Justia Securities Law Opinion Summaries

Lead Plaintiffs filed suit under sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 77k(a), 77(a)(2), and 77o, alleging that defendants made material misstatements and omissions in the offering of materials associated with the sales of Callable Dollar Preference Shares of Barclays. The district court dismissed the claims with prejudice because the claims were either time-barred, inadequately pled or without an adequate lead plaintiff. After the district court's decision, this court decided Fait v. Regions Fin. Corp., which held, inter alia, that defendants could be liable under section 11 and 12(a)(2) for misstatements of belief and opinion. The court concluded that Lead Plaintiffs' proposed amendments satisfactorily incorporated the clarification in the applicable law that occurred after the district court's decision and also addressed the other concerns identified by the district court. Accordingly, the court remanded to give Lead Plaintiffs the opportunity, with respect to the Series 5 Offering, to proceed with the claims in the Proposed Complaint and with a new-Lead Plaintiff. The court affirmed the dismissal of Series 2, 3, and 4 Offering claims as time-barred. View "In Re: Barclays Bank PLC Security" on Justia Law

Plaintiffs, members of a certified class of securities fraud plaintiffs whose certification order was vacated in 2004 (the Drnek action), filed a class action in 2009 reciting the same claims previously outlined in the Drnek action. The district court concluded that plaintiffs' claims have been extinguished because they filed their class action more than five years after the Drnek court vacated its certification order. The court held that the Drnek court's vacatur of certification caused American Pipe & Construction Co. v. Utah tolling to cease and the statute of repose to resume running. Because plaintiffs brought this action after the statute of repose expired, their claim has been extinguished. Accordingly, the court affirmed the judgment of the district court.View "Hall, et al. v. Variable Annuity Life Ins. Co., et al." on Justia Law

A class of Motorola investors claimed that, during 2006, the firm made false statements to disguise its inability to deliver a competitive mobile phone that could employ 3G protocols. When the problem became public, the price of Motorola’s stock declined. The parties settled for $200 million. None of the class members contends that the amount is inadequate. Two objected to approval of counsel’s proposal that it receive 27.5 percent of the fund. One objector protested almost a month after the deadline and failed to file a claim to his share of the recovery. The Seventh Circuit dismissed his appeal, stating that he lacks any interest in the amount of fees, since he would not receive a penny from the fund even if counsel’s share were reduced to zero. The other objector claimed that fee schedules should be set at the outset, preferably by an auction in which law firms compete to represent the class. Noting the problems inherent in such a system, the court held that the district judge did not abuse her discretion in approving the award.View "Liles v. Motorola Solutions, Inc." on Justia Law

Plaintiffs, purchasers of condominiums in the Hard Rock Hotel San Diego, filed a putative class action suit under the Securities Exchange Act of 1933, 15 U.S.C. 78a et seq., and California state law, against the Hotel's developer and others. At issue on appeal was whether plaintiffs have alleged the sale of a security based on their purchase of the condominiums. The court affirmed the judgment of the district court, holding that plaintiffs have not adequately alleged facts showing that they were offered the real-estate and rental-management contracts as a package. Plaintiffs did not allege facts showing that they were induced to buy the condominiums by the rental-management agreement. Accordingly, plaintiffs have not alleged the sale of a security and plaintiffs' claims were properly dismissed. View "Salameh v. Tarsadia Hotel" on Justia Law

Plaintiffs filed suit against MuniMae defendants, alleging that they committed securities fraud by falsely representing that the Company was in full compliance with a new accounting standard enacted in 2003; and concealing the substantial cost of correcting the accounting error. The court affirmed the district court's dismissal of plaintiffs' claims under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5, 17 C.F.R. 240.10b-5, for failing to adequately plead scienter; affirmed the district court's dismissal of plaintiffs' claim under sections 11 of the Securities Act of 1933, 15 U.S.C. 77k(a), as time-barred under section 13's statute of repose; affirmed the district court's dismissal of plaintiffs' claim under section 12(a)(2) of the Securities Act, 15 U.S.C. 77(a)(2), for lack of standing; and affirmed the district court's dismissal of the section 15 claim because plaintiffs failed to adequately plead a primary violation of the Securities Act. View "Yates v. Municipal Mortgage & Equity" on Justia Law

After defendants were found liable for securities fraud stemming from their practice of late trading in the mutual fund market, the district court ordered disgorgement and imposed a civil penalty. The court affirmed the district court's determination of liability and there was no abuse of discretion in the amount of disgorgement award. The court concluded, however, that, in light of the Supreme Court's recent decision in Gabelli v. SEC, the court must vacate the district court's civil penalty award and remand for reconsideration. In Gabelli, the Supreme Court held that the so-called "discovery rule," which tolls a statute of limitations for crimes that were difficult to detect, did not apply to toll the five-year statue of limitations for fraud cases in SEC enforcement actions. The court also concluded that the language in 15 U.S.C. 77t(d)(2) did not permit the district court's interpretation that the civil penalty be imposed jointly and severally. Accordingly, the court reversed the district court's imposition of joint and several liability for the civil penalty, vacated the penalty, and remanded for further proceedings.View "SEC v. Pentagon Capital Management" on Justia Law

