Justia Securities Law Opinion Summaries

Escala shareholders sued financial institutions that engage in equity trading, alleging that the defendants participated in “naked” short selling of Escala stock, which “increased the pool of tradable shares by electronically manufacturing fictitious and unauthorized phantom shares.” Plaintiffs claim dilution of voting rights and decline in value. All claims were under New Jersey law: the New Jersey Racketeer Influenced and Corrupt Organizations Act, based on predicate acts of state securities fraud and theft, and common law claims for unjust enrichment, interference with economic advantage and contractual relations, breach of contract, breach of the covenant of good faith and fair dealing, and negligence. The district court denied Plaintiffs’ motion to remand to state court. The Third Circuit reversed, holding that there is no federal-question jurisdiction. Short sales are subject to detailed federal regulation. New Jersey does not have an analogous provision, but whether the naked short selling at issue violated state law requires no reference to federal regulation SHO. The success of those claims does not “necessarily” depend upon federal law, so the case does not “arise under” the laws of the United States. Regulation SHO’s exclusive jurisdiction provision does not change the analysis; such provisions cannot independently generate jurisdiction. View "Manning v. Merrill Lynch Pierce Fenner & Smith, Inc." on Justia Law

The district court approved a settlement agreement between representative plaintiffs and Bank of America in a class action lawsuit alleging violations of the Securities Act of 1933, 15 U.S.C. 77a et seq., and the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The underlying litigation stemmed from Bank of America's negotiations with Merrill Lynch in 2008, which resulted in the two financial institutions merging in 2009. The court concluded that the district court did not violate the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(a)(2)(A)(vi), 78u-4(a)(4), when it awarded reimbursement costs to representative plaintiffs; the notice of the statement of average amount of damages per share was not constitutionally deficient in violation of appellants' due process rights and the district court did not exceed the bounds of its discretion in approving the notice; the award of attorneys' fees was reasonable and appellants failed to identify any specific abuse of discretion on the part of the district court; and appellants' remaining arguments are without merit. Accordingly, the court affirmed the judgment. View "In re Bank of America" on Justia Law

NASDAQ conducted the initial public offering (IPO) for Facebook in May 2012. UBS subsequently initiated an arbitration proceeding against NASDAQ seeking indemnification for injuries sustained in the Facebook IPO, as well as damages for breach of contract, breach of an implied duty of good faith and fair dealing, and gross negligence. NASDAQ initiated a declaratory judgment action to preclude UBS from pursuing arbitration. The district court granted a preliminary injunction and UBS appealed. The court concluded that federal jurisdiction is properly exercised in this case; the district court properly decided the question of arbitrability because the parties never clearly unmistakably expressed an intent to submit that question to arbitration, and such an intent cannot be inferred where, as here, a broad arbitration clause contains a carved-out provision that, at least arguably covers the instant dispute; UBS's claims against NASDAQ are not subject to arbitration because they fall within the preclusive language of NASDAQ Rule 4626(a), and the parties specifically agreed that their arbitration agreement was subject to limitations identified in, among other things, NASDAQ Rules; and, therefore, the court affirmed the district court's order preliminarily enjoining UBS from pursuing arbitration against NASDAQ. The court remanded for further proceedings. View "NASDAQ OMX Grp., Inc. v. UBS Sec., LLC" on Justia Law

Dynegy filed a voluntary Chapter 11 bankruptcy petition. Charles Silsby then filed a securities class action complaint against Dynegy and others alleging dissemination of false and misleading information and failure to disclose material facts about Dynegy's financial performance and prospects, in violation of securities laws. Stephen Lucas was appointed lead plaintiff in Silsby v. Icahn, the securities class action litigation. In this appeal, Lucas challenged the district court's conclusion that he lacked standing to opt out of or object to the joint reorganization plan on behalf of the putative class in the securities litigation. The court concluded that Lucas' status as lead plaintiff of the putative class in the district court securities litigation did not automatically extend to the bankruptcy proceedings; because Lucas did not seek application of Rule 23 in bankruptcy court, he represented no one but himself; and since he opted out of the release in his individual capacity, Lucas lacks standing to appeal the order confirming the Plan. Accordingly, the court affirmed the judgment. View "In re: Dynegy, Inc.," on Justia Law

This case arose out of the collapse of SIV, managed by Cheyne and structured by Morgan Stanley. PSERS and Commerzbank appealed from the final order of judgment denying class certification, dismissal of Commerzbank's claim for lack of standing; and dismissal of PSERS's claim because its presence as a party would destroy complete diversity, the sole basis of subject matter jurisdiction. The court affirmed the denial of class certification and dismissal of PSERS; held that it was not a permissible exercise of discretion for the district court to limit Commerzbank's ability to establish its standing; certified to the New York Court of Appeals the question of whether a reasonable trier of fact could find that Commerzbank had acquired from a third party that had purchased securities a fraud claim against Morgan Stanley; and certified the question whether, if Commerzbank has standing, a reasonable trier of fact could hold Morgan Stanley liable for fraud based on the present record. View "Pennsylvania Public School Employees’ Retirement System v. Morgan Stanley" on Justia Law

