Justia Securities Law Opinion Summaries

The Court of Chancery initially found that Wal-Mart stockholders who were attempting to prosecute derivative claims in Delaware could no longer do so because a federal court in Arkansas had reached a final judgment on the issue of demand futility first, and the stockholders were adequately represented in that action. But the derivative plaintiffs in Delaware asserted that applying issue preclusion in this context violated their Due Process rights. The Delaware Supreme Court surmised this dispute implicated complex questions regarding the relationship among competing derivative plaintiffs (and whether they may be said to be in “privity” with one another); whether failure to seek board-level company documents renders a derivative plaintiff’s representation inadequate; policies underlying issue preclusion; and Delaware courts’ obligation to respect the judgments of other jurisdictions. The Delaware Chancellor reiterated that, under the present state of the law, the subsequent plaintiffs’ Due Process rights were not violated. Nevertheless, the Chancellor suggested that the Delaware Supreme Court adopt a rule that a judgment in a derivative action could not bind a corporation or other stockholders until the suit has survived a Rule 23.1 motion to dismiss The Chancellor reasoned that such a rule would better protect derivative plaintiffs’ Due Process rights, even when they were adequately represented in the first action. The Delaware Supreme Court declined to adopt the Chancellor’s recommendation and instead, affirmed the Original Opinion granting Defendants’ motion to dismiss because, under the governing federal law, there was no Due Process violation. View "California State Teachers' Retirement System, et al. v. Alvarez, et al." on Justia Law

The CFTC filed suit alleging that defendant violated the Commodities Exchange Act (CEA), when they failed to register as futures commission merchants, transacted the purchase and sale of contracts for the future delivery of a commodity (futures) outside of a registered exchange, and promised to invest customers' money in precious metals (metals) but instead invested the funds in futures. The Eleventh Circuit affirmed the district court's judgment in favor of the CFTC on all claims except as to the restitution award for the group of investors whose losses were associated solely with the registration violations. The court vacated that portion of the judgment and remanded with instructions to consider other equitable remedies. In this case, the district court erred in finding that the registration violation alone proximately caused any loss. View "U.S. Commodity Futures Commission v. Southern Trust Metals, Inc." on Justia Law

The CFTC filed suit alleging that defendant violated the Commodities Exchange Act (CEA), when they failed to register as futures commission merchants, transacted the purchase and sale of contracts for the future delivery of a commodity (futures) outside of a registered exchange, and promised to invest customers' money in precious metals (metals) but instead invested the funds in futures. The Eleventh Circuit affirmed the district court's judgment in favor of the CFTC on all claims except as to the restitution award for the group of investors whose losses were associated solely with the registration violations. The court vacated that portion of the judgment and remanded with instructions to consider other equitable remedies. In this case, the district court erred in finding that the registration violation alone proximately caused any loss. View "U.S. Commodity Futures Commission v. Southern Trust Metals, Inc." on Justia Law

After NASDAQ encountered a variety of technical difficulties in executing Facebook, Inc.'s initial public offering (IPO), retail investors filed suit against NASDAQ. After those claims were eventually settled, NASDAQ filed suit against insurance companies for coverage under both errors and omissions (E&O) and directors' and officers' (D&O) insurance policies. The district court granted ACE and Illinois National summary judgment. The Second Circuit held that federal securities law makes clear that retail investors in company stock are "customers" of NASDAQ within the meaning of the insurance policies at issue; the claims in the underlying complaint arose out of the provision of "professional services" as plaintiffs could not prevail without demonstrating that their losses flowed from NASDAQ's failure to properly process their trades; and thus the court affirmed the district court's grant of summary judgment on the issue of indemnification. View "Beazley Insurance Co. v. Ace American Insurance Co." on Justia Law

After NASDAQ encountered a variety of technical difficulties in executing Facebook, Inc.'s initial public offering (IPO), retail investors filed suit against NASDAQ. After those claims were eventually settled, NASDAQ filed suit against insurance companies for coverage under both errors and omissions (E&O) and directors' and officers' (D&O) insurance policies. The district court granted ACE and Illinois National summary judgment. The Second Circuit held that federal securities law makes clear that retail investors in company stock are "customers" of NASDAQ within the meaning of the insurance policies at issue; the claims in the underlying complaint arose out of the provision of "professional services" as plaintiffs could not prevail without demonstrating that their losses flowed from NASDAQ's failure to properly process their trades; and thus the court affirmed the district court's grant of summary judgment on the issue of indemnification. View "Beazley Insurance Co. v. Ace American Insurance Co." on Justia Law

