Justia Civil Procedure Opinion Summaries

Articles Posted in Securities Law
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In this case before the United States Court of Appeals for the Second Circuit, the plaintiffs were U.S. investors who purchased Mexican government bonds. They alleged that the defendants, Mexican branches of several multinational banks, conspired to fix the prices of the bonds. The defendants sold the bonds to the plaintiffs through non-party broker-dealers. The defendants moved to dismiss the case for lack of personal jurisdiction, and the District Court granted the motion, concluding that it lacked jurisdiction as the alleged misconduct, price-fixing of bonds, occurred solely in Mexico.Upon appeal, the Second Circuit vacated and remanded the case. The court found that the defendants had sufficient minimum contacts with New York as they had solicited and executed bond sales through their agents, the broker-dealers. The plaintiffs' claims arose from or were related to these contacts. The court rejected the defendants' argument that the alleged wrongdoing must occur in the jurisdiction for personal jurisdiction to exist, stating that the defendants' alleged active sales of price-fixed bonds through their agents in New York sufficed to establish personal jurisdiction. The court remanded the case for further proceedings consistent with its opinion. View "In re: Mexican Government Bonds Antitrust Litigation" on Justia Law

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The Court of Chancery of the State of Delaware has selected the Friedlander Team as lead counsel and the NYC/Oregon Funds as lead plaintiffs in a derivative lawsuit against Fox Corporation. After the 2020 presidential election, Fox News broadcasted statements accusing two voting machine companies of facilitating election fraud, leading to defamation lawsuits against the network. Fox Corporation paid $787.5 million to settle one lawsuit, with another still pending. As a result, various stockholders filed derivative complaints, seeking to shift the losses from the corporation to the directors and officers allegedly responsible for the harm. The court was required to choose between two competing teams of attorneys to lead the consolidated actions. After evaluating the teams according to recently amended Rule 23.1, which identifies factors for consideration when resolving leadership disputes, the court selected the Friedlander Team and the NYC/Oregon Funds. The court noted the deliberate, client-driven process through which these entities were chosen, their resources and expertise, and the legitimacy conferred by the involvement of public officials. View "In re Fox Corporation Derivative Litigation" on Justia Law

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The Securities and Exchange Commission (“SEC”) adopted a rule requiring issuers to report day-to-day share repurchase data once a quarter and to disclose the reason why the issuer repurchased shares of its own stock. Despite Petitioners’ comments, however, the SEC maintained that many of the effects of the daily disclosure requirement could not be quantified. Petitioners filed a petition for review of the final rule.   The Fifth Circuit granted the petition for review and remanded with direction to the SEC to correct the defects in the rule within 30 days of this opinion. The court found that the e SEC’s notice and comment period satisfies the APA’s requirements. However, the court held that the SEC acted arbitrarily and capriciously, in violation of the APA, when it failed to respond to Petitioners’ comments and failed to conduct a proper cost-benefit analysis. The court explained that almost every part of the SEC’s justification and explanation of the rule reflects the agency’s concern about opportunistic or improperly motivated buybacks. That error permeates—and therefore infects—the entire rule. The court explained that short of vacating the rule, it affords the agency limited time to remedy the deficiencies in the rule. View "Chamber of Com of the USA v. SEC" on Justia Law

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Two law firms that represented Plaintiffs in this litigation, Schlichter Bogard & Denton LLP (“SBD”) and Schneider Wallace Cottrell Konecky LLP (“SWCK”), appealed the district court’s order imposing sanctions against them under 28 U.S.C. § 1927. Plaintiffs’ counsel represented individual shareholders and an employee retirement plan in a lawsuit claiming that the investment company, investment adviser, and recordkeeper (collectively “Empower”) servicing their mutual funds charged excessive fees in violation of its fiduciary duties under § 36(b) of the Investment Company Act. Following denial of Empower’s summary judgment and Daubert motions, the case proceeded to a bench trial where the district court ruled in favor of Empower. Thereafter, the court sanctioned Plaintiffs’ counsel for “recklessly pursu[ing] their claims through trial despite the fact that they were lacking in merit” and held SWCK and SBD jointly and severally liable for $1.5 million in Empower’s trial costs, expenses, and attorneys’ fees. After review, the Tenth Circuit concluded the district court abused its discretion and therefore reversed the order imposing sanctions. Accordingly, the Court did not reach the issues of SWCK and SBD’s joint and several liability or the court’s denial of SWCK’s motion to amend the judgment. View "Obeslo, et al. v. Empower Capital, et al." on Justia Law

