Securities Law Summaries
Page 1 of 16 of Securities Law Summaries » New Judicial Opinions 1 2 3 > Last »
Securities and Exchange Commission v. Chancellor Corporation, et al.
No. 08-1347,
United States Court of Appeals for the First Circuit, 11/03/2008
Holding: The U.S. Court of Appeals for the First Circuit dismissed the appeal of defendant Brian M. Adley of a judgment that was entered against him in January 2008 in a securities fraud action filed by the Securities and Exchange Commission ("SEC"). Adley is the former chairman and chief executive officer of Chancellor Corporation, a now defunct Boston, Massachusetts transportation equipment-leasing company. On January 3, 2008, the U.S. District Court for the District of Massachusetts entered a final judgment against Adley for his role in the multi-faceted financial fraud. The district court ordered that Adley be enjoined from future violations of the federal securities laws, pay $930,000 in disgorgement and be barred from acting as an officer or director of a public company for twenty-years. Thereafter, on February 27, 2008, Adley filed a notice of appeal. The First Circuit notified Adley on October 3, 2008, that he was in default for failure to file an opening brief in his appeal, and warned him to file the brief by October 20 or face dismissal. Adley failed to file the required brief. The First Circuit dismissed his appeal on November 3, 2008.
More...
Steve Staehr v. The Hartford Financial Services Group, Inc., et al.
No. 06-3877-cv,
U.S. Court of Appeals for the Second Circuit, 11/17/2008
Holding: The U.S. Court of Appeals for the Second Circuit has reinstated a stockholder class action suit against insurance giant The Hartford Financial Services Group, Inc. ("The Hartford") over claims that the company was engaged in kickback and price manipulation schemes to inflate its financial performance. Earlier, the U.S. District Court for the Southern District of New York granted the company's motion to dismiss on the ground that the action was time-barred by the applicable two-year statute of limitations. On appeal, the Second District held otherwise. The Second Circuit reasoned that the evidence on record was insufficient to conclude, as a matter of law, that an investor of ordinary intelligence could be put on inquiry notice of The Hartford’s allegedly fraudulent conduct. For instance, media reports in the record, as well as the company's regulatory filings, simply did not reveal the scope of The Hartford’s schemes as alleged in the action. On the basis of the foregoing, the Second Circuit reversed the district court's judgment of dismissal, and remanded the case for further proceedings.
More...
Morrison v. National Australia Bank Ltd.
No. 07-0583-cv,
U.S. Court of Appeals for the Second Circuit, 10/23/2008
Holding: The U.S. Court of Appeals for the Second Circuit dismissed for lack of subject matter jurisdiction a "foreign-cubed" securities fraud class action, i.e., an action in a U.S. court filed by foreign plaintiffs against a foreign issuer for violations of U.S. securities laws based on securities transactions in a foreign country. The Second Circuit essentially reasoned that the mix of factors of factors in this case -- the fact that the fraudulent statements at issue emanated from the corporate headquarters in Australia of defendant-appellee National Australia Bank, Ltd. ("NAB"), the complete lack of any effect of such statements on the U.S. or Americans, and the lengthy chain of causation between HomeSide Lending Inc.'s ("HomeSide", the U.S. subsidiary of NAB) actions and the statements that reached investors -- all added up to a determination that U.S. courts lacked subject matter jurisdiction. The Second Circuit explained that notwithstanding the unusual fact pattern in this case, the usual rules should still apply, since the heart of the fraud here occurred outside the U.S. The Second Circuit however rejected calls by amici curiae to lay down a categorical ruling that disallows all foreign-cubed actions in American courts, stating that such a rule would conflict with the goal of preventing the export of fraud from the U.S., and that it also could not anticipate all circumstances in each case.
More...
John Mizzaro, et al, v. Home Depot, Inc. et al.
No. 07-13810,
U.S. Court of Appeals for the Eleventh Circuit, 10/08/2008
Holding: In this class action fraud suit against Home Depot, Inc., the U.S. Court of Appeals for the Eleventh Circuit affirmed the dismissal of shareholders' claims that the company and its senior management obtained excessive rebates from its vendors, and that they violated the securities laws by failing to report that such rebates inflated the retailer's financial results. According to the Eleventh Circuit, the U.S. District Court for the Middle District of Florida had acted correctly in finding that the shareholders' allegations in the amended complaint failed to adequately show strong inference of scienter. What this meant was that the amended complaint contained no allegations directly linking the defendants to the rebates or charge-back fraud, and the allegations about the geographic scope, duration, and amount of the alleged fraud were insufficient to create a “strong inference” (i.e., a “cogent and compelling” one) that the defendants orchestrated the fraud, knew about it, or were severely reckless in not knowing about it.
More...
