Justia Securities Law Opinion Summaries

This appeal centered on claims for securities fraud against Spirit AeroSystems, Inc., and four of its executives. Spirit produced components for jetliners, including Boeing’s 737 MAX. But Boeing stopped producing the 737 MAX, and Spirit’s sales tumbled. At about the same time, Spirit acknowledged an unexpected loss from inadequate accounting controls. After learning about Spirit’s downturn in sales and the inadequacies in accounting controls, some investors sued Spirit and four executives for securities fraud. The district court dismissed the suit, and the investors appealed. "For claims involving securities fraud, pleaders bear a stiff burden when alleging scienter." In the Tenth Circuit's view, the investors did not satisfy that burden, so it affirmed the dismissal. View "Meitav Dash Provident Funds and Pension Ltd., et al. v. Spirit AeroSystems Holdings, et al." on Justia Law

Shareholders of Defendant-Appellant Goldman Sachs Group, Inc. brought this class action lawsuit against Goldman and several of its former executives, claiming defendants committed securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5 promulgated thereunder by misrepresenting Goldman’s ability to manage conflicts of interest in its business practices. After a number of appeals and subsequent remand, including an appeal to the Supreme Court, the district court once again certified a shareholder class under Federal Rule of Civil Procedure 23(b)(3).   The Second Circuit reversed the district court’s class certification decision with instructions to decertify the class. The court held that the district court clearly erred in finding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence and, therefore, abused its discretion by certifying the shareholder class. The court explained that there is an insufficient link between the corrective disclosures and the alleged misrepresentations. Defendants have demonstrated, by a preponderance of the evidence, that the misrepresentations did not impact Goldman’s stock price and, by doing so, rebutted Basic’s presumption of reliance. Thus, the district court clearly erred in concluding otherwise and therefore abused its discretion in certifying the shareholder class. View "Ark. Tchr. Ret. Sys. v. Goldman Sachs Grp., Inc." on Justia Law

Certain healthcare entities entered into a lease agreement and related lease schedules with Winthrop Resources Corporation (Winthrop). Prospect ECHN, Inc. (Prospect) purchased the healthcare entities’ assets and later sought to be released from their obligations to Winthrop. After negotiations failed, Prospect filed suit against Winthrop, alleging that the schedules must be recharacterized as security interests under the Uniform Commercial Code (U.C.C.), as adopted by Minnesota. If recharacterized as security interests, Prospect owns the equipment that Winthrop had leased to it and can argue that Winthrop must return any security deposits and excess payments. If the schedules are true leases, however, Prospect owes Winthrop the amounts due under the contracts. The district court granted summary judgment in favor of Winthrop, concluding that the agreement and schedules constitute true leases and that Prospect had breached them. The court awarded damages to Winthrop and determined that it was entitled to attorneys’ fees and costs.   The Eighth Circuit affirmed. The court wrote that although the U.C.C. demands recharacterization under its bright-line test or when so compelled by the facts of the case, it does not demand so here, where the parties negotiated a lease agreement and related schedules that skirt the line of creating security interests without crossing it. Thus, the court concluded that the district court correctly granted summary judgment in Winthrop’s favor. Further, the court found no error in the award of damages in the amount of the unpaid lease charges and other amounts due, as well as in the amount of the accelerated lease charges. View "Prospect ECHN, Inc. v. Winthrop Resources Corp." on Justia Law

Petitioner Cboe Futures Exchange (CFE) announced plans to list futures contracts based on the Cboe Volatility Index, more commonly known as the “VIX Index.” The following year, the SEC and the CFTC issued a joint order “excluding certain indexes comprised of options on broad-based security indexes”—including the VIX—“from the definition of the term narrow-based security index.” The petition, in this case, challenged the SEC’s 2020 order treating SPIKES futures as futures.   The DC Circuit granted the petition. The court explained that the SEC did not adequately explain why SPIKES futures must be regulated as futures to promote competition with VIX futures. However, the court wrote that while it vacates the Commission’s order, it will withhold issuance of our mandate for three calendar months to allow market participants sufficient time to wind down existing SPIKES futures transactions with offsetting transactions. The court explained that the Exemptive Order never mentions the futures disclosures. And at any rate, those disclosures only partially fill the void left by the absence of the Disclosure Statement. As with the Exemptive Order’s exceptions and conditions, the futures disclosures do not address any number of matters covered by the Disclosure Statement. And even when the two sets of disclosures overlap, the Disclosure Statement tends to provide much greater detail than the futures disclosures. View "Cboe Futures Exchange, LLC v. SEC" on Justia Law

