas trading at four regional hubs in the western part of the United States. The Second Circuit held that plaintiffs had Article III standing, but they failed to plausibly allege injury under any of their claims. In this case, plaintiffs failed to state a claim under the Commodities Exchange Act (CEA) because it was not plausible on the record that they were injured by the manipulations West Desk perpetrated. For similar reasons, plaintiffs failed to establish antitrust standing. Accordingly, the court modified the order and judgment to remove the dismissal for lack of standing and affirmed the judgment as modified. View "Harry v. Total Gas & Power North America, Inc." on Justia Law

Petitioners challenged the Commission's issuance of an order approving Rule 2030, a regulation governing the political contributions of FINRA members who solicit government officials for investment advisory services contracts. The Eleventh Circuit held that it could not consider the petition on the merits because the Georgia party did not have standing to challenge the Rule and this court was not the proper venue for either the New York Committee or the Tennessee Party. Accordingly, the court dismissed the Georgia Party for lack of jurisdiction, and transferred the appeal of the remaining two parties to the United States Court of Appeals for the District of Columbia Circuit. View "The Georgia Republican Party v. Securities and Exchange Commission" on Justia Law

Plaintiff, on behalf of former Emulex shareholders, appealed the district court's dismissal of his putative securities class action. The Ninth Circuit held that claims under Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(e), require a showing of negligence, not scienter. Therefore, the panel reversed the dismissal of the complaint and remanded to the district court for it to reconsider defendants' motion to dismiss under a negligence standard. Because plaintiff's Section 14(e) claim survived, his claim under Section 20(a) of the Exchange Act also remained. Furthermore, the panel affirmed the district court's conclusion that Section 14(d)(4) of the Exchange Act did not create a private right of action and dismissal of the complaint as to Emerald Merger Sub because it was not a proper defendant. View "Varjabedian v. Emulex Corp." on Justia Law

Plaintiff, a variable annuity policy holder, filed a putative class action in state court alleging breach of contract by an insurance company when it introduced a volatility management strategy to the policies without full compliance with state law. The case was removed to district court and then dismissed. The Second Circuit reversed and remanded, holding that a holder's passive retention of a security following a misrepresentation of which the holder is unaware lacks the "in connection with" requirement for preclusion under the Securities Litigation Uniform Standards Act (SLUSA). In this case, the alleged misrepresentation was not made in connection with the purchase or sale of a SLUSA-covered security. There was no plausible allegation in the complaint that any decision to hold a security occurred that was related in any way to AXA's disclosures to the DFS. The court remanded with instructions to remand the case to state court. View "O'Donnell v. AXA Equitable Life Ins. Co." on Justia Law

Plaintiffs, five Korean citizens, filed suit alleging that Tower Research Capital, a New York based high‐frequency trading firm, and its founder injured them and others by engaging in manipulative "spoofing" transactions on the Korea Exchange (KRX) night market in violation of the Commodity Exchange Act (CEA), 7 U.S.C. 1 et seq., and New York law. The Second Circuit vacated the district court's dismissal of the action, holding that plaintiffs' allegations make it plausible that the trades at issue were "domestic transactions" under the court's precedent, and thus the court did not agree that application of the CEA to defendants' alleged conduct would be an impermissible extraterritorial application of the Act. Furthermore, the court held that plaintiffs have brought a claim for unjust enrichment where New York unjust enrichment claims did not require a direct relationship between the plaintiff and defendant. Accordingly, the court remanded for further proceedings. View "Choi v. Tower Research Capital LLC" on Justia Law

Plaintiffs, five Korean citizens, filed suit alleging that Tower Research Capital, a New York based high‐frequency trading firm, and its founder injured them and others by engaging in manipulative "spoofing" transactions on the Korea Exchange (KRX) night market in violation of the Commodity Exchange Act (CEA), 7 U.S.C. 1 et seq., and New York law. The Second Circuit vacated the district court's dismissal of the action, holding that plaintiffs' allegations make it plausible that the trades at issue were "domestic transactions" under the court's precedent, and thus the court did not agree that application of the CEA to defendants' alleged conduct would be an impermissible extraterritorial application of the Act. Furthermore, the court held that plaintiffs have brought a claim for unjust enrichment where New York unjust enrichment claims did not require a direct relationship between the plaintiff and defendant. Accordingly, the court remanded for further proceedings. View "Choi v. Tower Research Capital LLC" on Justia Law