Justia Securities Law Opinion Summaries

Appellants sought arbitration with BBVA Securities of Puerto Rico, Inc. and one of its securities brokers, asserting several claims under both federal and Puerto Rico law. An arbitration panel issued an award denying Appellants’ claims. Appellants then filed a complaint in the Puerto Rico Court of First Instance requesting that the court vacate or modify the arbitration award, seeking relief under the Puerto Rico Arbitration Act. Defendants removed the case to the U.S. District Court of the District of Puerto Rico, arguing that the district court had federal question jurisdiction and also had supplemental jurisdiction over the state law claims. Appellants moved to remand the case to Puerto Rico state court for lack of jurisdiction. The district court denied the motion after applying the look-through approach and determining that the underlying statement of claim alleged federal claims. The district court subsequently confirmed the award. The First Circuit affirmed, holding (1) the look-through approach was the correct test in this case; (2) federal jurisdiction existed; and (3) the district court did not err in refusing to vacate the award and in confirming it. View "Ortiz-Espinosa v. BBVA Securities of Puerto Rico, Inc." on Justia Law

JPMorgan offers to manage clients’ securities portfolios. Its affiliates sponsor mutual funds in which the funds can be placed. Plaintiffs in a putative class action under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2), alleged that customers invested in these mutual funds believing that, when recommending them as suitable vehicles, JPMorgan acts in clients’ best interests (as its website proclaims), while JPMorgan actually gives employees incentives to place clients’ money in its own mutual funds, even when those funds have higher fees or lower returns than third-party funds. The Seventh Circuit affirmed dismissal under the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which requires the district court to dismiss any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” Under SLUSA, securities claims that depend on the nondisclosure of material facts must proceed under the federal securities laws exclusively. The claims were framed entirely under state contract and fiduciary principles, but necessarily rest on the “omission of a material fact,” the assertion that JPMorgan concealed the incentives it gave its employees. View "Holtz v. J.P. Morgan Chase Bank, N.A." on Justia Law

If a LaSalle Bank custodial account had a cash balance at the end of a day, the cash would be invested in (swept into) a mutual fund chosen by the client. The Trust had a custodial account with a sweeps feature. After LaSalle was acquired by Bank of America, clients were notified that a particular fee was being eliminated. The trustee, who had not known about the fee, brought a putative class action in state court, claiming breach of the contract (which did not mention this fee) and violation of fiduciary duties. The bank removed the suit to federal court, relying on the Securities Litigation Uniform Standards Act, 15 U.S.C. 78bb(f), which authorizes removal of any “covered class action” in which the plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.” The statute requires that such state‑law claims be dismissed. The district court held that the suit fit the standards for removal and dismissal. The Seventh Circuit affirmed. The complaint alleged a material omission in connection with sweeps to mutual funds that are covered securities; no more is needed. The Trust may have had a good claim under federal securities law, but chose not to pursue it; the Act prohibits use of a state-law theory. View "Goldberg v. Bank of America, N.A." on Justia Law

HP shareholders filed a putative class action alleging violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. At issue is whether shareholders may bring a claim for securities fraud when a CEO and Chairman violates the corporate code of ethics after publicly touting the business’s high standards for ethics and compliance. The court held that Retail Wholesale, lead plaintiff in the putative class action, has failed to state a claim under the Act. The court explained that Retail Wholesale's fraud allegations must satisfy the particularity standard of Federal Rule of Civil Procedure 9(b), as well as the heightened pleading standard for securities fraud created by the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u–4. In this case, the court concluded that there were no material misrepresentations or actionable material omissions. Further, even if the complaint adequately alleged the existence of a misrepresentation or a misleading omission, it would not have been actionable, as it was immaterial. Accordingly, the court affirmed the district court's dismissal of the action. View "Retail Wholesale Union v. Hewlett-Packard Co." on Justia Law

EDMC challenges the district court's holding that a series of transactions meant to restructure EDMC’s debt over the objections of certain noteholders violated Section 316(b) of the Trust Indenture Act of 1939, 15 U.S.C. 77ppp(b). The district court ordered EDMC to continue to guarantee Marblegate's notes and pay them in full. The court agreed with EDMC that EDMC complied with Section 316(b) because the transactions did not formally amend the payment terms of the indenture that governed the notes. The court concluded that Section 316(b) prohibits only non‐consensual amendments to an indenture’s core payment terms. Accordingly, the court vacated the district court's judgment and remanded for further proceedings. View "Marblegate Asset Management v. Education Management Finance Corp." on Justia Law

