Justia Securities Law Opinion Summaries

In 2009, Lopez created financial investment business entities and solicited funds from family and friends. He received approximately $450,000 total from five people, stating that he intended to invest in companies such as Coca-Cola, ExxonMobil, Wells Fargo, Visa, American Express, and Procter & Gamble. Documents the investors signed reserved Lopez’s discretion to invest where he saw fit. Lopez deposited their funds into accounts that he controlled and never invested in the companies listed in his advertising materials. Lopez used much of the money for personal expenses. Lopez unilaterally changed the terms of each investors’ promissory note; they were not aware of these changes, did not give Lopez permission to make them, and did not sign documents. After an investor complained to the Indiana Secretary of State and the IRS investigated Lopez’s businesses, Lopez was convicted of 15 counts of wire fraud, 18 U.S.C. 1343; four counts of money laundering, 18 U.S.C. 1957; and securities fraud, 15 U.S.C. 78j(b), 77ff(a). The Seventh Circuit affirmed, rejecting claims that the district court erred in allowing a government witness to testify that payments Lopez made to his investors were “lulling payments,” that the government’s references to Bernie Madoff in its closing argument denied him a fair trial, that the court erred in denying Lopez’s request to label his witness an “expert” in front of the jury, that the court improperly prevented him from introducing extrinsic evidence of a government witness's prior inconsistent statement. View "United States v. Lopez" on Justia Law

Plaintiffs alleged insider-trading side deals in connection with the sale of a small aerospace manufacturing company, Kreisler, and insufficient disclosure to stockholders regarding the sales process. Before the sale, Kreisler was offered to dozens of potential acquirers. Several bidders emerged. A fairness opinion was rendered and a special committee ultimately recommended the sale. The transaction was approved by written consent of a majority of the shares outstanding. A block of shares of just over 50 percent executed a stockholder support agreement providing for approval of the transaction, so there was no stockholder vote. An Information Statement was provided to stockholders to permit them to decide whether to seek appraisal. A majority of Kreisler’s board of directors are independent and disinterested, and its charter contains an exculpation provision. The Delaware Court of Chancery dismissed the complaint, finding that even accepting the well-pled allegations as true and drawing all reasonable inferences in the Plaintiff’s favor, the Complaint fails to state a claim on which relief may be granted. View "Kahn v. Stern" on Justia Law

The Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 77p(b)–(f), 78bb(f)), bars private class actions based on state law in cases where the plaintiff alleges a material falsehood or omission connected to the purchase or sale of most federally-regulated securities. In this case, plaintiff filed suit for breach of contract and various fiduciary duties under Massachusetts law. The district judge held that SLUSA barred his claims, and dismissed them with prejudice. The panel held that dismissals pursuant to SLUSA's class-action bar must be for lack of subject-matter jurisdiction—and therefore without prejudice—rather than on the merits. Therefore, the panel affirmed the district court's judgment to the extent it concluded that plaintiff's claims were barred. View "Hampton v. Pacific Investment Management Co." on Justia Law

Globus, a publicly-traded medical device company, terminated its relationship with one of its distributors, Vortex, in keeping with a policy of moving toward in-house sales. Several months later, in August 2014, Globus executives alerted shareholders that sales growth had slowed, attributed the decline in part to the decision to terminate its contract with Vortex, and revised Globus’s revenue guidance downward for fiscal year 2014. The price of Globus shares fell by approximately 18% the following day. Globus shareholders contend the company and its executives violated the Securities Exchange Act, 15 U.S.C. 78j(b) and Rule 10b-5 and defrauded investors by failing to disclose the company’s decision to terminate the distributor contract and by issuing revenue projections that failed to account for this decision. The Third Circuit affirmed dismissal of the case. Globus had no duty to disclose either its decision to terminate its relationship with Vortex or the completed termination of that relationship. Plaintiffs did not sufficiently plead that a drop in sales was inevitable; that the revenue projections were false when made; nor that that Globus incorporated anticipated revenue from Vortex in its projections. View "Williams v. Globus Medical, Inc." on Justia Law

