Justia Securities Law Opinion Summaries

Defendant and the entities he controls appeal a judgment entered on jury verdicts finding securities fraud. The SEC alleged that defendant and his companies violated Section 17(a) of the Securities Act, 15 U.S.C. 77q(a); Section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5; and Section 206(4) of the Investment Advisers Act, 15 U.S.C. 80b-6(4), and Rule 206(4)-8 thereunder, 17 C.F.R. 275.206(4)-8. The SEC also alleged that defendant personally violated Section 20(a) of the Securities Exchange Act, 15 U.S.C. 78t(a), and aided and abetted SCAF’s violations of Section 10(b) and Rule 10b-5 and SIA’s violations of Section 206(4) and Rule 206(4)-8, 15 U.S.C. 78t(e) (aiding-and-abetting liability). The jury found liability on every count except the alleged violations of Section 17(a)(1) and the allegation that defendant personally aided and abetted SCAF's violations of Section 10(b) and Rule 10b-5. Because the verdicts in this case are not actually inconsistent, the court assumed without deciding that defendant preserved his argument and proceeded to the merits. The jury's finding that defendant did not violate Section 17(a)(1), but did violate Rule 10b-5 was not inconsistent because the bar for finding liability was higher under Section 17(a)(1) than under Rule 10b-5(b); the jury could have found liability under Section 17(a)(3), requiring only negligence, without finding the intent or severe recklessness necessary for liability under Section 17(a)(1); there is no inconsistency in the jury finding that defendant personally violated Rule 10b-5, but did not aid and abet SCAF in violating the same rule; the court agreed with the district court that the jury need not agree on a particular false statement or misleading omission for liability under Section 17(a)(2) or Rule 10b-5(b); and the disgorgement award the district court ordered here was a permissible equitable remedy. Accordingly, the court affirmed the judgment. View "SEC v. Quan" on Justia Law

Plaintiffs filed suit on behalf of a putative class of former participants in an employee stock ownership plan (ESOP) invested exclusively in Lehman’s common stock, alleging that the Plan Committee Defendants, who were fiduciaries of the ESOP, breached their duty of prudence under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. Specifically, plaintiffs alleged that the Plan Committee Defendants breached ERISA by continuing to permit investment in Lehman stock in the face of circumstances arguably foreshadowing its eventual bankruptcy. Plaintiffs also filed claims against Lehman's former directors, including Richard S. Fuld. The district court dismissed plaintiff's consolidated amended complaint (CAC) and second consolidated amended complaint (SAC) for failure to state a claim. The court affirmed. The Supreme Court subsequently held in Fifth Third Bancorp v. Dudenhoeffer that ESOP fiduciaries are not entitled to any special presumption of prudence. After remand, the district court dismissed plaintiffs' third amended complaint (TAC). The court agreed with the district court that, even without the presumption of prudence rejected in Fifth Third, plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman’s collapse. The court concluded as it had before, that plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees’ retirement savings. Accordingly, the court affirmed the judgment. View "Rinehart v. Lehman Brothers Holdings" on Justia Law

Petitioner challenges a joint regulation implementing a section of the Securities Exchange Act of 1934 (Exchange Act), 15 U.S.C. 78o-11. Congress added that particular section to the Exchange Act in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), Pub. L. No. 111-203, 941, 124 Stat. 1376. The court concluded that the Exchange Act provides a limited grant of jurisdiction, and only rules implementing specific, enumerated sections of the Act are entitled to direct review. Because Congress knew how to add sections to that list, but chose not to do so here, the court lacked jurisdiction over the appeal. Accordingly, the court transferred the petitions “in the interest of justice” to the United States District Court for the District of Columbia. View "The Loan Syndications Assoc. v. SEC" on Justia Law

DeKalb filed suit against defendants, alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(a), 78t(a), and SEC Rule 14a‐9, 17 C.F.R. 240.14a‐9. The court held that Sections 9(f) and 18(a) provide “private right[s] of action that involve[ ] a claim of fraud, deceit, manipulation, or contrivance,” to which a five‐year statute of repose now applies under section 1658(b), but Section 14(a) does not provide such a private right of action; the same three‐year statutes of repose that applied to Sections 9(f) and 18(a) before the passage of the Sarbanes‐Oxley Act of 2002 (SOX), Pub. L., No. 107‐204, 116 Stat. 745, which the court borrowed and applied to Section 14 in Ceres Partners v. GEL Associates, still apply to Section 14(a) today; the statutes of repose applicable to Section 14(a) begin to run on the date of the defendant’s last culpable act or omission; DeKalb’s lead‐plaintiff motion does not “relate back” under Rule 17(a)(3) to Bricklayers’ filing of the original class‐action complaint; the Private Securities Litigation Reform Act of 1995 (PSLRA), Pub. L. No. 104‐67, 109 Stat. 737, does not toll the statutes of repose applicable to Section 14(a); and the tolling rule in American Pipe & Construction Co. v. Utah does not extend to the statutes of repose applicable to Section 14(a). Accordingly, the court affirmed the district court's dismissal of DeKalb's s Section 14(a) claim as time‐barred by the applicable three‐year statutes of repose and its Section 20 claim for failure to state a claim upon which relief can be granted. View "DeKalb Cty. Pension Fund v. Transocean Ltd." on Justia Law