A 2004 judgment entered against John Zelaya was rendered in the United States District Court for the Southern District of New York and was registered in the Southern District of Florida. ZC was not party to the suit that led to the judgment and, instead, the prevailing parties assigned their interests in the judgment to ZC. ZC then sought a writ of execution against Zelaya from the Southern District of Florida. In 2010, Zelaya deposited the full amount of the judgment into the district court's registry where the district court then dissolved writs of garnishment against all of the banks at issue, granted Zelaya's motion for a satisfaction judgment, and awarded attorney fees and costs to Deutsche Bank. The court concluded that it had jurisdiction over the consolidated appeal; the district court did not err in allowing Zelaya to deposit the disputed funds into the court's registry; the district court did not err in granting Zelaya's motion for a satisfaction of the judgment; the district court did not err in its award of attorney fees and costs to Deutsche Bank; and, therefore, the court affirmed the judgment. View "Zelaya/Capital Int'l Judgment, LLC v. Zelaya, et al." on Justia Law

KBC Asset Management sued Omnicare (a pharmaceutical company) and affiliated individuals, on behalf of Ansfield and other similarly situated shareholders, alleging that the defendants had committed securities fraud in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b) and 78t(a), and Securities and Exchange Commission (SEC) Rule 10b-5. KBC charged the defendants with making various material misrepresentations and omissions between January 10, 2007 and August 5, 2010 in public and in SEC filings regarding Omnicare’s compliance with Medicare and Medicaid regulations. The district court dismissed. The Sixth Circuit affirmed, based on the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u-4, which created heightened pleading standards for securities-fraud cases and requires that plaintiffs identify each misleading or false statement and explain how it is misleading. Plaintiffs also must “state with particularity facts giving rise to a strong inference that the defendant[s] acted with the required state of mind.” KCB did not meet those requirements. View "Ansfield v. Omnicare, Inc." on Justia Law

Plaintiffs purchased FCH stock through Shearson’s broker, Steinberg, between 1987 and 1990. FCH filed for bankruptcy in 1991. Plaintiffs retained the law firm to represent them in claims under the Illinois Securities Law. At that time, they had a viable claim for rescission. The firm failed to serve the required rescission notice. In 1992, plaintiffs hired new counsel to pursue their claims against Shearson, which were later dismissed as time-barred. In 1994 plaintiffs filed a malpractice action against the law firm. The appellate court affirmed the dismissal of the Illinois Securities Law claim, but reversed as to common law fraud and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. In 2007, plaintiffs settled those claims for $3.2 million. Later, the trial court found the law firm liable and calculated damages: plaintiffs’ $3.2 million settlement would be deducted from the total they paid for their 11 stock purchases, and 10% interest would be calculated on the remaining amount based on the dates of the stock purchases, for a total award of $4,091,752.19 plus attorney fees of $1,636,700.80, and $207,167.28 in costs and expenses. The appellate court affirmed, but remanded for recalculation of damages and attorney fees. The Illinois Supreme Court remanded for calculation of statutory interest damages on the full amount paid for each security from the date of purchase to the 2007 date of settlement, then deducting the $3.2 million recovery.View "Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman" on Justia Law

Plaintiffs, purchasers of NVIDIA's stock, filed suit alleging that the company violated Section 10(b) of the Securities Exchange Act of 1934 and corresponding SEC Rule 10b-5, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5. The district court dismissed plaintiffs' amended complaint because they failed to adequately allege scienter. The court held that Item 303 of Regulation S-K did not create a duty to disclose for purposes of Section 10(b) and Rule 10b-5. Such a duty to disclose must be separately shown according to the principles set forth in Basic, Inc. v. Levinson and Matrixx Initiatives, Inc. v. Siracusano. Further, neither the collective scienter doctrine nor the core operations doctrine alone gives rise to a strong inference of scienter in this case. There is no allegation that the issue of an inherent defect in NVIDIA's Material Set was ever publicly raised prior to NVIDIA's disclosure, nor is there any allegation that NVIDIA knowingly issued a false press release, attempting to discount any public discussion regarding its chips' defects. Accordingly, the court affirmed the judgment of the district court. View "In Re: Nvidia Corp. Sec. Litig." on Justia Law

Plaintiffs filed suit against Amedisys and others, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4). Plaintiffs claimed that Amedisys defrauded investors by concealing a Medicare fraud scheme. The district court granted a motion to dismiss for failure to state a claim under Rule 12(b)(6) and dismissed the suit with prejudice. Plaintiffs filed a motion for reconsideration but the district court denied the motion. The court concluded that the motion to dismiss should be denied as to the element of loss causation. The district court's application of the "actual fraud" standard to the partial disclosures at issue, and when viewed against the stark results of Amedisys's second quarter of 2010 earnings report, requires reversal and vacating the prior dismissal. View "Bach, et al. v. Amedisys, Inc., et al." on Justia Law