Justia Securities Law Opinion Summaries

Jeffrey Campbell sold investments in Beverly Hills Development Corporation (BHDC) while he was a registered agent of Horner, Townsend & Kent, Inc. (HTK), a broker-dealer licensed to sell securities in the state. After resigning from HTK, Campbell began soliciting investments from and selling BHDC notes to Plaintiffs. When they discovered that they had been scammed, Plaintiffs filed suit against Campbell and HTK. During discovery, Campbell pleaded no contest to selling unregistered securities and was ordered to pay restitution. The district court granted summary judgment for HTK on Plaintiffs’ claims of securities violations, negligent misrepresentation, and negligent training and supervision, and regarding a release signed by one investor; and (2) denied Plaintiffs’ motion for reconsideration in which they alleged negligence, control-person liability, and material aid. The Supreme Court remanded in part, holding that the district court erred when it denied all of Plaintiffs’ requests for attorney fees. The Court otherwise affirmed. Remanded. View "Burdick v. Townsend" on Justia Law

This appeal stemmed from a putative securities fraud class action brought by lead plaintiff Nitesh Banker on behalf of all persons who purchased common stock in Gold Resource Corporation (GRC) during the class period between January 30, 2012, and November 8, 2012. GRC, a Colorado corporation, was a publicly traded mining company engaged in Mexico in the exploration and production of precious metals, including gold and silver. GRC’s aggressive business plan called for a dramatic increase in mining production during its initial years. Plaintiff alleged the "El Aguila" project experienced severe production problems during the class period, and that defendants knew about these problems but concealed them from investors. Plaintiff alleged GRC and four of its officers and directors committed securities fraud in violation of federal securities laws. He also asserted claims against individual defendants as "control persons." The district court dismissed the complaint with prejudice pursuant to Fed. R. Civ. P. 12(b)(6), holding that plaintiff failed to meet the heightened pleading standard for scienter required by the Private Securities Litigation Reform Act of 1995. Plaintiff appealed. But finding no reversible error, the Tenth Circuit affirmed. View "In re: Gold Resource Corp." on Justia Law

Even after receiving investments from four investors of over $20 million from 2001 to 2005, Access Cardiosystems, Inc. filed for Chapter 11 bankruptcy protection in 2005. Four investors filed a third amended complaint against Access’s founder, director, and officer, Randall Fincke, alleging, among other claims, that Fincke had violated the Massachusetts blue sky law. The bankruptcy court found as a matter of fact that Fincke had made a false statement of material fact to investors in violation of the blue sky law and that one such investor was entitled to $1.5 million in damages for his investments that Fincke solicited “by means of” that material misstatement. On appeal, these findings were affirmed by the district court. The Supreme Court affirmed, holding (1) the bankruptcy court did not err in finding that Fincke knew or should have known of the falsity of the misstatement and that the falsity could not be cured by warnings; (2) it was not inconsistent for the bankruptcy court to find this particular misstatement was material to investors; and (3) the bankruptcy’s finding as to damages was not in error. View "Fincke v. Radley" on Justia Law

Plaintiffs filed suit under Sections 10(b) and 20(a) of the Securities and Exchange Act, 15 U.S.C. 78j(b) and 78t(a), alleging that Morgan Stanley and six of its officers and former officers made material misstatements and omissions during the class period in an effort to conceal the company's exposure to and losses from the subprime mortgage market. The district court dismissed all claims for failure to state a claim. The court affirmed, concluding that the district court properly dismissed plaintiffs' claim that defendants' omission of information purportedly required to be disclosed under Item 303 of Regulation S-K, 17 C.F.R. 229.303(a)(3)(ii), violated Section 10(b). The court also affirmed the district court's order dismissing plaintiffs' other claims in a summary order issued simultaneously with this decision. View "Fjarde AP-Fonden v. Morgan Stanley" on Justia Law

Defendant appealed the district court's judgment imposing liability on him for violations of the Louisiana Securities Law, La. Rev. Stat. Ann. 51.701 et seq. The court denied plaintiffs' motion to dismiss defendant's appeal for lack of jurisdiction; plaintiffs' argument that defendant should be held liable under federal law are not properly before the court because they failed to file a cross-appeal; the district court erred in requiring the jury to find the elements of a Rule 10b-5 of the Securities and Exchange Ac tof 1934, 15 U.s.C. 78j(b), claim to impose liability under Section 712 of the Louisiana Securities Law, but this error was committed at defendant's insistence and his complaints are foreclosed; defendant's claim that the evidence does not support the district court's judgment of liability under Louisiana Securities Law fails; whether or not plaintiffs are correct that the jury found the requisite elements to hold defendant liable under Rule 10b-5, this argument is not properly before the court; as a codefendant was liable to plaintiffs as a seller of securities under Section 714(A), defendant should have been held jointly and severally liable for the total damages award under Section 714(B); but, because plaintiffs have not cross-appealed, they are without jurisdiction to correct this error. Accordingly, the court affirmed the judgment. View "Heck v. Triche" on Justia Law

