Justia Securities Law Opinion Summaries

Morgan Keegan & Company, Inc. and Regions Bank (hereinafter referred to collectively as "Regions") appealed an order of the Baldwin Circuit Court which granted in part and denied in part their motions to compel arbitration in an action filed against them by Baldwin County Sewer Service, LLC ("BCSS"). In 2001 BCSS began discussing with AmSouth Bank ("AmSouth"), the predecessor-in-interest to Regions Bank, options to finance its existing debt. AmSouth recommended that BCSS finance its debt through variable-rate demand notes ("VRDNs").1 In its complaint, BCSS alleged that in late 2008 it received a notice of a substantial increase in the variable interest rates on its 2002, 2003, 2005, and 2007 VRDNs, which constituted BCSS's first notice that the interest-rate-swap agreements recommended by Regions did not fix the interest rate on the VRDNs but, instead, exposed BCSS to "an entirely new increased level of market risk in the highly complex derivative market." BCSS sued Regions Bank and Morgan Keegan asserting that Regions falsely represented to BCSS that swap agreements fixed BCSS's interest rates on all the BCSS debt that had been financed through the VRDNs. Following a hearing on the motions to compel arbitration, the trial court entered an order in which it granted the motions to compel arbitration as to BCSS's claims concerning the credit agreements but denied the motions to compel arbitration as to BCSS's claims concerning the failure of the swap transactions to provide a fixed interest rate. The trial court reasoned that the "Jurisdiction" clause in a master agreement, in combination with its merger clause, "prevent[ed] any argument that the VRDN arbitration agreement applies to disputes concerning the swap agreements" and that those clauses demonstrated that it was "the parties' intention, as it relates to the interest-swap agreement and any transaction related to that agreement, that the parties would not arbitrate but instead [any dispute] would be resolved by proceedings in a court of competent jurisdiction." Upon review, the Supreme Court concluded that Regions presented evidence of the existence of a contract requiring arbitration of the disputes at issue. The Court reversed the order of the trial court denying the motions to compel arbitration of BCSS's claims concerning the master agreement and the swap agreement and remanded the case for further proceedings.View "Regions Bank v. Baldwin County Sewer Service, LLC " on Justia Law

The Court of Chancery held that Defendants-Appellants, Americas Mining Corporation (AMC), a subsidiary of Southern Copper Corporation's (Southern Peru) controlling shareholder, and affiliate directors of Southern Peru, breached their fiduciary duty of loyalty to Southern Peru and its minority stockholders by causing Southern Peru to acquire the controller’s 99.15% interest in a Mexican mining company, Minera Mexico, S.A. de C.V., for much more than it was worth (at an unfair price). The Plaintiff challenged the transaction derivatively on behalf of Southern Peru. The Court of Chancery found the trial evidence established that the controlling shareholder through AMC, "extracted a deal that was far better than market" from Southern Peru due to the ineffective operation of a special committee. To remedy the Defendants' breaches of loyalty, the Court of Chancery awarded the difference between the value Southern Peru paid for Minera ($3.7 billion) and the amount the Court of Chancery determined Minera was worth ($2.4 billion). The Court of Chancery awarded damages in the amount of $1.347 billion plus pre- and postjudgment interest, for a total judgment of $2.0316 billion. The Court of Chancery also awarded the Plaintiff's counsel attorneys' fees and expenses in the amount of 15% of the total judgment, which amounts to more than $304 million. Defendants raised five issues on appeal pertaining to their perceived errors at trial, the valuation of the shares and companies involved and the awarding of attorneys fees. Upon review, the Supreme Court determined that all of the Defendants' arguments were without merit. Therefore, the judgment of the Court of Chancery was affirmed. View "Americas Mining Corp. v. Theriault Southern Copper Corp." on Justia Law