Potter v. Hughes
No. 06-56082,
U.S. Court of Appeals for the Ninth Circuit, 10/10/2008
Holding: The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a shareholder derivative action filed by Katherine Potter and Charles Krieger against Public Storage, Inc. ("PS"). In this action, Krieger drafted a demand letter upon PS' Board of Directors to challenge a particular corporate transaction, but the U.S. District Court for the Central District of California dismissed the suit as to him for failure to meet the contemporaneous owner requirement (i.e., for failure to own PS shares at the time of the disputed transaction) under the Federal Rule of Civil Procedure 23.1. The district court also dismissed Potter (who was not named in the demand letter) for not making a specific demand on the board as required in the same rule. Potter appealed, claiming that the mere absence of her name in the demand letter was insufficient to disqualify her, and in the alternative, that the letter qualified as a futile demand. But the Ninth Circuit rejected such argument, concluding that the district court did not abuse its discretion in holding that Potter failed to make an adequate demand. The Ninth Circuit further reasoned that Potter’s allegations were not complete and detailed enough to excuse her from the demand requirement. The dismissal of the suit was therefore warranted.
More...
Page 1 of 16 of Securities Law Summaries » New Judicial Opinions 1 2 3 > Last »
Securities Law Commentaries
Following are Securities Law Commentaries elaborating on the significance of the most important of the Securities Law Summaries.
Page 1 of 4 of Securities Law Commentaries 1 2 3 > Last »
Guyden v. Aetna
Posted: 12/31/2008
Commentary: In Guyden v. Aetna, 544 F.3d 376 (2nd Cir. 2008) – a case of first impression in the federal circuit courts -- the Second Circuit confirmed that arbitration provisions are enforceable against an employee who claims that her termination violated the whistleblower protections of the Sarbanes-Oxley Act. The opinion confirms the federal court’s strong support of arbitration provisions, and provides some guidance for employers seeking to implement arbitration agreements.
More...
Related summary: Whistleblower Claims Arbitrable under Sarbanes-Oxley Act, Second Circuit Says
In re: Salomon Analyst Metromedia Litigation
Posted: 12/12/2008
Commentary: In Douglas Millowitz v. Citigroup Global Markets et al (“In Re Salomon Analyst Metromedia Litigation”), 544 F.3d 474 (2nd Cir. 2008), the Second Circuit extended the fraud-on-the-market presumption of reliance, first set forth in Basic v. Levinson, 485 U.S. 224 (1988), to analyst reports. The Court also stated that defendants should be afforded the opportunity to rebut that presumption at the class certification stage in an effort to prevent certification. The opinion may make it harder to pursue class actions in some securities fraud cases.
More...
Related summary: Second Circuit Remands Metromedia Case, Rules that Liability Presumption Now Applies to Stock Analysts as Well
In re Merck & Co., Inc. Securities, Derivative & “ERISA” Litigation
Posted: 11/17/2008
Commentary: In In re Merck & Co., Inc. Securities, Derivative & “ERISA” Litig., ___ F.3d ___, 2008 WL 4138476 (3rd Cir. 2008), a federal circuit court revived a securities fraud class action suit against Merck that accuses the pharmaceutical company of hiding the truth about Vioxx and its link to cardiac problems. The district court had dismissed the class action as time barred, claiming that the plaintiffs were on inquiry notice more than two years before filing the suit. In a split decision on appeal, the Circuit Court disagreed, finding that reassuring messages from Merck and the market prevented plaintiffs from being on inquiry notice until much later.
More...
Related summary: Third Circuit Reinstates Vioxx Class Action Suit Against Merck
Enterprise Fund v. PCAOB
Posted: 10/23/2008
Commentary: In its long-awaited opinion in Free Enterprise Fund v. PCAOB, 537 F.3d 667 (D.C. Cir. 2008), the Circuit Court for the D.C. Circuit upheld the Sarbanes-Oxley Act of 2002 – specifically that Act’s establishment of the Public Company Accounting Oversight Board (“PCAOB”) – against constitutional challenges. The plaintiffs argued that Act violates both the Appointments Clause of the Constitution as well as separation-of-powers principles by creating the PCAOB as a virtually independent, autonomous agency over which the President has minimal practical control and authority. The Court disagreed, finding that the Securities and Exchange Commission, over which the President has an appropriate amount of control, has sufficient legal authority over the PCAOB to support a finding that the Act is constitutional. But this case is far from over – appeals are expected, including to the U.S. Supreme Court, meaning that the future of Sarbanes-Oxley is still in question.
More...
Related summary: DC Circuit Upholds Constitutionality of SEC Audit Panel
Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc.
Posted: 09/19/2008
Commentary: In its highly anticipated opinion in Teamsters Local 445 Freight Div. Pension Fund v. Dynex Capital Inc., 531 F.3d 190 (2nd Cir. 2008), the Second Circuit affirmed that a securities fraud plaintiff can plead corporate scienter without specifically identifying the culpable corporate officer or director whose individual scienter could be imputed to the corporation. The plaintiff need only plead facts sufficient to establish a “strong inference” that someone in the corporation whose acts could be imputed to the corporation acted with the requisite scienter. However, the court warns that the standard for making such a pleading is very high, requiring heightened specificity.
More...
Related summary: Second Circuit: Securities Class Suit Failed to Plead Corporate Scienter Against Dynex and Merit
Page 1 of 4 of Securities Law Commentaries 1 2 3 > Last »
