Justia Securities Law Opinion Summaries

Plaintiffs filed suit against defendants, alleging, inter alia, that Barclays knowingly misrepresented its cost of borrowing funds by submitting false information for the purpose of calculating the London Interbank Offered Rate (LIBOR), in violation of section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The court held that the district court erred in concluding, prior to any discovery, that plaintiffs failed to plead loss causation where plaintiffs' allegations that the June 28, 2012 decline in Barclay's stock price resulted from the revelation of Barclay's misrepresentations of its 2007-2008 LIBOR rates and defendant Diamond's conference call misrepresentation of Barclays's borrowing costs presented a plausible claim. The court also held that the district court correctly concluded that Barclays's statements in its SEC filings relating to the company's internal control requirements were not materially false. Accordingly, the court vacated in part, affirmed in part, and remanded. View "Carpenters Pension Trust v. Barclays PLC, et al." on Justia Law

Amendments to the Commodity Exchange Act, Pub. L. No. 111-203, 124 Stat. 1376, made by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 purported to expand the enforcement authority of the Commodity Futures Trading Commission. The Dodd-Frank amendments authorize the Commission to regulate retail commodity transactions offered "on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the officer or counterparty on a similar basis." In light of the district court's factual findings and legal conclusions with which the court agreed, the court held that the Commission has enforcement authority over these transactions, and no exception applied. The court affirmed the district court's grant of the preliminary injunction because the Commission had pleaded a prima facie case of a violation of the Act. View "U.S. Commodity Futures v. Martin, Jr., et al." on Justia Law

In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law

Plaintiff (the customer) filed suit against State Street (the custodian bank), alleging in essence that it had a duty to notify him that the securities in his account were worthless. The district court granted State Street's motion to dismiss the contract claims on the ground that State Street had a merely administrative role in managing plaintiff's accounts and thus owed him no duty to guard against his investment advisor's misconduct. The district court concluded that plaintiff's negligence claims were barred by Florida's economic loss rule and plaintiff had not sufficiently alleged knowledge on the part of State Street in regards to the aiding and abetting claims. The court affirmed, holding that, under these facts, the custodian bank breached no duty, contractual or otherwise, by accepting on behalf of its customer securities that later turn out to be fraudulent and listing those securities on monthly account statements issued to the customer. Plaintiff's allegations failed to state claims for breach of contract; plaintiff failed to establish that State Street owed him an independent duty to monitor the investments in his account, verify their market value, or ensure they were in valid form; therefore, he failed to state valid negligence claims; plaintiff's allegations were insufficient to state a claim for aiding and abetting; and plaintiff's claims for breach of fiduciary duty and negligent misrepresentation also failed. View "Lamm v. State Street Bank and Trust" on Justia Law

This appeal stemmed from the City's offering of municipal bonds to finance the development of a cable and Internet system. Nuveen subsequently brought federal and state securities claims against the City, alleging that the City misrepresented the risks to investors. The court concluded that Nuveen has not shown a triable issue of fact on the issue of loss calculation in regards to its federal claims under Section 10b-5 and Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4); the City enjoys statutory immunity from suit on Nuveen's state claims where California courts have applied section 818.8 of California's Government Claims Act to immunize public entities from liability for misrepresentations sanctioned by those entities; and, although the City was entitled to summary judgment, Nuveen had reasonable cause to bring suit and the evidence suffices to establish its good faith. Accordingly, the court affirmed the district court's denial of the City's motion for defense costs, as well as the district court's grant of summary judgment in favor of the City.View "Nuveen Municipal v. City of Alameda" on Justia Law

Lukas owns stock in Miller, a publicly owned corporation engaged in production of oil and natural gas. In 2009, Miller announced that it had acquired the “Alaska assets,” worth $325 million for only $2.25 million. Miller announced several increases in the value of the Alaska assets over the following months, causing increases in its stock price. In 2010, Miller amended its employment agreement with its CEO (Boruff), substantially increasing his compensation and giving him stock options. The Compensation Committee (McPeak, Stivers, and Gettelfinger) recommended the amendment and the Board, composed of those four and five others, approved it. In 2011 a website published a report claiming that the Alaska assets were worth only $25 to $30 million and offset by $40 million in liabilities. In SEC filings, Miller acknowledged “errors in . . . financial statements” and “computational errors.” The stock price decreased., Lukas filed suit against Miller and its Board members, alleging: breach of fiduciary duty and disseminating materially false and misleading information; breach of fiduciary duties for failing to properly manage the company; unjust enrichment; abuse of control; gross mismanagement; and waste of corporate assets. The district court dismissed. The Sixth Circuit affirmed. Lukas brought suit without first making a demand on the Miller Board of Directors to pursue this action, as required by Tennessee law, and did not establish futility.View "Lukas v. McPeak" on Justia Law