Wilson was the Director, Chairman of the Board, President, and CEO of Imperial, which acquired e-Bio, which ran a fraud scheme, "Alchemy." It involved purchasing biodiesel from a third party and reselling it as though it had been produced by e-Bio, to take advantage of government incentives for renewable-energy production without expending production costs. Wilson was convicted of 21 counts: fraud in connection with the purchase or sale of securities, 15 U.S.C. 78j(b) and 78ff; fraud in the offer or sale of securities, 15 U.S.C. 77q(a) and 77x, and 18 U.S.C. 2; material false statements in required SEC filings, 15 U.S.C. 78ff and 18 U.S.C. 2; wrongful certification of annual and quarterly reports by a corporate officer, 18 U.S.C. 1350(c)(1); material false statements by a corporate officer to an accountant, 15 U.S.C. 78m(b)(5) and 78ff, and 18 U.S.C. 2; and false statements to government investigators, of 18 U.S.C. 1001. The dcourt sentenced Wilson to 120 months’ imprisonment and to pay $16,468,769.73 in restitution. The Seventh Circuit affirmed. None of Wilson’s contentions reach the high threshold of showing that a reasonable jury could not have found him guilty. Viewed in the light most favorable to the prosecution, the evidence adequately supports the jury’s finding that Wilson knowingly and willfully made false statements to investors, regulators, an outside accountant, and government agents, and the reasonable inference that Wilson participated in “Alchemy.” View "United States v. Wilson" on Justia Law

Goldman Sachs appealed the district court's order certifying a class of plaintiffs who purchased shares of common stock in Goldman Sachs. Plaintiffs alleged that Goldman Sachs made material misstatements about its efforts to avoid conflicts of interest, and those misstatements caused the value of their shares to decline. In light of the Second Circuit's recent pronouncement that defendants bear the burden of persuasion to rebut the presumption in Basic Inc. v. Levinson, 485 U.S. 224 (1988), by a preponderance of the evidence, and for additional reasons, the court vacated plaintiffs' motion for class certification and remanded for further proceedings. The court explained that it was unclear whether the district court applied the correct standard in this case. View "Arkansas Teachers Retirement System v. Goldman Sachs Group, Inc." on Justia Law

The Eighth Circuit affirmed the district court's dismissal of plaintiff's putative class action alleging that Scottrade violated the Missouri Merchandising Practices Act, breach of a common law fiduciary duty, and unjust enrichment. Plaintiff alleged that Scottrade routinely routes customer limit orders for the purchase and sale of securities to trading venues that pay rebates to sending brokers, violating Scottrade's duty of best execution in buying and selling securities on behalf of its customers. The court held that the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 78bb(f)(1), preempted plaintiff's action because the allegations in plaintiff's state law class action complaint, fairly read, alleged material misrepresentations or omissions, or the use of a manipulative or deceptive device or contrivance, in connection with the purchase and sale of covered securities. View "Lewis v. Scottrade, Inc." on Justia Law

The Ninth Circuit affirmed the dismissal of putative class actions because the Securities Litigation Uniform Standards Act (SLUSA), Pub L. 105-353, 112 Stat. 3227, deprived the court of subject matter jurisdiction. Plaintiffs filed suit alleging a breach by a securities dealer of the "duty of best execution" in completing trades. The panel held that plaintiffs had Article III standing because they alleged overpaying for securities trades and losses from trades not executed promptly and those concrete injuries, if proven, were redressable through monetary damages. However, plaintiffs' claims were barred by SLUSA, because all of plaintiffs' pleaded causes of action allege deceptive conduct actionable under federal securities law; the challenged conduct occurred in connection with the purchase or sale of a security; the complaint plainly pleaded a manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security; and thus the claims were SLUSA-barred. View "Fleming v. Charles Schwab Corp." on Justia Law

In this appeal, the issue before the Delaware Supreme Court was the limits of the stockholder ratification defense when directors make equity awards to themselves under the general parameters of an equity incentive plan. In the absence of stockholder approval, if a stockholder properly challenges equity incentive plan awards the directors grant to themselves, the directors must prove that the awards are entirely fair to the corporation. But, when the stockholders have approved an equity incentive plan, the affirmative defense of stockholder ratification comes into play. Here, the Equity Incentive Plan (“EIP”) approved by the stockholders left it to the discretion of the directors to allocate up to 30% of all option or restricted stock shares available as awards to themselves. The plaintiffs alleged facts leading to a pleading-stage reasonable inference that the directors breached their fiduciary duties by awarding excessive equity awards to themselves under the EIP. Thus, a stockholder ratification defense was not available to dismiss the case, and the directors had to demonstrate the fairness of the awards to the Company. The Supreme Court reversed the Court of Chancery’s decision dismissing the complaint and remanded for further proceedings. View "In Re Investors Bancorp, Inc. Stockholder Litigation" on Justia Law