Justia Securities Law Opinion Summaries

The plaintiffs were all affiliates of Arthur and Angela Williams, who owned stock in Citigroup. The defendants were Citigroup and eight of its officers and directors. In 1998, Citicorp and Travelers Group, Inc. merged, forming Citigroup. At that point, Arthur Williams's shares in Travelers Group were converted into 17.6 million shares of Citigroup common stock, which were valued at the time of the merger at $35 per share. In 2007, the Williamses had these shares transferred into AHW Investment Partnership, MFS Inc., and seven grantor-retained annuity trusts, all of which the Williamses controlled. In 2007, the Williamses sold one million shares at $55 per share. But, the Williamses halted their plan to sell all of their Citigroup stock because, based on Citigroup's filings and financial statements, they concluded that there was little downside to retaining their remaining 16.6 million shares. The Williamses allegedly held those shares for the next twenty-two months, finally selling them in March 2009 for $3.09 per share. After selling their 16.6 million shares, the Williamses sued Citigroup in the U.S. District Court for the Southern District of New York, arguing that their decision not to sell all of their shares in May 2007, and their similar decisions to hold on at least three later dates, were due to Citigroup‘s failure to disclose accurate information about its true financial condition from 2007 to 2009. The Second Circuit certified a question of Delaware law to the Delaware Supreme Court arising from an appeal of a New York District Court decision. The Second Circuit asked whether the claims of a plaintiff against a corporate defendant alleging damages based on the plaintiff‘s continuing to hold the corporation's stock in reliance on the defendant's misstatements as the stock diminished in value properly brought as direct or derivative claims. The Delaware Court answered: the holder claims in this action were direct. "This is because under the laws governing those claims [(]those of either New York or Florida[)] the claims belong to the stockholder who allegedly relied on the corporation's misstatements to her detriment. Under those state laws, the holder claims are not derivative because they are personal to the stockholder and do not belong to the corporation itself." View "Citigroup Inc., et al. v. AHW Investment Partnership, MFS, Inc., et al." on Justia Law

In October 2012, and again a year later, General Cable announced that it would reissue several public financial statements because they included material accounting errors. Soon after, City of Livonia Employees’ Retirement System initiated a class-action suit against General Cable, under the 1934 Securities Exchange Act, 15 U.S.C. 78j(b), 78t(a), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. Livonia asserted that defendants acted at least recklessly in issuing or approving materially false public financial statements. The defendants countered that the misstatements resulted from accounting errors and a theft scheme in its Brazilian operations of which the defendants were unaware and that they promptly sought to remediate upon discovering them. The district court dismissed Livonia’s complaint with prejudice because it failed to plead scienter adequately. The Sixth Circuit affirmed. Seven factors favored rejecting a scienter inference. Livonia cited no facts with sufficient particularity implicating suspicious insider trading or failure to disclose impending stock sales. View "Doshi v. General Cable Corp." on Justia Law

The FDIC filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., as receiver for Colonial. The complaint was timely under the terms of the FDIC Extender Statute, 12 U.S.C. 1821(d)(14)(A), because it was filed less than three years after the FDIC was appointed receiver. However, because the complaint was filed more than three years after the securities at issue were offered to the public, it would be untimely under the terms of the Securities Act’s statute of repose, 15 U.S.C. 77m.  In Federal Housing Finance Agency v. UBS Americas Inc., the court held that a materially identical extender statute for actions brought by the FHFA did displace the Securities Act’s statute of repose. The court concluded that UBS remains good law and that, under UBS, the FDIC's complaint was timely. Therefore, the court vacated the district court's judgment and remanded for further proceedings. View "FDIC v. First Horizon Asset Securities, Inc." on Justia Law