Central Mortgage and Morgan Stanley entered into a contract concerning the purchase of servicing rights for loans that Morgan Stanley planned to sell to Fannie Mae and Freddie Mac (the agencies) and private investors. Subsequently, many of the loans for which Morgan Stanley sold the servicing rights began to fall delinquent. The agencies exercised their contract right to put delinquent agency loans back to Central Mortgage. Central Mortgage then filed a complaint against Morgan Stanley for breach of contract. The Chancery Court granted Morgan Stanley's motion to dismiss. The Supreme Court reversed and remanded, holding that the claims were legally sufficient to withstand the motion. Central Mortgage then filed an amended complaint to add new claims for additional agency loans (new loans) that had been put back by the agencies and to challenge the private loans. Morgan Stanley moved to dismiss the amended complaint. The Chancery Court (1) denied the motion to dismiss to the extent that it rehashed theories that the Court and Supreme Court already considered in the context of its original motion to dismiss; but (2) granted the motion to dismiss the claims related to the new loans because those claims were barred by Delaware's statute of limitations. View "Central Mortgage Co. v. Morgan Stanley Mortgage Capital Holdings LLC" on Justia Law

In 2008, the General Assembly enacted a statute to require that a foreclosing lender provide advance written notice to the borrower of its intention to foreclosure. Among the information to be provided in that notice is the identity of the "secured party," although the statute does not specifically define that phrase. In this case, there was more than one entity that qualified as a "secured party" under the commonly understood meaning of the phrase. At issue before the Court of Appeals was whether, in such a situation, a foreclosing party was obligated to identify all secured parties in the advance written notice to the borrower. The Court held (1) a foreclosing party should ordinarily identify, in the notice of intent to foreclose, each entity that is a "secured party" with respect to the deed of trust in question; (2) however, a failure to disclose every secured party is not a basis for dismissing a foreclosure action when certain conditions are met; and (3) under the circumstances of the instant case, because many of the enumerated conditions were met even though the notice failed to disclose every secured party, the dismissal of the foreclosure action was not required.View "Shepherd v. Burson" on Justia Law

Plaintiff co-established Company. Plaintiff later sold his majority interest pursuant to an agreement calling for payments to Plaintiff and giving Plaintiff a security interest in Company's assets. Company subsequently applied for credit with Bank, which transaction made Plaintiff's security interest in Company's assets subordinate to Bank's. Thereafter, Company went out of business, leaving loans unpaid. Plaintiff brought claims against Bank for negligence, constructive fraud, actual fraud, and tortious interference with a contract. The trial court granted Bank's motion for judgment on the evidence on all claims, including finding that Bank owed no duty to Purcell. The court of appeals affirmed the trial court's ruling as to the issues of duty but reversed the trial court's judgment on the evidence as to Purcell's remaining claims. The Supreme Court granted transfer and affirmed the trial court, holding (1) there was not sufficient evidence presented in this case to withstand a motion for judgment on the evidence on Purcell's claims of fraud, deception, and tortious interference with a contract; and (2) Purcell's relationship with Bank as a subordinate creditor did not give rise to a duty of care required to prove Purcell's claims of negligence and constructive fraud.View "Purcell v. Old Nat'l Bank" on Justia Law

Plaintiffs are holders of Savient’s 4.75% convertible senior notes due in 2018, which are unsecured and subject to the terms of an indenture. Collectively, Plaintiffs own a face value of $48,709,000, approximately 40% of the outstanding Notes. Defendants are members of Savient’s board of directors USBNA serves as trustee for the Indenture governing the Notes. Following dismal sales of its new drug, KRYSTEXXA, Savient’s Board approved a financing transaction to exchange some existing unsecured Notes for new senior secured notes with a later maturity date. Through the Exchange, Savient exchanged around $108 million in Notes, raised around $44 million in new capital, and issued additional SSDNs with a face value of approximately $63 million. Like the Notes, the SSDNs are subject to an indenture for which USBNA serves as trustee. Plaintiffs sought a declaration that Savient was insolvent and brought derivative claims alleging waste and breach of fiduciary duty in connection with the Exchange Transaction; alleged breach of fiduciary duty and waste claims in connection with the Board’s approval of retention awards for certain Savient executives. The chancellor dismissed the receivership claim for lack of standing and granted a declaration that an Event of Default has not occurred.View "Tang Capital Partners LP, v. Norton" on Justia Law

