In In re Aetna, Inc. Securities Litigation, No. 09-2970, 2010 WL 3156560 (3d Cir. Aug. 11, 2010), the United States Court of Appeals for the Third Circuit held that certain allegedly misleading statements regarding the pricing of insurance premiums by a large health insurance company were protected under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 (“Reform Act”), 15 U.S.C. § 78u-5(c)(1). The Court reasoned that the statements warranted protection because they were not only forward-looking — despite containing both present and future elements — but also immaterial. This decision further clarifies the Court’s analysis of mixed present/future statements for purposes of protection under the Reform Act’s safe harbor for forward-looking statements.
 Continue Reading Third Circuit Holds That Mixed Present/Future Statements Are Protected By Reform Act Safe Harbor

In Northstar Financial Advisors, Inc. v. Schwab Investments, No. 09-16347, 2010 WL 3169400 (9th Cir. Aug. 12, 2010), the United States Court of Appeals for the Ninth Circuit held that nothing in Section 13(a) of the Investment Company Act of 1940 (“ICA”), as originally enacted or as subsequently amended, either created a private right of action or implied that such a right exists with the clarity and specificity required under United States Supreme Court precedent. In so holding, the Ninth Circuit followed the Second Circuit and the recent trend of federal courts to reject implied private rights of action under the ICA.
 Continue Reading Ninth Circuit Rejects Private Right Of Action To Enforce Section 13(a) Of The Investment Company Act Of 1940

In NetCoalition v. Securities & Exchange Commission, No. 09-1042 (D.C. Cir. Aug. 6, 2010), the United States Court of Appeals for the District of Columbia Circuit held that the Securities & Exchange Commission (“SEC” or “Commission”) failed adequately to explain the basis of, and failed to provide adequate support for, its approval of a proposed fee by NYSE Arca for access by investors to its proprietary “depth-of-book” product, Arcabook.  The Court vacated the approval order and remanded the matter to the SEC for further consideration of whether the proposed fee is consistent with the requirements and purposes of the Securities Exchange Act of 1934 (“Exchange Act”).
 Continue Reading D.C. Circuit Vacates Proposed Fee For NYSE Arca “Depth-Of-Book” Data And Remands To SEC For Further Review

The practice of marketing registered public offerings of debt securities with credit ratings information and related disclosure of issuer credit ratings in SEC filings will change with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank").
 Continue Reading Registered Public Offerings Of Debt Securities And The Use Of Credit Ratings Information In SEC Filings After Dodd-Frank

The treatment of accrued but unused vacation pay (hereinafter, referred to as "Vacation Benefits") in the context of selling a business has arisen in recent transactions involving clients advised by the firm’s Corporate Practice Group. This gives us an opportunity to remind business owners operating in California of the landscape of the rules associated with the payment of Vacation Benefits and the practice of transferring those liabilities to the new employer in the sale of a business.
 Continue Reading Treatment of Accrued But Unused Vacation in Asset Deals

In Securities & Exchange Commission v. Platforms Wireless Int’l Corp., No. 07-56542, 2010 U.S. App. LEXIS 15328 (9th Cir. July 27, 2010), the United States Court of Appeals for the Ninth Circuit held that under Section 10(b) of Securities Exchange Act of 1934 (“1934 Act”), 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, a showing that a statement is so obviously misleading to a reasonable person that the defendant who made the statement must have known of its misleading nature is sufficient on summary judgment to prove defendant’s scienter. The Court held further that a defendant cannot defeat summary judgment merely by denying subjective knowledge of the risk that a statement could be misleading. This decision clarifies two points of law in the Ninth Circuit: first, that the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 (“Reform Act”), did not alter the substantive requirement for pleading scienter for claims under Section 10(b) and Rule 10b-5, and second, that deliberate recklessness, for purposes of demonstrating scienter, may be proved by an objective, not subjective, evaluation of a defendant’s mental state.
 Continue Reading Ninth Circuit Holds That Scienter May Be Established Through An Objective Evaluation Of A Defendant’s Deliberate Recklessness

NERA and Cornerstone Research (in cooperation with Stanford Law School’s Securities Class Action Clearinghouse) recently issued their respective assessments of securities litigation for the first six months of 2010. (Their findings…

Continue Reading 2010 Mid-Year Securities Litigation Reports Indicate That New Federal Securities Class Action Filings Continue To Decline, Returning To Pre-Recession Levels

In Morrison v. National Australia Bank Ltd., 2010 WL 2518523 (U.S. Jun. 24, 2010), the United States Supreme Court held that domestic courts lack jurisdiction over claims brought by private citizens pursuant to Section 10(b) of Securities Exchange Act of 1934 (“Exchange Act’), 15 U.S.C. § 78j(b), and Securities & Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5, against corporations whose stock is traded exclusively in foreign exchanges. The decision, written by Justice Scalia on behalf of a five justice majority, departs from decades of precedent from the United States Courts of Appeals that allowed such claims to be brought when substantial aspects of the misconduct occurred in the United States or when the misconduct had a substantial effect on U.S. investors.
 Continue Reading United States Supreme Court Limits Extraterritorial Reach Of Private Federal Securities Claims

In Skilling v. United States, 2010 WL 2518587 (U.S. Jun. 24, 2010), the United States Supreme Court significantly limited the scope of a criminal statute used frequently by federal prosecutors to criminalize a wide range of behavior by business executives and public officials. The Court held that 18 U.S.C. § 1346, which makes it a federal crime to deprive another of the “intangible right of honest services,” may only be used by prosecutors in cases where the defendant has participated in conduct involving bribery or kickbacks. The justices agreed unanimously that the statute does not apply to cases where the defendant’s conduct merely entails a conflict of interest, self-dealing, breaches of fiduciary duty or unwise business decisions, and that does not include bribery or kickbacks. The Skilling case ends the long running debate between those who perceived this “statute of last resort” as a necessary tool for prosecutors to use in fighting malfeasance by corporate and public officials, and those who contended ambitious and/or unwise prosecutors were abusing the statute to target persons whose behavior may be unpopular, unethical or subject to second-guessing, but was not clearly criminal.
 Continue Reading United States Supreme Court Limits Scope Of Federal Criminal “Honest Services” Fraud Statute

In In re Cutera Securities Litigation, 2010 WL 2595281 (9th Cir. June 30, 2010), the United States Court of Appeals for the Ninth Circuit concluded that the Private Securities Litigation Reform Act’s (“Reform Act”) safe harbor provision, 15 U.S.C. § 78u-5, protects forward-looking statements accompanied by meaningful cautionary language” andforward-looking statements in the absence of meaningful cautionary language not made with “actualknowledge” that the statement was false or materially misleading when made. This decision greatly clarifies the law in the Ninth Circuit. Previously, in dicta, a Ninth Circuit court had suggested that if plaintiffs could prove a sufficiently strong inference that a forward-looking statement made with actual knowledge of its falsity, such a statement would not protected by the safe harbor provision of the Reform Act even if accompanied by meaningful cautionary language. In re Cutera puts this notion to rest. A forward-looking statement that is either accompanied by meaningful cautionary language or is made without actual knowledge of its falsity may not form the basis for a federal securities fraud claim.
 Continue Reading Ninth Circuit Holds That Safe Harbor Provision Of The Reform Act Applies To Forward-Looking Statements Accompanied By Cautionary Language And Forward-Looking Statements Made Without Actual Knowledge Of Falsity