In Absolute Activist Value Master Fund Ltd. v. Ficeto, 2012 WL 661771 (2d Cir. Mar. 1, 2012), the United States Court of Appeals for the Second Circuit held that, for purposes of applying the federal securities laws to transactions involving securities not traded on a U.S.-based stock exchange, a transaction is “domestic,” and thus within the reach of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), “if irrevocable liability is incurred or title passes within the United States.” The decision provides important clarification on the standard laid out by the United States Supreme Court in Morrison v. National Australia Bank Ltd., 130 S. Ct. 2869 (2010), which held that Section 10(b) applies only to “transactions in securities listed on domestic exchanges and domestic transactions in other securities.”Continue Reading Second Circuit Clarifies Meaning of “Domestic Transactions” As Used In Morrison v. National Australia Bank

In Dow Chemical Canada ULC v. Superior Court, 2011 WL 6382110 (Cal. App. 2d Dist. Dec. 21, 2011), the California Court of Appeal, Second District, held that “plac[ing] products into the stream of commerce in a foreign country (or another state), aware that some may or will be swept into the forum state[,]” is not, by itself, sufficient to support the forum state’s exercise of personal jurisdiction over the manufacturer of the products. The Court’s decision explores the limits of personal jurisdiction after the recent decision by the United States Supreme Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 8780 (2011), and provides more certainty to foreign corporations regarding the likelihood of being forced to litigate in California courts.Continue Reading Foreign Corporation’s Mere Awareness That Its Products May Ultimately End Up In a Forum State Is Not Sufficient Contact to Support Personal Jurisdiction

In Assured Guaranty (UK) Ltd. v. J. P. Morgan Investment Management Inc., 2011 N.Y. Slip Op. 09162, 2011 WL 6338898 (N.Y. Dec. 20, 2011), the New York Court of Appeals held that the Martin Act, N.Y. Gen. Bus. Law art. 23-A — New York’s “blue sky” law designed to address fraudulent practices in the marketing of securities — does not preempt common law causes of action for breach of fiduciary duty and gross negligence in connection with the marketing or sale of securities, even if the alleged wrongdoing also would fall within the purview of the Martin Act. This decision thus eliminates a defense to New York common law causes of action relating to securities.Continue Reading New York High Court Holds That State Blue Sky Law Does Not Preempt Common Law Claims Involving Securities

In Sarei v. Rio Tinto, PLC, Nos. 02-56256, 02-56390, 09-56381, 2011 WL 5041927 (9th Cir. Oct. 25, 2011), the United States Court of Appeals for the Ninth Circuit became the latest Circuit to hold that corporations may be held liable under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350. As previously reported here and here, the Second Circuit held last year in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that the scope of liability under the ATS does not extend to corporations because imposing liability on corporations for violations of the law of nations has not achieved a sufficiently “specific, universal, and obligatory” character so as to be considered a norm of customary international law. In Sarei, the Ninth Circuit joined the District of Columbia Circuit, the Seventh Circuit and the Eleventh Circuit in reaching the opposite conclusion. The current circuit split will be resolved by the United States Supreme Court, which granted certiorari to Kiobel on October 17, 2011.Continue Reading Ninth Circuit Latest to Permit Corporate Liability Under Alien Tort Statute; Supreme Court to Resolve Circuit Split in 2012

In Katz v. Gerardi, No. 10-1407, 2011 WL 3726279 (10th Cir. Aug. 25, 2011), the United States Court of Appeals for the Tenth Circuit affirmed the dismissal of claims alleging violations of Section 11 and Section 12(a)(2) of the Securities Act of 1933 (the “1933 Act”), 15 U.S.C. §§ 77k, 77l(a)(2), against a real estate investment trust (“REIT”). The claims were brought by a former minority unitholder of a REIT who, as part of a “squeeze-out merger” of the REIT with another entity, exchanged his units for cash. The Court held that the merger did not force the plaintiff to purchase newsecurities, but only to sell his old securities. Because Sections 11 and 12(a)(2) of the 1933 Act provide a private right of action only for purchasers, not sellers, of securities, the Tenth Circuit held that plaintiff lacked standing to assert a claim. The decision confirms that shareholders involved in forced sales resulting from a merger may not bring claims under the Section 11 and 12(a)(2) of the 1933 Act.
 Continue Reading Tenth Circuit Holds that “Forced Sellers” Resulting From a Squeeze Out Merger Lack Standing to Assert Claims Under Sections 11 and 12(a)(2) the Securities Act of 1933

In Fait v. Regions Financial Corp., No. 10-2311-cv, 2011 WL 3667784 (2d Cir. Aug. 23, 2011), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Section 11 and Section 12(a)(2) of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. §§ 77k, 77l(a)(2), alleging that statements concerning goodwill and loan loss reserves contained in a prospectus and registration statement were false and misleading. The Court held that such statements were “opinions” which can be false or misleading only if defendants did not genuinely believe the opinions at the times they were made.  This decision is notable because it recognizes squarely that estimates of goodwill and loan loss reserves are inherently subjective and thus constitute “opinions” rather than statements of fact.
 Continue Reading Second Circuit Holds that Falsity of Estimates of Goodwill and Loan Loss Reserves For Purposes of Sections 11 and 12(a)(2) of the Securities Act of 1933 Hinges on the Speakers’ Subjective Belief in the Estimates’ Accuracy