Category Archives: Securities Litigation

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Fourth Circuit Affirms Dismissal of Securities Fraud Complaint Where Inference of Scienter Was Not Sufficiently Strong

In Yates v. Municipal Mortgage & Equity, LLC, No. 12-2496 (4th Cir. Mar. 7, 2014), the United States Court of Appeals for the Fourth Circuit affirmed the dismissal of a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78(b), against defendant Municipal Mortgage & Equity (“MuniMae”) … Continue Reading

Appellate Court Issues Opinion on SEC’s Conflict Minerals Rule

Yesterday, the Court of Appeals for the D.C. Circuit issued its opinion in the challenge to the SEC’s Conflict Minerals Rule.  We have reviewed the D.C. Court of Appeals decision and find that it leaves much of the SEC’s rule intact.  It is specifically the requirement that companies describe products as not “DRC conflict free” … Continue Reading

District Court Cites Recent “Evolution” of Rule 23 Standards to Deny Class Certification Motion in Securities Action Based Upon Allegedly Misleading Registration Statement

In In re Kosmos Energy Ltd. Securities Litigation, No. 3:12-CV-373-B, 2014 U.S. Dist. LEXIS 36365 (N.D. Tex. Mar. 19, 2014), the United States District Court for the Northern District of Texas (Boyle, J.) denied lead plaintiff’s class certification motion in a consolidated action alleging claims under Sections 11, 12(a)(2) and 15 of the Securities Act … Continue Reading

Second Circuit Holds that Federal Common Law Prohibits Trading By Insiders of a Cayman Islands Corporation While In Possession of Material Nonpublic Information

In Steginsky v. Xcelera Inc., Nos. 13-1327-cv, 13-1892-cv, 2014 WL 274419 (2d Cir. Jan. 27, 2014), the United States Court of Appeals for the Second Circuit held that even when a company’s securities are unregistered, federal law requires corporate insiders either to disclose material nonpublic information or abstain from trading in those securities.  The Court … Continue Reading

Second Circuit Affirms Dismissal of Short-Swing Profit Claim Against Goldman Sachs Arising from Six-Month Call Options

In Roth v. The Goldman Sachs Group, Inc., No. 12-2509-cv, 2014 WL 305094 (2d Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit held that the short-swing profits rule imposed by Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), requiring corporate insiders (including ten-percent stockholders) to … Continue Reading

Second Circuit Applies Morrison to Criminal Prosecution Under Section 10(b) and Rule 10b-5

In United States v. Vilar, Case Nos. 10-521(L), 10-580(CON), 10-4639(CON), 2013 WL 4608948 (2d Cir. Aug. 30, 2013), the United States Court of Appeals for the Second Circuit held that Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities & Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder, … Continue Reading

Third Circuit Joins With the Seventh, Ninth and Eleventh Circuits in Holding That Plaintiffs Asserting 1933 Act Claims Need Not Plead Compliance With the Statute of Limitations, Splitting With the First, Eighth and Tenth Circuits

In Pension Trust Fund for Operating Engineers v. Mortgage Asset Securitization Transactions, Inc., No. 12-3454, 2013 WL 5184064 (3d Cir. Sept. 17, 2013), the United States Court of Appeals for the Third Circuit joined the Seventh, Ninth and Eleventh Circuits, holding that Section 13 of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. § 77m, … Continue Reading

Tenth Circuit Finds that Jury Must Determine Whether “Notes Are Securities” in a Securities Fraud Action

In United States v. McKye, No. 12-6108, 2013 U.S. App. LEXIS 17297 (10th Cir. Aug. 20, 2013), the United States Court of Appeals for the Tenth Circuit reversed the conviction of Brian William McKye for securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b).  The Tenth Circuit … Continue Reading

Delaware Chancery Court Finds Merger “Entirely Fair” to Common Stockholders Despite the Merger Leaving Common Stockholders With No Consideration for Their Shares

In In re Trados Inc. Shareholder Litigation, Case No. 1512-VCL, 2013 Del. Ch. LEXIS (Del. Ch. Aug. 16, 2013), Vice Chancellor Laster of the Court of Chancery of the State of Delaware resolved the long-pending dispute involving the 2005 sale of Trados Inc. (“Trados”) to SDL plc for approximately $60 million. The Court held that … Continue Reading

Eighth Circuit Applies Negligence Standard to SEC Enforcement Claims for Violations of Section 14(a) and Rules 14a-9, 13b2-1 and 13b2-2

In SEC v. Das, No. 12-2780, 2013 U.S. App. LEXIS 15327 (8th Cir. July 29, 2013), the United States Court of Appeals for the Eighth Circuit affirmed the district court’s delivery of jury instructions applying a negligence standard to alleged violations of Section 14(a) of the Securities Exchange Act of 1934 (“1934 Act”) and Securities … Continue Reading

Rules Eliminating the Prohibition on General Solicitation for Rule 506 and Rule 144A Offerings Become Effective September 23, 2013

The final rules for eliminating the prohibition against general solicitation and general advertising in Rule 506 and Rule 144A offerings will become effective on September 23, 2013, which is 60 days after the July 24, 2013 date they were published in the Federal Register. The rules prohibiting certain “bad actors” from participating in securities offerings … Continue Reading

Second Circuit Rejects the Application of American Pipe‘s Tolling Rule and Rule 15(c)’s “Relation Back” Doctrine to the Three-Year Statute of Repose for Section 11 and 12(a) Claims