Greenblatt, the “bad boy of Chicago arbitrage” became involved in litigation concerning use of his “web of corporations,” including Loop Corporation and Banco. In 2000, Banco extended a $9.9 million line of credit in exchange for a blanket lien over Loop’s assets. Loop defaulted; nevertheless, Banco expanded the line of credit by several million dollars in 2002 and continued lending Loop money until 2004. Banco lost senior creditor status when the district court voided the lien in an earlier case. In 2001 Loop purchased millions of shares of EZ Links stock from Golf Venture, giving a promissory note. Loop defaulted; Golf Venture won a judgment of $1.2 million. Also in 2001, a failed margin transaction left Loop indebted to its brokerage firm, Wachovia, in the amount of $1,885,751. Wachovia took Loop to arbitration and won a $2,349,000 award in 2005. Wachovia is still trying to collect. Loop had transferred almost all of its valuable assets to another Greenblatt company, leaving only the EZ Links stock, in possession of Banco, and Banco claimed to have creditor priority over Wachovia. The district vourt pierced Loop’s corporate veil, allowing Wachovia to reach Greenblatt’s assets, and voiding Banco’s lien, and ordered the sale of Loop’s only asset, EZ Links stock. Banco attempted to contest the d decisions. The Seventh Circuit dismissed Banco’s appeal for lack of standing.View "Wachovia Sec., LLC v. Loop Corp." on Justia Law

Plaintiffs Michael Hirsch, Robyn Hirsch, and Hirsch, LLP, claimed that they lost money invested in securities that were part of a "Ponzi" scheme. In 2002, plaintiffs' accountant, EisnerAmper LLP, referred them to Marc Scudillo, a financial advisor employed by Amper Financial Services, LLC (AFS), for investment planning. Scudillo also served as a representative for Securities America, Inc. (SAI), a separate corporation that served as a broker-dealer handling securities transactions. Plaintiffs hired Scudillo and invested in a portfolio with a conservative investment strategy. Their relationship was not reduced to a written contract. On Scudillo's recommendation, plaintiffs purchased securitized notes from Medical Provider Financial Corporation (Med Cap) totaling $550,000. Plaintiffs signed two applications with SAI for the purchase of the Med Cap notes. Each SAI application contained an arbitration clause requiring disputes to be arbitrated by the Financial Industry Regulatory Authority (FINRA). The issue before the Supreme Court in this appeal was whether it was proper to compel arbitration between a non-signatory and a signatory to a contract containing an arbitration clause on the basis that the parties and claims were sufficiently intertwined to warrant application of equitable estoppel. The Supreme Court held that although traditional contract principles may in certain cases warrant compelling arbitration absent an arbitration clause, the relationship of the parties in this case and the claims in dispute here, viewed alone, was insufficient to warrant application of equitable estoppel to compel arbitration.View "Hirsch v. Amper Financial Services, LLC" on Justia Law

Mike Richey sold his interest in Richey Oilfield Construction, Inc. to Nighthawk Oilfield Services, Ltd. Richey remained employed as president of Richey Oil and became a limited partner in Nighthawk. The primary agreements regarding the transaction were a stock purchase agreement, an agreement for the purchase of Richey Oil’s goodwill, and a promissory note. Each of the acquisition agreements contained a forum selection clause naming Tarrant County as the venue for state court actions. When the business did not go as well as the parties had hoped, Richey filed suit in Wise County, where Richey resided, against two Nighthawk executives (together, Relators) for, among other claims, breach of fiduciary duty, common law fraud, statutory fraud, and violations of the Texas Securities Act. Relators responded by unsuccessfully moving the trial court to transfer venue to Tarrant County or dismiss the suit pursuant to the mandatory venue selection clauses in the acquisition agreements. Relators subsequently sought mandamus relief. The Supreme Court conditionally granted relief, holding that the trial court abused its discretion by failing to enforce the forum selection clauses in the acquisition agreements. View "In re Fisher" on Justia Law

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Defendant-Appellees GeoDynamics, Inc., its managing director Jeffory Shields, and several other business entities affiliated with Shields, alleging securities fraud in connection with four oil and gas exploration and drilling ventures Shields marketed to thousands of investors as Joint Venture Agreements (JVAs). The district court granted defendants' 12(b)(6) motion to dismiss. The SEC appealed, contending that despite their labels as JVAs, the investment agreements were actually "investment contracts" and thus "securities" subject to federal securities regulations. Because it could not be said as a matter of law that the investments at issue were not "investment contracts," the Tenth Circuit reversed. View "SEC v. Shields, et al" on Justia Law