Justia Securities Law Opinion Summaries

During October 2008 the Trust lost $3.6 million trading futures contracts. Contending that errors by Dorman, a futures commission merchant, caused some of these losses, in October 2011 the Trust asked the Commodity Futures Trading Commission to order Dorman to make reparation, 7 U.S.C. 18(a)(1). The Commission dismissed the claim as untimely. The Trust had made a claim within the two-year limitations period, but with the National Futures Association, which referred it to arbitration. The arbitrators awarded the Trust $500,000 against several defendants but ruled in favor of Dorman because the Trust’s contract with that entity set a one‐year time limit for financial claims. The Commission rejected the Trust’s claim of equitable tolling. The Seventh Circuit denied a petition for review. The Trust knew about the trading losses as soon as they occurred but did nothing for almost two years; it did not diligently pursue the Commission’s processes. The Trust did not say that any circumstance, let alone an extraordinary one, prevented timely filing. The court reasoned that the arbitral award, right or wrong, has nothing to do with equitable tolling. View "Conway Family Trust v. Commodity Futures Trading Commission" on Justia Law

United BioSource LLC (UBC) and Bracket Holding Corp. entered into a securities purchase agreement (SPA) pursuant to which Bracket purchased all equity interests and ownership interests in three subsidiaries of UBC, including P-Star Acquisition Co. Section 2.6(e) of the SPA governed the handling of certain tax refunds relating to pre-closing periods that may be received after the transaction’s closing. UBC later filed this complaint asserting a claim for specific performance. The complaint asserted that Bracket breached section 2.6(e) of the SPA by failing to forward a Pennsylvania tax refund to UBC within fifteen days of P-Star’s receipt of the refund. The Court of Chancery granted UBC’s motion for summary judgment seeking an order requiring Bracket to immediately forward the tax refund to UBC, holding that UBC clearly established that Bracket breached section 2.6 of the EPA based on undisputed facts, and Bracket’s affirmative defenses failed as a matter of law. View "United BioSource LLC v. Bracket Holding Corp." on Justia Law

MCL 450.4515(1)(e) provided alternative statutes of limitations: one based on the time of discovery of the cause of action and the other based on the time of accrual of the cause of action. Plaintiffs were former employees of defendant ePrize who acquired ownership units in the company. Plaintiffs alleged founder Jeff Linkner orally promised them that their interests in ePrize would never be diluted or subordinated. In its fifth operating agreement, executed in 2009, ePrize stock issued in Series C and Series B Units carried distribution priority over the common units held by plaintiffs. The Operating Agreement further provided that if the company were ever sold, Series C Units would receive the first $68.25 million of any available distribution. In 2012, ePrize sold substantially all of its assets and, pursuant to the Operating Agreement, distributed nearly $100 million in net proceeds to the holders of Series C and Series B Units. Plaintiffs received nothing for their common shares. Plaintiffs thereafter sued, bringing claims for LLC member oppression, breach of contract, and breach of fiduciary duty. The trial court granted defendants’ motion for summary judgment, concluding that the three-year limitation period in MCL 450.4515(1)(e) constituted a statute of limitations, rather than a statute of repose, and that plaintiffs' claims accrued in 2009. The Court of Appeals disagreed, finding plaintiffs’ claims did not accrue until 2012, when ePrize sold substantially all of its assets, because until that sale plaintiffs had not incurred a calculable financial injury and any damage claim before that time would have been “speculative.” Accordingly, the Court concluded that plaintiffs’ claims were timely filed before the expiration of the three-year limitation period. The Michigan Supreme Court agreed with the trial court's reasoning: plaintiffs’ actions for damages under MCL 450.4515(1)(e) were barred by the three-year statute of limitations unless plaintiffs could establish on remand that they were entitled to tolling. View "Frank v. Linkner" on Justia Law

The First Circuit affirmed the district court’s dismissal of this putative class action alleging violations under sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The district court concluded that the initial amended complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Thereafter, the court denied Plaintiffs’ subsequent motion to vacate the judgment and for leave to file a second amended complaint to include purportedly new evidence. The First Circuit held, on de novo review, that (1) the initial amended complaint failed to plead particularized facts giving rise to a strong inference of scienter, as required by the PSLRA; and (2) the district court did not abuse its discretion in denying the motion to vacate the judgment and for leave to file a second amended complaint. View "In re Biogen Inc. Securities Litigation" on Justia Law

The Ninth Circuit affirmed the dismissal of plaintiff's suit alleging securities fraud under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, 15 U.S.C. 78j(b) and 78t(a), 17 C.F.R. 240.10b-5. Plaintiff alleged that defendants violated these statutes in connection with statements regarding Align's goodwill valuation of its subsidiary, Cadent. The Ninth Circuit held that the three standards for pleading falsity of opinion statements articulated in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, apply to Section 10(b) and Rule 10b-5 claims; plaintiff has failed to sufficiently plead falsity under any of the three Omnicare standards; plaintiff has also failed to sufficiently plead scienter; and, because plaintiff has inadequately alleged a primary violation of federal securities law, plaintiff cannot establish control person liability. View "City of Dearborn Heights Act 345 Police & Fire Retirement System v. Align Technology" on Justia Law

