In Starr International Co. v. Federal Reserve Bank of New York, No. 12-5022-cv, 2014 U.S. App. LEXIS 1770 (2d. Cir. Jan. 29, 2014), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims against the Federal Reserve Bank of New York (“FRBNY”) for alleged breaches of its fiduciary duties, holding that federal common law preempted state fiduciary duty law. This decision provides an example of circumstances in which federal common law preempts state law. Where, as here, a uniquely federal interest in the stability of the economy conflicts with state law, federal common law will prevail.
Continue Reading Second Circuit Holds Delaware Fiduciary Duty Law Preempted By Federal Interest In Fiscal Stability
Second Circuit Clarifies Scope of SLUSA Preclusion
In Trezziova v. Kohn (In re Herald, Primeo & Thema Sec. Litig.), No. 12-156-cv, 2013 U.S. App. LEXIS 19132 (2d Cir. Sept. 16, 2013), the United States Court of Appeals for the Second Circuit affirmed the dismissal of state law class action claims alleging, among other claims, that defendants had aided and abetted Bernard Madoff Investment Securities’ (“BMIS”) Ponzi scheme. Plaintiffs were investors in the defendant investment companies and funds, which had, in turn, invested large sums of money in BMIS. The Court held the claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”), 15 U.S.C. § 78bb(f), even though plaintiffs did not actually purchase any “covered securities” under SLUSA and did not style their claims as securities fraud allegations. The fact that plaintiffs’ allegations centered on purported sales of covered securities by BMIS was sufficient to trigger SLUSA.
Continue Reading Second Circuit Clarifies Scope of SLUSA Preclusion
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 & Exchange Commission (“SEC”) Rules 14a-9, 13b2-1 and 13b2-2. This decision indicates that it is becoming easier for corporate officers to be held liable for violations of Section 14(a), Rule 14a-9, Rule 13b2-1 and Rule 13b2-2.