In In re IndyMac Mortgage-Backed Securities Litigation, No. 11-2998-CV, 2013 WL 3214588 (2d Cir. June 27, 2013), the United States Court of Appeals for the Second Circuit held that the tolling rule established by the United States Supreme Court in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), which suspends the applicable … Continue Reading

Fifth Circuit Holds That Securities Fraud Defendants May Not Rebut the Fraud-on-the-Market Presumption at the Class Certification Stage Through Evidence of No Price Impact

In Erica P. John Fund, Inc. v. Halliburton Co., No. 12-10544, 2013 WL 1809760 (5th Cir. Apr. 30, 2013), the United States Court of Appeals for the Fifth Circuit held that a defendant in a securities fraud class action is not entitled to rebut the fraud-on-the-market presumption of reliance at the class certification stage by … Continue Reading

Sixth Circuit Splits with Second and Ninth Circuits Regarding Need to Allege Defendants’ State of Mind for Claims Challenging Soft Information Under Section 11 of the Securities Act of 1933

In Indiana State District Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., 2013 WL 2248970 (6th Cir. May 23, 2013), the United States Court of Appeals for the Sixth Circuit held that a claim alleging a false statement of opinion or belief in a registration statement may proceed under Section … Continue Reading

Second Circuit Holds that Allegations of Direct Fraudulent Representations Are Necessary for Market Manipulation Claims Under Section 10(b) and Rule 10b-5

In Fezzani v. Bear, Stearns & Co., Inc., No. 09-4414-cv, 2013 WL 1876534 (2d Cir. May 7, 2013), a 2-1 majority of a panel of the United States Court of Appeals for the Second Circuit held that plaintiffs’ failure to plead direct misrepresentations from defendant to plaintiffs was fatal to their market manipulation claim under … Continue Reading

Seventh Circuit Affirms Dismissal of Securities Fraud Class Action, Remanding Question of Sanctions Against Plaintiffs’ Counsel

In City of Livonia Employee Retirement System v. Boeing Co., Nos. 12-1899, 12-2009 2013 WL 1197791 (7th Cir. Mar. 26, 2013), the United States Court of Appeals for the Seventh Circuit (Posner, J.) affirmed the dismissal of a securities fraud class action against the Boeing Company (“Boeing”) and remanded the question of whether sanctions under … Continue Reading

Second Circuit Reverses Dismissal of Section 11 and 12(a)(2) Claims, Holding that Plaintiff’s Allegations Were Sufficient to Plead a Reasonable Inference of Misrepresentations in a Prospectus

In New Jersey Carpenters Health Fund v. Royal Bank of Scotland Group, PLC, 2013 U.S. App. LEXIS 4317 (2d Cir. Mar. 1, 2013), the United States Court of Appeals for the Second Circuit reversed the dismissal of a claim for violations of Sections 11 and 12(a)(2) of the Securities Act of 1933 (“Securities Act”), 15 … Continue Reading

Third Circuit Reinforces Limits to Directors’ Exposure for Misconduct by Corporate Employees

In Belmont v. MB Investment Partners, Inc., No. 12-1580, 2013 WL 646344 (3d Cir. Feb. 22, 2013), the United States Court of Appeals for the Third Circuit held that a mere failure by corporate directors to oversee enforcement of compliance protocols which, if properly enforced, might have led to the directors’ knowledge of securities fraud … Continue Reading

United States Supreme Court Holds that Class Action Securities Fraud Plaintiffs Need Not Prove the Materiality of the Alleged False Statements or Omissions to Support Certification of a Class, Resolving Circuit Split

In Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, No. 11-1085, 2013 WL 691001 (U.S. Feb. 27, 2013), the United States Supreme Court affirmed the decision of the United States Court of Appeals for the Ninth Circuit holding that a securities fraud plaintiff need not prove that the alleged false statements made by defendants … Continue Reading

Second Circuit Affirms Dismissal of Securities Fraud Claims Relating to Allegedly Misleading Press Release

In Kleinman v. Elan Corporation, No. 11-3706-cv, 2013 WL 388006 (2d Cir. Feb. 1, 2013), the United States Court of Appeals for the Second Circuit affirmed the dismissal of a securities class action lawsuit alleging that defendants violated Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities & Exchange … Continue Reading

SEC Freezes Assets and Brings Civil Charges against EB-5 Investor Visa Project

In the first SEC enforcement action of its kind, the SEC announced on February 8, 2013 that it had filed civil charges against, and received an emergency order to freeze assets of, the Intercontinental Regional Center Trust of Chicago, a designated Regional Center under the EB-5 Immigrant Investor Program administered by U.S. Citizenship and Immigration … Continue Reading

Ninth Circuit Applies Securities Litigation Uniform Standards Act to Affirm Dismissal of Section 17200 Class Action Involving Variable Life Insurance Policies

In Freeman Investments, LP v. Pacific Life Insurance Co., No. 09-55513, 2013 WL 11884 (9th Cir. Jan 2, 2013), the United States Court of Appeals for the Ninth Circuit held that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) precluded plaintiffs’ class claims for violations of California Business & Professions Code § 17200, but … Continue Reading

The Second Circuit Finds No Section 16(b) Violation Where Different Securities of the Same Issuer Are Bought and Sold

In Gibbons v. Malone, No. 11-3620-cv, 2013 WL 57844 (2d Cir. Jan. 7, 2013), the United States Court of Appeals for the Second Circuit held that the “short-swing profits rule” imposed by Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(b), requiring corporate insiders to disgorge profits earned from certain purchases … Continue Reading
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