The corporate charter of a bank holding company capped at 10% the stock that could be voted by a “person” in any stockholder vote. During a proxy contest for three seats of a staggered board, the CCSB board of directors instructed the inspector of elections not to count 37,175 shares voted in favor of a dissident slate of directors. According to the board, the 37,175 shares exceeded the 10% voting limitation because certain stockholders were acting in concert with each other. If the votes had been counted, the dissident slate of directors would have been elected. The CCSB corporate charter also provided that the board’s “acting in concert” determination, if made in good faith and on information reasonably available, “shall be conclusive and binding on the Corporation and its stockholders.” In a summary proceeding brought by the plaintiffs, the Court of Chancery found: (1) the “conclusive and binding” charter provision invalid under Delaware corporate law; (2) the board’s instruction to the inspector of elections invalid because the individuals identified by the board were not acting in concert; and (3) the board’s election interference did not withstand enhanced scrutiny review. The court also awarded the plaintiffs attorneys’ fees for having conferred a benefit on CCSB. CCSB argued the Court of Chancery erred when it invalidated the charter provision and reinstated the excluded votes. The Delaware Supreme Court affirmed the Court of Chancery: plaintiffs proved that the board breached its duty of loyalty by instructing the inspector of elections to disregard the 37,175 votes. "The charter provision cannot be used to exculpate the CCSB directors from a breach of the duty of loyalty. Further, the court’s legal conclusion and factual findings that the stockholders did not act in concert withstand appellate review." View "CCSB Financial Corp. v. Totta" on Justia Law

Mimi Investors, LLC (“Mimi Investors”) sued Paul Tufano, David Crocker, Dennis Cronin, and Neil Matheson (“ORCA Officers”), the directors and officers of ORCA Steel, LLC (“ORCA Steel”), a now-defunct data storage company, alleging that ORCA Officers made material misrepresentations of fact in violation of the Pennsylvania common law and Section 1- 401(b) of the Pennsylvania Securities Act ("PSA"). Mimi Investors described a meeting held in February of 2014 during which ORCA Officers allegedly represented to Mimi Investors that they had received 400 orders for computer data storage space (“CDS Orders”) for ORCA Steel’s new data storage facility. To secure financing for the purpose of servicing the CDS Orders, ORCA Officers sought promissory notes to increase capital. In October 2014, ORCA Steel ceased making interest payments on the loan. ORCA Steel did not respond to Mimi Investors’ demand letter, sent in August 2015, which sought to cure the default. Mimi Investors asserted that neither “construction financing nor the fulfillment of the new orders materialized.” It also averred that, on October 21, 2014, ORCA Officers told Mimi Investors that they “had known for months that the loan to fund new construction was not viable” because the CDS Orders were “not investment grade.” Mimi Investors claimed that “these misrepresentations regarding available construction financing and committed orders, as well as other statements by” ORCA Officers, “were material and untrue within the meaning of the” PSA, and that Mimi Investors “relied on these misrepresentations in deciding to make the [l]oan[.]” In a matter of first impression, the Pennsylvania Supreme Court addressed whether a plaintiff must plead and prove scienter as an element of 70 P.S. § 1-401(b) of the PSA. After careful review, the Court held that under the plain language of its text, Section 1-401(b) of the PSA did not contain a scienter element. However, the PSA provided a defense to civil liability under Section 1-401(b) if the defendant could show they “did not know and in the exercise of reasonable care could not have known of the untruth or omission[.]” View "Mimi Investors, LLC v. Tufano, P., et al." on Justia Law

Jumper, a securities broker-dealer, arranged financing on behalf of private investors for the purchase of a Pennsylvania fire-brick manufacturer. Jumper fraudulently obtained authority to transfer the company’s pension plan assets by forging the majority stakeholder’s signature on several documents. Between 2007-2016, Jumper transferred $5.7 million from the pension plan to accounts he controlled.The SEC filed a civil complaint against Jumper for securities fraud in the Western District of Tennessee. The Department of Justice filed criminal charges against Jumper in the Middle District of Pennsylvania. The Tennessee court entered a default judgment for the SEC and ordered Jumper to disgorge $5.7 million and to pay prejudgment interest of $726,758.79. In Pennsylvania, Jumper pleaded guilty to wire fraud and agreed to make full restitution; the parties stipulated a loss of $1.5-$3.5 million.The district court considered Jumper’s request for a downward departure based on medical issues, discussed the relevant 18 U.S.C. 3553(a) factors, and denied Jumper’s requests, explaining, the Bureau of Prisons (BOP) is equipped to provide consistent, adequate medical care. The court sentenced Jumper to 78 months’ incarceration, at the bottom of the Guidelines range of 78–97 months, and ordered him to pay $2,426,550 in restitution. The Third Circuit affirmed, rejecting arguments that the sentence violated the Double Jeopardy Clause and principles of collateral estoppel and that the court improperly concluded that the BOP could treat his medical issues. View "United States v. Jumper" on Justia Law