Plaintiffs, pension funds, filed suit, seeking to hold BNYM responsible for the losses allegedly caused by Countrywide's breach of its representations and warranties in connection with 530 residential mortgage-backed securities (RMBS) created between 2004 and 2008 for which BNYM acts as trustee. The court affirmed the portion of the district court's order dismissing plaintiffs' claims related to the trusts in which they did not invest for lack of standing because plaintiffs' claims do not implicate the "same set of concerns" as those of absent class members who purchased certificates issued by trusts in which no named plaintiff invested; reversed the portion of that order denying BNYM's motion to dismiss plaintiffs' Trust Indenture Act (TIA), 15 U.S.C. 77aaa-77aaaa, claims related to the PSA-governed (pooling and servicing agreements) New York trusts where the New York certificates at issue are exempt from section 304(a)(2) of the TIA; and the court remanded in part for further proceedings. View "Retirement Board v. Bank of New York Mellon" on Justia Law

Shareholders are required to make a “demand” on the corporation’s board of directors before filing a derivative suit, unless they sufficiently allege that demand would be futile. Before Arduini filed his derivative action against IGT and its board, four shareholders filed derivative suits that were consolidated. They argued that a demand was excused because: the IGT board extended the employment contract of IGT’s former CEO and chairman of IGT’s board of directors, and allowed him to resign rather than terminating him for cause; three directors received such high compensation from IGT that their ability to impartially consider a demand was compromised; six directors faced a substantial likelihood of liability for breaches of their fiduciary duties as committee members; and that other members had engaged in insider trading. The district court dismissed the consolidated suit for failure to make a demand or sufficiently allege futility; the Ninth Circuit affirmed. The district court then dismissed Arduini’s action, holding that Arduini had failed to make a demand and could not allege demand futility based on issue preclusion due to its ruling in the prior suit. The Ninth Circuit affirmed, holding that under Nevada law and these facts, issue preclusion barred relitigation of futility. View "Arduini v. Int'l Gaming Tech." on Justia Law

Plaintiffs, representatives of a class of investors that purchased stock in Apollo, filed suit alleging, among other things, that defendants violated section 10(b) of the Securities and Exchange Act and SEC Rule 10b-5, 15 U.S.C. 78j and 17 C.F.R. 240.10b-5, by making false and misleading statements of material fact regarding Apollo's enrollment and revenue growth, financial condition, organizational values, and business focus. The district court dismissed the amended complaint under Rule 12(b)(6) for failure to state a claim. The court concluded that the material misrepresentations plaintiffs alleged in Counts I, III, and IV of the Amended Complaint are not objectively false misstatements, but are examples of lawful business puffing; moreover, plaintiff failed to plead scienter or loss causation; Count II contains largely conclusory allegations that Apollo improperly recorded student revenue; plaintiffs' allegations that defendants are guilty of insider trading fail to state a claim because the alleged non-public information to which defendants had access is the same information at issue in Counts I, II, and III, and IV of the Amended Complaint; and plaintiffs cannot establish control person liability. Accordingly, the court affirmed the judgment of the district court. View "OR Pub. Emp. Ret. Fund v. Apollo Group" on Justia Law

Accretive provides cost control, revenue cycle management, and compliance services to non-profit healthcare providers. Accretive and Fairview entered into a Revenue Cycle Operations Agreement (RCA), accounting for about 12% of Accretive’s revenue during the class period, and a Quality and Total Cost of Care (QTCC) contract, promoted as the future for healthcare services. In 2012, the Minnesota Attorney General sued Accretive for noncompliance with healthcare, debt collection, and consumer protection laws. Accretive wound down its RCA contract short of its term, expecting a loss of $62 to $68 million. The AG released a damaging report on Accretive’s business practices. Fairview cancelled its QTCC contract. Accretive’s stock fell from over $24 to under $10 per share. Plaintiffs filed a class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that Accretive concealed its practices to artificially inflate its common stock. The parties negotiated a settlement of $14 million: $0.20 per share ($0.14 with attorneys’ fees and expenses deducted). Notice was sent to 34,200 potential class members. Only one opted out; only Hayes filed an objection. At the fairness hearing, the district court granted approval, awarding attorneys’ fees of 30% and expenses of $63,911.14. Hayes did not attend. The Seventh Circuit affirmed. View "Hayes v. Accretive Health, Inc." on Justia Law

When Khazin began working for TD, he signed an employment agreement and agreed to arbitrate all disputes. Khazin was responsible for due diligence on financial products offered by TD . When he discovered that one product was priced in a manner noncompliant with securities regulations, he reported to his supervisor, Demmissie, and recommended changing the price. Demmissie instructed Khazin to analyze the “revenue impact,” which revealed that remedying the violation would save customers $2,000,000, but would cost TD $1,150,000 and negatively impact Demmissie’s divisions. Demmissie allegedly told Khazin not to correct the problem. Demmissie and TD’s human resources department later confronted Khazin about a purported billing irregularity that, he claims, was unrelated to his duties and nonexistent. His employment was terminated. Khazin sued, asserting violation of the Dodd-Frank Act, premised on the allegation that he had been terminated in retaliation for “whistleblowing.” Khazin contended that the Act prevented TD from compelling the arbitration of his whistleblower retaliation claim, 18 U.S.C. 1514A(e)(2). The district court held that the provision did not prohibit enforcement of arbitration agreements executed before Dodd-Frank was passed. The Third Circuit concluded that Khazin’s whistleblower claim is subject to arbitration because it is not covered by the restrictions. View "Khazin v. TD Ameritrade Holding Corp" on Justia Law