After petitioner was convicted of conspiracy, selling unregistered securities, and mail fraud, the SEC barred petitioner from associating with six classes of securities market participants. The court agreed with petitioner's argument that the Commissioner's imposition of Dodd-Frank’s collateral ban constitutes an impermissibly retroactive penalty because it is premised on pre-Dodd-Frank misconduct. See Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Pub. L. No. 111–203, 124 Stat. 1376 (2010). Therefore, the Commission abused its discretion in barring petitioner from associating with the investment adviser, municipal securities dealer and transfer agent classes because those bars are impermissibly retroactive, and the court granted that portion of the petition. The court rejected petitioner's "unclean hands" argument and denied the remainder of the petition. View "Bartko v. SEC" on Justia Law

After the share price of a corporation’s common stock dropped, investors filed suit against the corporation and its former CEO, alleging securities fraud. The lead plaintiff, on behalf of himself and a putative class of shareholders, alleged that Defendants inflated the value of the corporation’s common stock by issuing false or materially misleading press releases concerning the approval of human clinical trials for a new medical device the company was developing. The district court granted Defendants’ motion to dismiss the complaint. The First Circuit affirmed, holding that Plaintiff failed to allege false or misleading statements sufficient to state a claim and that Plaintiff’s control person claim against the CEO was also properly dismissed. View "Ganem v. InVivo Therapeutics Holdings Corp." on Justia Law

Appellants, retirement and investments funds, challenge the district court's grant of summary judgment to Medtronic on their securities fraud class action. Appellants alleged a number of securities laws violations related to Medtronic’s INFUSE product, including making false statements and employing a scheme to defraud the market. Section 10b of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), makes illegal the use of a manipulative or deceptive device in connection with the sale or purchase of a security by any instrumentality of interstate commerce. 17 C.F.R. 240.10b-5. Scheme liability concerns the use of “any device, scheme, or artifice to defraud” and “any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” 17 C.F.R. 240.10b-5(a), (c). In this case, because Appellants could not have discovered with reasonable diligence sufficient information to plead scienter with the particularity necessary to survive a motion to dismiss prior to June 27, 2011, Appellants brought their complaint within the two-year statute of limitations. The court rejected Medtronic's argument that Appellants’ scheme liability claim is barred as a matter of law by Janus Capital Group, Inc., and Stoneridge Investment Partners, LLC. Accordingly, the court affirmed the judgment. View "West Virginia Pipe Trades v. Medtronic, Inc." on Justia Law

Plaintiff filed suit against Archon, alleging breach of contract stemming from Archon's issuance of a Notice of Redemption to holders of outstanding shares of preferred stock. The court concluded that the district court properly held that it lacked federal question subject matter jurisdiction under 28 U.S.C. 1331 because plaintiff did not assert a federal claim, and the Securities Litigation Uniform Standards Act, 15 U.S.C. 77p(d)(1)(A), does not provide an independent basis for federal question jurisdiction over plaintiff's state-law claim. The court also concluded that it lacked diversity jurisdiction over the class action suit under section 1332(d)(2) because of the exception provided in section 1332(d)(9)(C). Finally, the court concluded that the district court properly held that it lacked diversity jurisdiction over plaintiff's individual claim under section 1332(a) and therefore could not exercise section 1367 supplemental jurisdiction over the class members’ claims. Accordingly, the court affirmed the district court's dismissal of the complaint. View "Rainero v. Archon Corp." on Justia Law

Scottsdale are respondents in an ongoing disciplinary proceeding before FINRA for allegedly selling unregistered securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e, and FINRA Rule 2010. Scottsdale sought an injunction in federal district court before FINRA completed its proceedings, claiming the FINRA proceeding is unauthorized because FINRA may only discipline members for violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The district court dismissed for lack of subject-matter jurisdiction. Because Scottsdale can obtain meaningful judicial review of its claim in this court following the appeal process outlined in the Exchange Act, the court held that its challenge to FINRA’s authority is the type of claim Congress intended to be reviewed within the statutory scheme. Therefore, the court concluded that the district court properly dismissed for lack of subject-matter jurisdiction and affirmed the judgment. View "Scottsdale Capital Advisors v. FINRA" on Justia Law