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Petitioner was employed at Office Depot as a senior financial analyst. He was responsible for, among other things, ensuring data integrity. One of Ronnie’s principal duties was to calculate and report a metric called “Sales Lift.” Sales Lift is a metric designed to quantify the cost-reduction benefit of closing redundant retail stores. Petitioner identified two potential accounting errors that he believed signaled securities fraud related to the Sales Lift. Petitioner alleged that after he reported the issue, his relationship with his boss became strained. Eventually, Petitioner was terminated at that meeting for failing to perform the task of identifying the cause of the data discrepancy. Petitioner filed complaint with the Department of Labor’s Occupational Safety and Health Administration (OSHA), and OSHA dismissed his complaint. Petitioner petitioned for review of the ARB’s decision.
The Eleventh Circuit denied the petition. The court explained that Petitioner failed to allege sufficient facts to establish that a reasonable person with his training and experience would believe this conduct constituted a SOX violation, the ARB’s decision was not arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with the law. The court wrote that Petitioner’s assertions that Office Depot intentionally manipulated sales data and that his assigned task of investigating the discrepancy was a stalling tactic are mere speculation, which alone is not enough to create a genuine issue of fact as to the objective reasonableness of Petitioner’s belief. View "Chris Ronnie v. U.S. Department of Labor" on Justia Law

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The Securities and Exchange Commission (“SEC”) sued Defendant as well as other individual Defendants and corporate entities for securities violations. Defendant appealed the district court’s order appointing a receiver over all corporations and entities controlled by him. A central dispute between the parties is what test the district court should have applied before imposing a receivership. Defendant argued the district court abused its discretion because it did not apply the standard or make the proper findings under the factors set forth in Netsphere (“Netsphere factors”). The SEC responded that Netsphere is inapplicable and the district court’s findings were sufficient under First Financial.   The Fifth Circuit vacated the district court’s order appointing a receiver. The court granted in part Defendant’s motion for a partial stay pending appeal. The court explained that, as Defendant points out, the district court’s order denying the stay discussed events and actions that took place after the receivership was already in place. Accordingly, the court vacated the appointment of the receiver and remanded so that the district court may consider whether to appoint a new receivership under the Netsphere factors. The court immediately suspended the receiver’s power to sell or dispose of property belonging to receivership entities, including the power to complete sales or disposals of property already approved by the district court. The court explained that the suspension does not apply to activities in furtherance of sales or dispositions of property that have already occurred or been approved by the district court. The court clarified that “activities in furtherance” do not include the completion of the sale of any property. View "SEC v. Barton" on Justia Law

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The Securities and Exchange Commission recently approved the trading of two bitcoin futures funds on national exchanges but denied approval of Grayscale’s bitcoin fund. Petitioning for review of the Commission’s denial order, Grayscale maintains its proposed bitcoin exchange-traded product is materially similar to the bitcoin futures exchange-traded products and should have been approved to trade on NYSE Arca.   The DC Circuit vacated the order and granted Grayscale’s petition. The court explained that the denial of Grayscale’s proposal was arbitrary and capricious because the Commission failed to explain its different treatment of similar products. The court explained that to avoid arbitrariness and caprice, administrative adjudication must be consistent and predictable, following the basic principle that similar cases should be treated similarly. The court wrote that NYSE Arca presented substantial evidence that Grayscale is similar, across the relevant regulatory factors, to bitcoin futures ETPs. As such, the court found that the Commission failed to adequately explain why it approved the listing of two bitcoin futures ETPs but not Grayscale’s proposed bitcoin ETP. Accordingly, the court explained that in the absence of a coherent explanation, this, unlike regulatory treatment of like products, is unlawful. View "Grayscale Investments, LLC v. SEC" on Justia Law