When the five investment funds at issue lost nearly 90 percent of their value in 2007-2008, investors lost large sums. Various plaintiffs (investors) initially filed claims with the Financial Industry Regulatory Authority, participated in arbitration, or filed state suits. In 2013, they filed suit under the Securities Act of 1933, 15 U.S.C. 77k, 77l, and 77o, the Securities Exchange Act of 1934, 15 U.S.C. 78j(b) and 78t(a), and SEC Rule 10b-5. They alleged that the funds were overvalued and concentrated in risky securities and that investors relied on misrepresentations in purchasing the funds. The district court initially granted class certification, but dismissed the claims as barred by the statutes of limitations. The Sixth Circuit affirmed, holding that the suits were barred by the applicable statutes of repose. The court declined to “toll” those statutes View "Stein v. Regions Morgan Keegan Select High Income Fund, Inc." on Justia Law

Plaintiffs, investors, filed suit contending that defendants sold securities representing shares in SaiNaith L.L.C. based on false statements that a hotel was owned by that company. The court focused on one of plaintiffs’ theories under Louisiana Revised Statutes 51:712(A)(2) and 51:714, which allows purchasers of securities to recover their investment from the seller of the securities, who made the sale based on false representations. The court agreed with the district court that the summary judgment evidence establishes that SaiNaith never owned the hotel and the investors received interests in a shell company and defendants violated Louisiana law by representing otherwise. Accordingly, the court affirmed the judgment in favor of plaintiffs against defendants personally under the Louisiana statutes. View "Meadaa v. Karsan" on Justia Law

Manning held 2,000,000 shares of Escala stock. He claims that he lost most of his investment when its price plummeted after Merrill Lynch devalued Escala through “naked short sales.” Unlike a typical short sale, where a person borrows stock from a broker, sells it to a buyer on the open market, and later purchases the same number of shares to return to the broker, the seller in a “naked” short sale does not borrow the stock he puts on the market, and never delivers the promised shares to the buyer. Securities and Exchange Commission’s Regulation SHO prohibits short-sellers from intentionally failing to deliver securities. Manning claimed violation of New Jersey law, but referred explicitly to Regulation SHO, citing past accusations against Merrill Lynch and suggesting that the transactions at issue had again violated the regulation. Merrill Lynch removed the case, invoking general federal-question jurisdiction, 28 U. S. C. 1331, and the Securities Exchange Act of 1934, 15 U.S.C. 78aa(a). The Third Circuit ordered remand, holding that Manning’s claims did not necessarily raise any federal issues and that the Exchange Act covers only cases that would satisfy the “arising under” test for general federal jurisdiction. The Supreme Court affirmed. The jurisdictional test established by Section 27 is the same as Section 1331’s test for deciding if a case “arises under” a federal law. Section 27 confers federal jurisdiction over suits brought under the Exchange Act and the rare suit in which a state-law claim rises and falls on the plaintiff’s ability to prove the violation of a federal duty. View "Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning" on Justia Law

Plaintiffs filed suit against Pfizer and others, alleging violations of federal securities laws because Pfizer made fraudulent misrepresentations and fraudulently omitted to disclose information regarding the safety of two of its drugs, Celebrex (celecoxib) and Bextra (valdecoxib). On appeal, plaintiffs argued that the district court abused its discretion in excluding the testimony of plaintiffs' expert regarding loss causation and damages. The court concluded that the district court abused its discretion by excluding the expert's testimony in its entirety; the district court erred in concluding that the expert needed to disaggregate the effects of Pfizer’s allegedly fraudulent conduct from Searle’s or Pharmacia’s, regardless of whether Pfizer is ultimately found liable for the latters’ statements; the testimony could have been helpful to the jury even without such disaggregation; as to the expert's adjustment to the price increases, the district court did not abuse its discretion in concluding that this change was not sufficiently reliable to be presented to a jury; the expert's error did not render the remainder of his testimony unreliable and the district court should have prevented him from testifying about the adjustment, but otherwise allowed him to present his findings on loss causation and damages; the district court erred in concluding, as a matter of law, that Pfizer had insufficient authority over certain Searle and Pharmacia statements as to have “made” them; but, however, the court's finding that the district court abused its discretion in excluding the expert's testimony does not turn on the question of Pfizer’s ultimate liability for these statements. Accordingly, the court vacated the district court's grant of summary judgment for Pfizer and remanded. View "In re Pfizer Inc. Securities Litigation" on Justia Law