Plaintiff Patrick Hogan brought a putative federal securities-fraud class action against poultry producer Pilgrim’s Pride Corp., Pilgrim’s former chief executive officer and president William Lovette, and Pilgrim’s then chief financial officer Fabio Sandri (collectively, Defendants). Plaintiff accused Defendants of violating § 10(b) of the Securities Exchange Act of 1934, and Securities and Exchange Commission Rule 10b–5, 17 C.F.R. § 240.10b–5. Plaintiff also accused Lovette and Sandri of violating § 20(a) of the Act, 15 U.S.C. § 78t(a). Plaintiff appealed four decisions by the district court: (1) the grant of Defendants’ motion to dismiss the first amended complaint (the FAC) for failure to adequately plead a claim; (2) the denial of Plaintiff’s motion to reconsider "Hogan I" (but granting leave to amend the complaint without setting a deadline); (3) the grant of Defendants’ motion to dismiss the second amended complaint (the SAC) as barred by the applicable statute of repose; and (4) the denial of Plaintiff’s motion to reconsider "Hogan III." After review, the Tenth Circuit Court of Appeals reversed the district court’s order in Hogan III, dismissed as moot Plaintiff’s challenges to the orders in Hogan I, Hogan II, and Hogan IV, and remanded for further proceedings at the district court. Because (1) the SAC did not raise new claims or add any defendants and (2) the district court did not enter a final order after Hogan I and Hogan II (so Defendants’ right to repose had not vested), the SAC was not barred by the statute of repose. Because the SAC superseded the FAC, the Court found the sufficiency of the FAC was a moot issue. And because the district court did not address the sufficiency of the SAC, the case was remanded for the district court to address this issue in the first instance. View "Hogan, et al. v. Pilgrim's Pride Corporation, et al." on Justia Law

MiMedx is a Florida corporation headquartered in Marietta, Georgia. Carpenters Pension Fund of Illinois is the lead plaintiff in this consolidated securities class action. Carpenters purchased 41,080 shares of MiMedx common stock in three separate transactions between August 2017 and October 2017 and later sold those shares in December 2017. The district court dismissed Carpenters’s action, finding that none of the complaint’s allegations occurring before the date Carpenters sold its MiMedx stock constituted a partial corrective disclosure sufficient to demonstrate loss causation. Carpenters contend that the district court erred in its loss causation analysis. Carpenters further argued that the district court erred in denying its post-judgment motion for relief from judgment, as well as its post-judgment request for leave to amend its complaint.   The Eleventh Circuit concluded that the district court erred in finding that Carpenters lacked standing to bring its Exchange Act claims against Defendants and vacated that portion of the district court’s order. The court affirmed the district court’s order dismissing Carpenters’ second amended complaint for failure to plead loss causation. The court explained that as to Rule 59(e), the district court did not abuse its discretion in determining that Carpenters sought to relitigate arguments it had already raised before the entry of judgment. As to Rule 60(b)(1) the court found no mistake in the district court’s application of the law in this case that would change the outcome of this case. And, as to Rule 60(b)(6), the district court found that Carpenters’ motion primarily focused on the court’s purported “mistakes in the application of the law,” which fall squarely under Rule 60(b)(1). View "Carpenters Pension Fund of Illinois v. MiMedx Group, Inc., et al." on Justia Law

The Securities and Exchange Commission (“SEC”) sued Defendant as well as other individual Defendants and corporate entities for securities violations. Defendant appealed the district court’s order appointing a receiver over all corporations and entities controlled by him.   The Fifth Circuit vacated the order appointing the receiver effective 90 days after the issuance of the court’s mandate and remanded for further proceedings. The court also granted in part Defendant’s motion for a partial stay pending appeal. The court explained that Faulkner does not support the district court’s actions here. Under Faulkner, the SEC could have sought an injunction freezing asset transfers while it traced the funds and determined which entities should be placed in the receivership. But it did not. Since a receivership’s jurisdiction extends only over property subject to the underlying claims, the district court abused its discretion by including all Defendant-controlled entities in the receivership without first finding that they had received or benefited from the ill-gotten funds. Should the district court decide that a new receivership is justified on remand, it can only extend over entities that received or benefitted from assets traceable to Defendant’s alleged fraudulent activities that are the subject of this litigation. View "SEC v. Barton" on Justia Law