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Lead Plaintiff E. Öhman J:or Fonder AB and others (“Plaintiffs”) brought this putative class action on behalf of all persons or entities who purchased or otherwise acquired common stock of NVIDIA Corporation (“NVIDIA”) during the proposed Class Period. The district court dismissed Plaintiffs’ first complaint with leave to amend, holding that it failed to plead sufficiently that defendants’ statements were materially false or misleading, and that the statements were made knowingly or recklessly.   The Ninth Circuit affirmed in part and reversed in part. The court explained that Section 20(a) assigns joint and several liability for any person who controls any person liable under Section 10(b). Because the panel held that the amended complaint did not sufficiently plead a cause of action under Section 10(b) and Rule 10b-5 against defendants Kress and Fisher, the only alleged primary violation was that committed by NVIDIA through defendant Huang. The panel affirmed the district court’s dismissal of plaintiffs’ Section 20(a) claims against Kress and Fisher, vacated the dismissal of the Section 20(a) claims as to Huang, and remanded for further proceedings as to those claims. View "E. OHMAN J:OR FONDER AB, ET AL V. NVIDIA CORPORATION, ET AL" on Justia Law

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This appeal centered on claims for securities fraud against Spirit AeroSystems, Inc., and four of its executives. Spirit produced components for jetliners, including Boeing’s 737 MAX. But Boeing stopped producing the 737 MAX, and Spirit’s sales tumbled. At about the same time, Spirit acknowledged an unexpected loss from inadequate accounting controls. After learning about Spirit’s downturn in sales and the inadequacies in accounting controls, some investors sued Spirit and four executives for securities fraud. The district court dismissed the suit, and the investors appealed. "For claims involving securities fraud, pleaders bear a stiff burden when alleging scienter." In the Tenth Circuit's view, the investors did not satisfy that burden, so it affirmed the dismissal. View "Meitav Dash Provident Funds and Pension Ltd., et al. v. Spirit AeroSystems Holdings, et al." on Justia Law

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The corporate charter of a bank holding company capped at 10% the stock that could be voted by a “person” in any stockholder vote. During a proxy contest for three seats of a staggered board, the CCSB board of directors instructed the inspector of elections not to count 37,175 shares voted in favor of a dissident slate of directors. According to the board, the 37,175 shares exceeded the 10% voting limitation because certain stockholders were acting in concert with each other. If the votes had been counted, the dissident slate of directors would have been elected. The CCSB corporate charter also provided that the board’s “acting in concert” determination, if made in good faith and on information reasonably available, “shall be conclusive and binding on the Corporation and its stockholders.” In a summary proceeding brought by the plaintiffs, the Court of Chancery found: (1) the “conclusive and binding” charter provision invalid under Delaware corporate law; (2) the board’s instruction to the inspector of elections invalid because the individuals identified by the board were not acting in concert; and (3) the board’s election interference did not withstand enhanced scrutiny review. The court also awarded the plaintiffs attorneys’ fees for having conferred a benefit on CCSB. CCSB argued the Court of Chancery erred when it invalidated the charter provision and reinstated the excluded votes. The Delaware Supreme Court affirmed the Court of Chancery: plaintiffs proved that the board breached its duty of loyalty by instructing the inspector of elections to disregard the 37,175 votes. "The charter provision cannot be used to exculpate the CCSB directors from a breach of the duty of loyalty. Further, the court’s legal conclusion and factual findings that the stockholders did not act in concert withstand appellate review." View "CCSB Financial Corp. v. Totta" on Justia Law