Mortgage-backed securities, known as the MASTR Pass-Through Certificates, Series 2007-3, were offered to the public in 2007. UBS, the sponsor of the Certificates, purchased the underlying loans from originators, including Countrywide Home Loans and IndyMac Bank, then sold the loans to MASTR, which placed the loans into the MASTR Adjustable Rate Mortgages Trust, the issuer of the Certificates. UBS Securities, the underwriter, sold the Certificates to investors. The Certificates were issued pursuant to a Securities and Exchange Commission (SEC) Form S-3 Registration Statement filed in 2005 and an SEC Form 424B5 Prospectus Supplement filed in 2007. Those documents assured investors that the underlying loans were originated pursuant to particular underwriting policies and in compliance with federal and state laws and regulations. The district court dismissed a purported class action by investors, alleging violations of the Securities Act of 1933, 15 U.S.C. 77, for failure to plead compliance with the one-year statute of limitations and dismissed an amended complaint as untimely under an inquiry notice standard. The Third Circuit affirmed, holding that a Securities Act plaintiff need not plead compliance with Section 13 and that Section 13 establishes a discovery standard for evaluating the timeliness of Securities Act claims, but the claims were, nonetheless, untimely. View "Pension Trust Fund for Operating Eng'rs v. Mortg. Asset Securitization Transactions, Inc." on Justia Law

Plaintiffs alleged that various foreign investment vehicles secretly funneled investors' assets to Madoff Securities. The district court granted defendants' motion to dismiss plaintiffs' claims against JPMorgan and BNY on the ground that the claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 78bb(f), and, alternatively, by New York's Martin Act, N.Y. Gen. Bus. Law 352 et seq. In this instance, the allegations were more than sufficient to satisfy SLUSA's requirement that the complaint alleged a "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." Accordingly, the court affirmed the judgment, concluding that plaintiffs' claims against JPMorgan and BNY were properly dismissed as precluded by SLUSA.View "Trezziova v. Kohn" on Justia Law

The Funds, closed-end investment companies registered under the Investment Company Act of 1940, 15 U.S.C. 80a- 5(a)(1)(2), are organized as Massachusetts business trusts under G.L. c. 182. Plaintiffs are beneficial owners of preferred shares of each of the Funds. The Funds’ declarations of trust state that meetings shall be held “so long as Common Shares are listed for trading on the New York Stock Exchange, on at least an annual basis." After plaintiffs delivered written notice stating an intention to nominate one of their partners for election as a preferred shares trustee of each fund at the 2011 annual meeting, the Funds issued a press release stating that their annual meeting was being rescheduled to July 2012, the last day of the Funds' 2012 fiscal year. Plaintiffs claimed that the bylaws require that an annual shareholders’ meeting be held within 12 months of the last annual shareholder meeting. The Funds argued that the bylaws require only that one meeting be held each fiscal year. The Massachusetts Supreme Court held that "on at least an annual basis" means that a shareholders' meeting for each Fund must be held no later than one year and 30 days after the last annual meeting. View "Brigade Leveraged Capital Structures Fund, Ltd. v. PIMCO, Income Strategy Fund" on Justia Law

The SEC brought a civil enforcement action against numerous defendants allegedly involved in a scheme to sell unregistered securities of CMKM. The district court granted summary judgment in favor of the SEC, ruling that Global, Helen Bagley, and Brian Dvorak participated in an unregistered distribution of securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e. The court concluded that a material issue of fact remained regarding whether Global and Bagley were necessary participants and substantial factors in the distribution of CMKM securities sufficient to impose liability under Section 5. Accordingly, the court reversed the grant of summary judgment as to Global and Bagley, remanding for further proceedings. The court affirmed the magistrate judge's denial of Dvorak's motion to stay and the district court's disgorgement order as to Dvorak.View "SEC v. CMKM Diamonds, Inc." on Justia Law