Plaintiffs filed suit against Best Buy and three of its executives, alleging violation of section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. 240.10b-5. Plaintiffs alleged that defendants made fraudulent or recklessly misleading public statements in a press release and conference call, which artificially inflated and maintained Best Buy's publicly traded stock price until the misstatements were disclosed. In this interlocutory appeal, defendants challenged the district court's certification of the class. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), the Supreme Court concluded that loss causation has no logical connection to the facts necessary to establish the efficient market predicate to Basic, Inc. v. Levinson's fraud-on-the-market theory. The court agreed with the district court that, when plaintiffs presented a prima facie case that the Basic presumption applies to their claims, defendants had the burden to come forward with evidence showing a lack of price impact. However, what the district court ignored is that defendants did present strong evidence on this issue. Defendants rebutted the Basic presumption by submitting direct evidence (the opinions of both parties’ experts) that severed any link between the alleged conference call misrepresentations and the stock price at which plaintiffs purchased. Because plaintiffs presented no contrary evidence of price impact, they failed to satisfy the predominance requirement of Rule 23(b)(3). Therefore, the district court abused its discretion in certifying the class, and the court reversed and remanded. View "IBEW Local 98 Pension Fund v. Best Buy Co., Inc." on Justia Law

The Golf Channel, Inc. entered into an agreement with Stanford International Bank Limited (Stanford) under which Golf Channel received $5.9 million in exchange for media-advertising services. It was later discovered that Stanford used a classic Ponzi-scheme artifice. At issue in this case was whether Golf Channel must return all remuneration paid for services rendered absent proof the transaction benefited Stanford’s creditors. The Fifth Circuit initially ordered Golf Channel to relinquish its compensation, concluding that media-advertising services have “no value” to a Ponzi scheme’s creditors despite the same services being potentially “quite valuable” to the creditors of a legitimate business. On rehearing, the Circuit vacated its opinion and certified a question to the Supreme Court regarding the Texas Uniform Fraudulent Transfer Act (TUFTA), under which an asset transferred with intent to defraud a creditor may be reclaimed for the benefit of the transferor’s creditors unless the transferee took the asset in good faith and for “reasonably equivalent value.” The Supreme Court held that TUFTA does not contain separate standards for assessing “value” and “reasonably equivalent value” based on whether the debtor was operating a Ponzi scheme and that value must be determined objectively at the time of the transfer and in relation to the individual exchange at hand. View "Janvey v. Golf Channel, Inc." on Justia Law

Plaintiffs filed suit against defendants, alleging securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), Section 20(a) of the Exchange Act, 15 U.S.C. 78t(a), and Securities and Exchange Commission Rule 10b‐5, 17 C.F.R. 240.10b‐5. Plaintiffs alleged material misstatements and omissions in SAIC’s public filings regarding its exposure to liability for employee fraud in connection with SAIC’s contract work for New York City’s CityTime project. On appeal, plaintiffs challenged the district court's denial of their motion to vacate the judgment and to amend the complaint. The court disagreed with the district court’s conclusion that amending the complaint to include the Financial Accounting Standard No. 5 (FAS 5) and Item 303 of the SEC Regulation S-K claims based on the March 2011 10‐K would be futile. Because the district court improperly denied plaintiffs' postjudgment motion to amend their FAS 5 and Item 303 claims, the court vacated the district court's order as to those claims and remanded for further proceedings. The court affirmed as to the remaining claims. View "Indiana. Pub. Ret. Sys. v. SAIC, Inc." on Justia Law