In Edward J. Goodman Life Income Trust v. Jabil Circuit, Inc., No. 09-10954, 2010 WL 154519 (11th Cir. Jan. 19, 2010), the United States Court of Appeals for the Eleventh Circuit affirmed the dismissal of securities fraud and insider trading claims arising out of options backdating. This decision represents the most recent effort by the Eleventh Circuit to apply the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (“Reform Act”) and the Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) [see blog article here], to allegations of securities fraud arising from options backdating.
 Continue Reading Eleventh Circuit Affirms Dismissal Of Options Backdating Securities Fraud Class Action For Failure To Meet Reform Act’s Heightened Pleading Standards

In Konkol v. Diebold, Inc., No. 08-4572, 2009 WL 4909110 (6th Cir. Dec. 22, 2009), the United States Court of Appeals for the Sixth Circuit applied the United States Supreme Court’s decision in Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) (see blog article here), to hold that securities fraud plaintiffs must plead an inference of scienter that is both “cogent and at least as compelling as any opposing competing inference.”  The Sixth Circuit clarified that, under Tellabs, the inference of defendants’ scienter be “cogent” requires plaintiffs to plead “with particularity” facts supporting each individual allegation of scienter. Additionally, the Sixth Circuit held that Tellabs does not impose any burden on defendants to set forth a competing, non-fraudulent inference of scienter at the pleading stage. In reaching its decision, the Court attempted to harmonize Tellabs with the Sixth Circuit leading pre-Tellabs decision on the topic, Helwig v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001) (en banc).
 Continue Reading Sixth Circuit Affirms Dismissal Of Securities Fraud Complaint Where Inference Of Scienter Was Not Supported By Sufficiently Particularized Allegations Of Fact

NERA and Cornerstone Research (in cooperation with Stanford Law School’s Securities Class Action Clearinghouse) recently issued their respective assessments of securities litigation for 2009. (Their findings and analyses are summarized in…

Continue Reading 2009 Year-End Securities Litigation Reports Are Out; Filings Are Down Following Easing Of The Financial Crisis And Reduced Stock Price Volatility

The following is a brief summary of certain tax provisions included in President Obama’s budget proposal. Following this summary is a list of certain tax provisions that expired at the end of 2009 or will expire at the end of 2010 if Congress doesn’t act to extend them.
 Continue Reading Tax Provisions in President Obama’s Budget Proposal; Expiring Tax Provisions

1. Lower Thresholds For HSR Filings

On January 19, 2010, the Federal Trade Commission announced revised, lower thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product. For the first time, the thresholds have been reduced. They will be effective thirty days after publication in the Federal Register. Publication is expected to occur this week. Thus the new thresholds will most likely become effective late February 2010. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
 Continue Reading Lower Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

Directors of California corporations have, for years, struggled to understand the scope of their fiduciary duties when a corporation is insolvent versus when a corporation is in the “zone of insolvency.” While other states (particularly Delaware) have provided some recent guidance in this area[1], the California Court of Appeal recently provided some much needed clarification – including providing comfort to the decision making processes of directors who are considering various alternatives when a corporation enters into a zone of insolvency.Continue Reading California Court of Appeal Clarifies Fiduciary Duties When a Company is Insolvent or Nearing Insolvency

In Bader v. Anderson, No. CV041521, 2009 Cal. App. LEXIS 1880 (Cal. App. Nov. 23, 2009), the California Court of Appeal for the Sixth Appellate District addressed two important issues affecting shareholder derivative actions under California law. First, the Court offered guidance regarding the distinctions between direct claims and derivative claims by shareholders against corporate management, holding that “incidental harm” to shareholders, in the form of reduced share value, does not transform a derivative claim into a direct cause of action. Second, the Court confirmed that no exception to the presuit demand requirement exists for claims alleging misleading statements or omissions in proxy statements.
 Continue Reading California Court Of Appeal Addresses Important Issues Affecting Shareholder Derivative Claims

In Electronic Trading Group, LLC v. Banc of America Securities LLC (In re Short Sale Antitrust Litigation), 2009 WL 4350035 (2d Cir. Dec. 3, 2009), the United States Court of Appeals for the Second Circuit affirmed the dismissal of a putative antitrust class action against certain financial institutions that serve as “prime brokers” in connection with short sale transactions, on the ground that the federal securities laws precluded application of antitrust law to the matters at hand. This was the first time the Second Circuit applied the considerations for the implied preclusion of antitrust laws by the securities laws outlined by the United States Supreme Court in Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264 (2007).
 Continue Reading Second Circuit Affirms Dismissal Of Antitrust Class Action Due To Implied Preclusion By The Securities Laws

Registrants should be aware of recent fee rate adjustments made by the Securities and Exchange Commission in response to President Obama’s recent signing of H.R. 3288, the appropriations bill that includes funding for the Securities and Exchange Commission. Specifically, the Section 6(b) fee rate applicable to the registration of securities, the Section 13(e) fee rate applicable to the repurchase of securities and the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions will increase from $55.80 per million dollars to $71.30 per million dollars. Note that the fee rate for Section 6(b) is also used to calculate fees payable with the Annual Notice of Securities Sold Pursuant to Rule 24f-2 under the Investment Company Act of 1940. The fee rate adjustments will be effective as of December 21, 2009.
 Continue Reading SEC ADJUSTS FEE RATES FOR SECTION 6(b), SECTION (13e) and SECTION 14(g)

In United States v. Berger, No. 08-50171, 2009 WL 4141478 (9th Cir. Nov. 30, 2009), a three-judge panel of the United States Court of Appeals for the Ninth Circuit declined to apply loss causation principles in civil securities fraud litigation established by the United States Supreme Court in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 342-48 (2005), in connection with the sentencing of a defendant in a criminal securities fraud prosecution. Declining to follow two other circuits that had endorsed the application of Dura Pharmaceuticals to criminal sentencing, the Ninth Circuit held that the policies underlying the proper standard for pleading and proving a loss by investors in civil cases are not present in the criminal sentencing context and that applying Dura Pharmaceuticals’ civil rule to criminal sentencing would clash with Congress’ endorsement of that method. Notwithstanding that the split in circuit decisions may prompt Supreme Court review, this decision provides another instance where courts have applied policy distinctions between civil litigation and criminal/enforcement proceedings involving securities fraud.Continue Reading Ninth Circuit Declines Application Of Loss Causation Principles In Dura Pharmaceuticals In Connection With Criminal Securities Fraud