After Lehman Brothers filed for Chapter 11 bankruptcy, thousands of its employees were holding restricted stock units (RSUs) that had been awarded over the preceding five years, but that had not yet vested and had thus been rendered worthless by the bankruptcy filing. The employees filed proofs of claim in the Chapter 11 proceeding and Lehman Brothers filed omnibus objections to the claims. The Second Circuit noted that it need not determine whether an RSU is an "equity security" under 11 U.S.C. 101(16), because, even if it is, RSU holders are not barred from asserting proofs of claim—such as the breach‐of‐contract claims asserted here—inasmuch as at least some of their claims are not duplicative of proofs of interest. However, the Second Circuit affirmed and concluded that Lehman Brothers' omnibus objections must nonetheless be sustained on the alternative ground that, pursuant to section 510(b) of the Bankruptcy Code, 11 U.S.C. 510(b), the claims must be subordinated to the claims of general creditors because, for purposes of this statute, (1) RSUs are securities, (2) the claimants acquired them in a purchase, and (3) the claims for damages arise from those purchases or the asserted rescissions thereof. View "In re: Lehman Bros." on Justia Law

The SEC brought an enforcement action against LPHI and two of its senior officers, Pardo and Peden, alleging violations of reporting and anti-fraud provisions of the federal securities laws. The SEC alleged that LPHI, a company in the business of facilitating the sales of existing life insurance policies to investors, knowingly underestimated life expectancies for the insureds in public filings with the SEC. A jury found defendants liable for violations of section 17(a) of the Securities Act of 1933 and section 13(a) of the Securities Exchange Act of 1934, 15 U.S.C. 77q(a), 78m(a). The district court sustained the jury's verdict as to section 13(a), but the district court set aside the verdict as to section 17(a). The district court then imposed civil penalties and issued injunctions restraining them from committing additional violations of the securities laws. The district court declined to order Pardo to reimburse LPHI for compensation under section 304 of the Sarbanes-Oxley Act (SOX), 15 U.S.C. 7243(a). Both parties appealed. The court found no abuse of discretion in the admission of the SEC expert witness's opinion; the evidence was sufficient to support the jury verdict that defendants aided and abetted LPHI's violation of section 13(a) and the rules thereunder; the court affirmed the district court's imposition of second-tier penalties; remanded the case specifically for recalculation of the number of violations without the flaws conceded by the SEC and for reassessment of the amounts of civil penalties imposed on defendants; and affirmed the district court's injunctions. As for the SEC's cross-appeal, the court concluded that the jury's section 17(a) verdict must stand and reversed the district court's grant of judgment as a matter of law, remanding for determination of appropriate remedies; the district court erred in concluding that the restatements were not required by LPHI's misconduct in connection with its underestimated life expectancy estimates; and the court reversed the district court's judgment, remanding for that court to determine the appropriate amount of SOX reimbursements. View "SEC v. Life Partners Holdings, Inc." on Justia Law

Plaintiffs, shareholders of ATP, filed a securities class action concerning ATP's collapse into bankruptcy. Plaintiffs alleged that defendants, each of whom was an officer or director of ATP, misrepresented the production of Well 941 #4, ATP's liquidity and whether the company had the available funds to complete the Clipper pipeline, and the true reason that Matt McCarroll resigned as CEO of ATP. The district court dismissed plaintiffs' Second Amended Complaint with prejudice. The court concluded that, viewing plaintiffs' allegations as a whole, plaintiffs failed adequately to allege scienter with regard to Defendant Reese's statements; plaintiffs' allegations of scienter as to ATP's liquidity and the Clipper project failed as a matter of law; and there was no basis for the court to conclude that Defendants Bulmahn and Reese knew or were reckless in not knowing McCarroll's true reasons for resigning. Accordingly, the court affirmed the judgment. View "Neiman v. Bulmahn" on Justia Law

A New Mexico county board filed a lawsuit in state court against its securities broker and registered agent. The board refrained, however, from serving process while it determined whether arbitration was available. The securities broker and agent nonetheless removed the case to federal court and moved to dismiss the suit. Four days after briefing was complete and about three months after the board had filed suit, the board voluntarily dismissed the case and filed for arbitration. The securities broker and agent then filed this action to enjoin arbitration, arguing the board waived its right to demand arbitration when it filed the state court action. The district court disagreed and instead granted the board’s counterclaim to compel arbitration. The broker and registered agent appealed the waiver issue. Finding no reversible error, the Tenth Circuit affirmed. View "BOSC v. Board of County Commissioners" on Justia Law

Zafgen Inc.’s investors (Investors) brought a securities fraud class action suit against Zafgen and its Chief Executive Officer (collectively, Defendants) following a significant drop in the share price of the company. Specifically, Investors alleged that the Defendants made several misleading statements regarding Zafgen’s anti-obesity drug Beloranib. The district court granted Defendants’ motion to dismiss, concluding that the complaint did not contain facts giving rise to a “cogent and compelling” inference of scienter as required under the Private Securities Litigation Reform Act. The First Circuit affirmed, holding that the district court properly dismissed Investors’ claims because the complaint, considered as a whole, did not present allegations giving rise to a cogent and compelling inference of scienter. View "Brennan v. Zafgen, Inc." on Justia Law