The First Circuit affirmed the district court’s finding, in this securities fraud class action against Sarepta Therapeutics, Inc. and former and current Sarepta executives, that Plaintiffs, several shareholders, failed to allege facts creating a strong inference that Defendants intentionally or recklessly deceived the investing public in the months before the Food and Drug Administration deemed premature Sarepta’s application for approval of a novel gene therapy. The price of the publicly traded securities issued by Sarepta dropped sixty-four percent after the FDA judged Sarepta’s filing premature. Plaintiffs allegedly that Defendants overstated the significance of certain data and exaggerated the likelihood that the FDA would accept a new drug application for filing, thereby deceiving the investing public and causing the purchase of Sarepta securities at inflated prices. The First Circuit affirmed the district court’s dismissal of this action, holding that Plaintiffs failed to satisfy the requisite pleadings standards. View "Corban v. Sarepta Therapeutics, Inc." on Justia Law

Plaintiffs appealed the district court's dismissal of their amended securities fraud class action complaint, alleging that Atossa and its Chairman and CEO, Steven Quay, made a series of public statements about Atossa's breast cancer screening products that were materially false or misleading. The district court dismissed the complaint. The Ninth Circuit held that plaintiffs have properly alleged falsity and materiality as to some, but not all, of these statements. In this case, plaintiffs have sufficiently alleged that the following were materially false or misleading: (1) Quay's statement quoted in Atossa's December 20, 2012 Form 8–K filing describing the ForeCYTE Test as "FDA-cleared"; (2) Quay's statement during his interview with NewsMedical.Net that the ForeCYTE test had "gone through all of the FDA clearance process"; (3) Atossa's Form 8–K filing on February 25, 2013, giving notice of the FDA's warning letter; and (4) Quay's statement during his interview with the Wall Street Transcript that "FDA clearance risk has been achieved." Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "Levi v. Atossa Genetics, Inc." on Justia Law

Patel saved $560,000, enough to purchase a 7-Eleven franchise. He kept the money with Portfolio; the contract gave Wagha discretion over the funds’ deployment. Wagha invested much of the money in options. By the time Patel needed the funds (four months later), the market was down and he had lost a considerable sum. A jury concluded that Wagha and Portfolio had broken their promise to invest the money conservatively and awarded Patel $136,000 for breach of contract plus $64,000 for securities fraud. The district court remitted the $64,000 award, ruling that Patel has not shown loss causation, but entered judgment on the $136,000 award. The Seventh Circuit affirmed, holding that the district court retained jurisdiction after it resolved the federal law claim. In addition, the federal-law claim should not have been dismissed. The premise of that holding—that the securities laws are concerned only with inaccurate pricing—was incorrect. Securities laws forbid fraud in all aspects of securities transactions, whether or not the fraud affects the instruments’ prices. One kind of fraud is procuring securities known to be unsuitable to a client’s investment goals, after promising to further those goals. View "Patel v. Portfolio Diversification Group, Inc." on Justia Law

OCC, a clearing agency that facilitates trades in options and other financial instruments, developed a Capital Plan in an attempt to boost its capital reserves and to alter how fees and refunds were calculated. The DC Circuit remanded to the SEC, which approved OCC's proposed change to its rules, for further proceedings. In this case, the change was subject to approval by the SEC, which granted approval without itself making the findings and determinations prescribed by the Securities Exchange Act of 1934. The court held that, because the SEC effectively abdicated its responsibility to OCC, this did not represent the kind of reasoned decisionmaking required by either the Exchange Act or the Administrative Procedure Act. View "Susquehanna International Group v. SEC" on Justia Law

Plaintiffs filed this would-be class action on behalf of all persons or entities who purchased or otherwise acquired the common stock of QSI, alleging that during the Class Period, QSI and its officers made false or misleading statements about the current and past state of QSI's sales "pipeline," and used those statements to support public guidance to investors about QSI's projected growth and revenue. The Ninth Circuit reversed the district court's dismissal of the complaint and remanded for further proceedings. The panel held that some of defendants' statements were mixed statements, containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings; a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5, by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings; many of defendants' non-forward-looking statements were materially false or misleading; and some of defendants' forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature. View "City of Miami Fire Fighters' and Police Officers' Retirement Trust v. Quality Systems, Inc." on Justia Law

Stratasys shareholders filed a securities fraud action claiming several company promotional statements were knowingly false. The Eighth Circuit affirmed the district court's determination that these statements were mere puffery and that the shareholders failed to sufficiently plead that Stratasys knew its statements were false when made. In this case, the statements the shareholders claim were materially misleading were so vague and such obvious hyperbole that no reasonable investor would rely upon them. Therefore, without tying the timing of the knowledge to the allegedly misleading statements, the shareholders did not plead facts sufficient to support a strong inference of scienter. View "Macomb County Employees Retirement System v. Stratasys Ltd." on Justia Law