Justia Civil Procedure Opinion Summaries

The State, by and through the State Treasurer of Wyoming and the State Retirement System (collectively, the State), filed this action against Appellees - rating agencies - alleging that the rating agencies were liable for hundreds of millions of dollars in investment losses on mortgage-backed securities during the 2007-2008 financial crisis. The district court granted the rating agencies’ motion to dismiss all claims against them for lack of personal jurisdiction, concluding that the rating agencies did not have sufficient contacts with Wyoming to rise to the level required by the due process clause. The Supreme Court affirmed, holding that the State failed to establish a prima facie case of personal jurisdiction over the rating agencies. View "State v. Moody’s Investors Serv., Inc." on Justia Law

The district court dismissed a suit brought by Sanderson, individually and on behalf of all others similarly situated, alleging that auditors (defendants) committed securities fraud by falsely representing that they performed their audits of Advanced Battery Technologies in accordance with professional standards and that the company’s filings accurately reflected its financial condition from the 2007 through the 2010 fiscal years. The court found that the complaint failed adequately to plead scienter as required by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u‐4. Sanderson sought to correct these deficiencies by moving to file an amended complaint. The court denied the motion, concluding that even the new allegations failed to “rise to the level of recklessness.” The Second Circuit affirmed, finding that the factual allegations did not give rise to a strong inference of either fraudulent intent or conscious recklessness, rather than mere negligence. View "In re: Advanced Battery Techs., Inc." on Justia Law

Plaintiff-appellant National Credit Union Administration Board ("NCUA") appealed the district court's order dismissing as untimely its complaint against defendants-appellees Barclays Capital Inc., BCAP LLC, and Securitized Asset Backed Receivables LLC. This case arose from the failure of two of the nation's largest federally insured credit unions: U.S. Central Federal Credit Union and Western Corporate Federal Credit Union. The NCUA was appointed conservator and later as their liquidating agent. The NCUA determined that the Credit Unions had failed because they had invested in residential mortgage-backed securities ("RMBS") sold with offering documents that misrepresented the quality of their underlying mortgage loans. The NCUA set out to pursue recoveries on behalf of the Credit Unions from the issuers and underwriters of the suspect RMBS, including Barclays, and began settlement negotiations with Barclays and other potential defendants. As these negotiations dragged on through 2011 and 2012, the NCUA and Barclays entered into a series of tolling agreements that purported to exclude all time that passed during the settlement negotiations when "calculating any statute of limitations, period of repose or any defense related to those periods or dates that might be applicable to any Potential Claim that the NCUA may have against Barclays." Significantly, Barclays also expressly made a separate promise in the tolling agreements that it would not "argue or assert" in any future litigation a statute of limitations defense that included the time passed in the settlement negotiations. After negotiations with Barclays broke down, the NCUA filed suit, more than five years after the RMBS were sold, and more than three years after the NCUA was appointed conservator of the Credit Unions. Barclays moved to dismiss for failure to state a claim on several grounds, including untimeliness. Barclays initially honored the tolling agreements but argued that the NCUA's federal claims were nevertheless untimely under the Securities Act's three-year statute of repose, which was not waivable. While Barclays's motion to dismiss was pending, the district court in a separate case involving different defendant Credit Suisse, granted Credit Suisse's motion to dismiss a similar NCUA complaint on the grounds that contractual tolling was not authorized under the Extender Statute. Barclays amended its motion to dismiss asserting a similar Extender Statute argument. The district court dismissed the NCUA's complaint, incorporating by reference its opinion in Credit Suisse. The NCUA appealed, arguing that its suit was timely under the Extender Statute. The Tenth Circuit reversed and remanded: "while it is true that the NCUA's claims are outside the statutory period and therefore untimely, that argument is unavailable to Barclays because the NCUA reasonably relied on Barclays's express promise not to assert that defense." View "National Credit Union v. Barclays Capital" on Justia Law