Magruder bought 940,000 shares of Bancorp through his Fidelity account, paying $9,298. Years later he asked Fidelity for a certificate showing his ownership. When Fidelity did not comply, Magruder initiated arbitration through the Financial Industry Regulatory Authority. Magruder and Fidelity chose simplified arbitration, in which the arbitrator cannot award more than $50,000 in damages or order specific performance that would cost more than $50,000. Magruder had demanded $28,000 (actual plus punitive damages). The arbitrator directed Fidelity to deliver a stock certificate or explain why it could not do so. Fidelity explained that in 2005 the Depository Trust & Clearing Corporation, responsible for issuing Bancorp paper certificates, had placed a “global lock” on that activity as a result of Bancorp reporting that fraudulent shares bearing identification number 106 were flooding the market. In 2012 Bancorp offered to swap series 106 shares for new series 205 shares, but by then Bancorp had been delisted from stock exchanges and FINRA blocked the swaps. The arbitrator accepted this explanation. Magruder then filed suit. The district judge sided with Fidelity. The Seventh Circuit vacated for lack of jurisdiction. Even assuming that the parties are of diverse citizenship, the stakes cannot exceed $50,000, and the minimum under 28 U.S.C. 1332(a) is $75,000. View "Magruder v. Fidelity Brokerage Servs., LLC" on Justia Law

The Court Appointed Receiver for the Stanford International Bank Ltd. filed a fraudulent transfer claim against defendant, a former international advisor to the Stanford entities. The court concluded that there was a legally sufficient evidentiary basis for the jury’s finding that the Receiver did not discover and could not reasonably have discovered the transfers to defendant and their fraudulent nature until after February 15, 2010, and that, therefore, the Receiver’s fraudulent transfer claim was timely under the Texas Uniform Fraudulent Transfer Act’s, Tex. Bus. & Com. Code 24.010 statute of repose. Therefore, the district court did not err in denying defendant's post-verdict motion for judgment as a matter of law as to the fraudulent transfer. The court did not reach the alternative issues raised by defendant. Finally, the court denied defendant's request to abate this appeal where defendant did not object during trial to this specific language in the jury instruction and he did not request a jury finding on market value even though the parties presented conflicting evidence of market value at trial. Further, defendant failed to brief this issue on the merits. Accordingly, the court affirmed the judgment. View "Janvey v. Romero" on Justia Law

The SEC filed a civil law enforcement action against Todd Duckson, the Fund, and related individuals and entities. A jury found Duckson liable for violating the antifraud provisions of the federal securities laws and for aiding and abetting the Fund's violations.The court held that the district court did not abuse its discretion by declining to admit the complete versions of the appraisals at issue under Federal Rule of Evidence 104 and 403. Further, Duckson cannot show that he was prejudiced by the district court's rulings. The court also concluded that the district court did not abuse its discretion by rejecting Duckson's proposal to set forth separately in the verdict form each alleged misstatement or omission where Duckson has not shown how the district court's factual findings conflict with the jury's findings; the jury was instructed on the relevant time period at issue; and the district court's verdict form did not deprive Duckson of a meaningful right to appellate review of the remedies determination or the liability finding. Accordingly, the court affirmed the judgment. View "Securities and Exchange Comm. v. Duckson" on Justia Law

Plaintiffs filed a putative class action against Allen Standford's lawyers, Thomas Sjoblom, and the law firms where he worked, arguing that they aided and abetted Stanford’s fraud and conspired to thwart the SEC’s investigation of Stanford’s Ponzi scheme. The district court subsequently denied defendants' motion to dismiss the complaint as barred by the attorney immunity under Texas law. The court held that, under Texas law, attorney immunity is a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine. The court reversed the district court’s order denying defendants’ motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no “fraud exception” to attorney immunity. Accordingly, the court rendered judgment that the case is dismissed with prejudice. View "Troice v. Proskauer Rose, L.L.P." on Justia Law

Plaintiffs filed suit under federal securities laws and state blue sky laws, alleging that Sanofi made materially false or misleading statements regarding its breakthrough drug, Lemtrada, designed to treat multiple sclerosis. The district court granted defendants' motion to dismiss for failure to state a claim. The court agreed with the district court's reasoning and holding. The court writes principally to examine the impact of the Supreme Court’s decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, decided after the district court rendered its decision. Given the sophistication of the investors here, the FDA’s public preference for double‐blind studies, and the absence of a conflict between defendants’ statements and the FDA’s comments, the court concluded that no reasonable investor would have been misled by defendants’ optimistic statements regarding the approval and launch of Lemtrada. Issuers must be forthright with their investors, but securities law does not impose on them an obligation to disclose every piece of information in their possession. As Omnicare instructs, issuers need not disclose a piece of information merely because it cuts against their projections. Accordingly, the court affirmed the judgment. View "In re Sanofi Sec. Litig." on Justia Law

Plaintiff filed suit against Stiefel Labs and its president, Charles Stiefel, on several grounds, including a violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5. Plaintiff requested that the jury instructions, in order to prevail on a claim under Rule 10b-5(b), require plaintiff to prove only that defendants failed to disclose material information. The district court refused to include the jury instruction. The court concluded that plaintiff's jury instruction misstated the law because Rule 10b-5(b) does not prohibit a mere failure to disclose material information. Accordingly, the court affirmed the judgment. View "Fried v. Stiefel Labs., Inc." on Justia Law