Petitioner Billie L. Redding asked the Supreme Court to exercise supervisory control over the First Judicial District Court, Lewis and Clark County, and to conclude it was error for the District Court to grant partial summary judgment to Defendants Timothy Janiak; Anderson ZurMuehlen & Co., P.C.; Ray E. Petersen; and Rick Ahmann. Petitioner's case arose from a series of real estate transactions by which she sold her property to Defendants for which she would receive payments from them which would serve as her monthly income. The scheme by which Defendants paid Petitioner and their other real estate clients collapsed in 2008 (as a Ponzi scheme), and they filed for bankruptcy. Petitioner sued, alleging: (1) unlawful sale of securities; (2) negligence; (3) negligent misrepresentation; (4) breach of fiduciary duty; (5) breach of contract; and (6) tortious breach of the covenant of good faith and fair dealing. Petitioner sought damages in the amount of $4,635,485.51, plus additional amounts for punitive damages, emotional distress, loss of established course of life, and consequential damages. Petitioner moved for summary judgment on several issues, the only issue before the Court was whether the "investments" Petitioner made with Defendants qualified as "securities" under the state Securities Act. The district court found that Petitioner "did not engage in a common enterprise," an essential element of an investment contract (i.e. a security), because she "did not share the risks of the investment with other investors because she agreed upon a contractually set return on her investment." Upon review, the Supreme Court determined that supervisory control was appropriate in this case and that the real estate transactions in question here were indeed securities. Accordingly the Court granted Petitioner's request for a Writ of Supervisory Control. View "Redding v. Montana 1st Jud. District" on Justia Law

A stockholder of Republic, a Delaware corporation that engages in waste hauling and waste disposal, filed a derivative suit based on Republic’s compensation decisions: that a payment to O’Connor was made without consideration and was, therefore, wasteful; that an incentive payment to O’Connor was wasteful because it was not tax-deductible and rendered Republic’s compensation plan not tax-deductible; that Directors paid themselves excessive compensation; that Directors breached their duty of loyalty and wasted corporate assets by awarding a certain type of stock option; and that Directors improperly awarded employee bonuses because the requirements of the bonus scheme under which the bonuses were awarded were not met. The chancellor dismissed all but the claim arising from the board’s granting itself stock awards.View "Frank David Seinfeld v. Donald W. Slager, et al." on Justia Law

This case presented a battle between banks over the proceeds of the sale of cattle by a financially strapped borrower who had financial dealings with both banks. When Security Savings Bank (Security) obtained the proceeds of the sale, Peoples Trust and Savings Bank (Peoples) claimed a security interest in the proceeds and sued for conversion. The district court granted summary judgment in favor of Peoples. After Security appealed, Peoples commenced garnishment proceedings against Security to enforce its judgment, and Security paid the underlying judgment. The court of appeals then determined that Security had waived its right to appeal and dismissed the case. The Supreme Court affirmed, holding (1) a defendant faced with post-judgment garnishment does not waive a pending appeal by paying the judgment in order to avoid further enforcement proceedings; and (2) the district court correctly determined that Peoples had a security interest in the proceeds superior to Security's interest and that Peoples did not waive its superior position through its course of conduct.View "Peoples Trust & Savings Bank v. Sec. Savings Bank" on Justia Law

In these cross-motions for partial summary judgment, at issue was whether ION violated the rights of its preferred stockholder, Fletcher, by causing a wholly-owned ION subsidiary to issue certain promissory notes without Fletcher's approval in connection with ION's purchase of a business. The court agreed with the parties that to determine whether the notes were securities was an issue appropriate for summary judgment. On the merits, however, the court held that it did not agree with ION's argument that all notes issued as compensation to a seller of a business by the buyer of that business were not securities. The court concluded that two of the promissory notes issued to the business seller by the ION subsidiary were not securities because they were most sensibly characterized as short-term commercial bridge financing to facilitate the closing of the acquisition transaction. But the court concluded that the third note was a security. Accordingly, the court found that Fletcher's consent rights under the Certificates were not breached by the issuance of the first two notes, but were breached when ION caused its subsidiary to issue the third note.View "Fletcher Int'l, Ltd. v. ION Geophysical Corp., et al." on Justia Law