Overstock.Com alleged that defendants intentionally depressed the price of Overstock stock by effecting “naked” short sales: sales of shares the brokerage houses and their clients never actually owned or borrowed to artificially increase the supply and short sales of the stock. The parties’ discovery demands were extensive, and, pursuant to a stipulation, the trial court issued a protective order that allowed the parties to designate Protected Material, and to further classify it as “Confidential” or “Highly Confidential.” The order required the parties to exercise good faith to restrict submissions to Confidential Information reasonably necessary for deliberations. Two years later, the court extended the order to confidential information pertaining to third parties. In 2011, the court allowed plaintiffs to propose a Fifth Amended Complaint. The publicly filed document and opposing documents were heavily redacted; un-redacted versions were conditionally lodged under seal. Defendants made10 motions to seal. Plaintiffs opposed five. The media also opposed sealing. The court then denied leave to file the proposed Fifth Amended Complaint, granted the motions to seal, and entered summary judgment for the defendants. The appeals court affirmed most of the sealing decisions, with exceptions for “irrelevant materials” that never should have burdened the court.View "Overstock.com, Inc. v. Goldman Sachs Grp., Inc." on Justia Law

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

Investors can recover damages in a private securities fraud action only with proof that they relied on misrepresentation in deciding to buy or sell stock. The Supreme Court held, in "Basic," that the requirement could be met by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information, including material misrepresentations; a defendant can rebut the presumption by showing that the alleged misrepresentation did not actually affect the stock price. EPJ filed a putative class action, alleging misrepresentations designed to inflate Halliburton’s stock price, in violation of the Securities Exchange Act of 1934 and SEC Rule 10b–5. The Supreme Court vacated denial of class certification, concluding that securities fraud plaintiffs need not prove causal connection between the alleged misrepresentations and their economic losses at the class certification stage. On remand, Halliburton argued that certification was nonetheless inappropriate because it had shown that alleged misrepresentations had not affected stock price. Without that presumption, investors would have to prove reliance on an individual basis, so that individual issues would predominate over common ones and class certification was inappropriate under FRCP 23(b)(3). The district court certified the class. The Fifth Circuit affirmed. The Supreme Court vacated and remanded, while declining to reject the Basic presumption.The Court rejected arguments that “a robust view of market efficiency” is no longer tenable in light of evidence that material, public information often is not quickly incorporated into stock prices and that investors do not invest in reliance on the integrity of market price. Congress could alter Basic’s presumption, given recent decisions construing Rule 10b–5 claims, but has not done so, although it has responded to other concerns. The Basic doctrine includes two presumptions: if a plaintiff shows that the misrepresentation was public and material and that the stock traded in a generally efficient market, there is a presumption that the misrepresentation affected price. If the plaintiff also shows that he purchased stock at market price during the relevant period, there is a presumption that he purchased in reliance on the misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first presumption. Defendants, however, must have an opportunity to rebut the presumption of reliance before class certification with evidence of lack of price impact. That a misrepresentation has price impact is Basic’s fundamental premise and has everything to do with predominance. If reliance is to be shown by that presumption, the publicity and market efficiency prerequisites must be proved before certification. Because indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact. View "Halliburton Co. v. Erica P. John Fund, Inc." on Justia Law

Plaintiffs, a class of investors, brought a securities fraud action against Genzyme Corporation, an international pharmaceutical company, and several of Genzyme’s executives, alleging that Defendants violated the Securities Exchange Act by making false or misleading statements to investors. The district court dismissed the complaint for failure to state a claim upon which relief could be granted and subsequently denied Plaintiffs’ post-judgment motion to amend the complaint. The First Circuit affirmed, holding (1) the district court did not err in concluding that the complaint failed to meet the formidable pleading standard for securities fraud claims; and (2) the district court did not abuse its discretion in denying Plaintiffs’ post-judgment motion to amend the complaint. View "Deka Int'l S.A. Luxembourg v. Genzyme Corp." 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