Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

In these two civil enforcement actions for securities fraud, various entities that were defrauded by defendants appealed from the district court's order approving initial pro rata distributions recovered from defendants and associated entities by the Receiver in accordance with the Plan proposed by the Receiver. Interested parties, 3M Group, contended principally that the district court should have rejected the proposed pro rata distributions because under the Plan, fraud victims who chose allegedly safer investments fare no better than victims whose investments were riskier. Interested party, KCERA, contended that the district court should have rejected the proposed Plan because it did not provide an adjustment for inflation to compensate for longer-term investors. The court considered all of the contentions of the 3M Group and KCERA in support of their respective appeals and found them to be without merit. Accordingly, the court affirmed the order. View "CFTC v. 3M Employee Welfare Benefit Assoc. Trust I, et al." on Justia Law

Lehigh appealed the district court's award of damages to plaintiffs under the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. 2801-2841. At issue was whether a franchisor could be held under the PMPA for failing to provide notice to a "trial franchisee" prior to termination of its franchise. The court held that the PMPA provided a right of action, both to "full" and "trial" franchisees, when a franchisor failed properly to notify it prior to terminating the franchise. The court also concluded that the district court did not abuse its discretion in awarding plaintiffs compensatory damages, punitive damages, attorney's fees and costs, and interest. View "Jimico Enterprises, Inc. v. Lehigh Gas Corp." on Justia Law

LSED sought to rescind an agreement to purchase bond insurance from FGIC and recover its $13 million premium payment. LSED based its claim on failure of cause, a tenet of Louisiana law that required all contracts be supported by cause. Because the court found that the principal cause of the agreement between the parties was the purchase of bond insurance to protect the bondholders in the event of default, not to reduce the interest rate LSED paid to borrow money, the court affirmed the district court's decision. View "In Re: Merrill Lynch & Co., Inc." on Justia Law

Plaintiff appealed the district court's dismissal of his complaint against defendant Justin Korn. Plaintiff, a former shareholder and officer of defendant GVC, sought indemnification from GVC after successfully defending a suit brought by GVC in Delaware, and also sought to pierce the corporate veil to hold Korn accountable for any resulting judgment. The district court entered a stipulated judgment against GVC, but dismissed the complaint against Korn. Because the district court erroneously held that plaintiff could not pursue both indemnification and an alter-ego veil-piercing theory, the court vacated the order of dismissal and remanded for further proceedings. View "Kertesz v. General Video Corp." on Justia Law

This case arose when WWP sued Shinkong seeking damages and injunctive relief arising out of the failure of a joint venture between the parties. On appeal, WWP challenged the district court's order striking its expert report and claim for money damages after it attempted to file its expert disclosures seven weeks late, and later granting Shinkong summary judgment. Because the court found that WWP lacked sufficient notice of such severe consequences for late filing; an opportunity to respond before being sanctioned; and because the court found the penalty far exceeded the transgression, the court vacated and remanded for further proceedings. View "World Wide Polymers, Inc. v. Shinkong Synthetic Fibers Corp." on Justia Law

Krist claimed that defendant, a New York City restaurant, discriminated against her on the basis of her disabilities in violation of of the Americans with Disabilities Act, 42 U.S.C. 12181-12189; New York State Executive Law 290-301; and New York City Administrative Code 8-101 to 8-703 by attempting to restrict her access and that of her service dog to the restaurant and by verbally harassing her on account of her disability and use of the service dog. The district court dismissed. The Second Circuit affirmed, rejecting arguments that the ADA imposes a code of civility and that the trial court erroneously imposed a requirement that plaintiff prove intentional discrimination. View "Krist v. Kolombos Rest. Inc." on Justia Law

Plaintiffs appealed from a judgment of the district court granting defendants' motion to dismiss and denying as moot plaintiffs' motion for summary judgment on liability. The District Court held that plaintiffs failed to state a claim, under a variety of theories, based on defendants' purchase and possession of an interest in the Coca-Cola Bottling Company of Egypt. The court concluded that the facts alleged in plaintiffs' Amended Complaint, if true, told a tragic story of religious discrimination in Egypt in the 1960s and the court understood the desire for compensation. However, that wrong, if it did indeed occur, was inflicted by the Egyptian government, not by defendants. Because the district court correctly determined that the Amended Complaint failed to state a claim against defendants and also therefore correctly denied plaintiffs' motion for partial summary judgment as moot, the judgment of the district court was affirmed. View "Bigio v. The Coca-Cola Co." on Justia Law

The United States appealed from a judgment of the district court invalidating two notices of Final Partnership Administrative Adjustments issued by the IRS. The district court so ruled because it concluded that the taxpayer's characterization of two tax-exempt Dutch banks as its partners in Castle Harbour LLC was proper under Internal Revenue Code 704(e)(1). The district court also concluded that, even if the banks did not qualify as partners under section 704(e)(1), the government was not entitled to impose a penalty pursuant to Internal Revenue Code 6662. The court held that the evidence compelled the conclusion that the banks did not qualify as partners under section 704(e)(1), and that the government was entitled to impose a penalty on the taxpayer for substantial understatement of income. Accordingly, the judgment of the district court was reversed.

Defendants appealed from a judgment of the district court in favor of plaintiff on claims of Section 16(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78p(b). At issue was whether a beneficial owner's acquisition of securities directly from an issuer - at the issuer's request and with the board's approval - should be exempt from the definition of a "purchase" under Section 16(b), on the theory that such a transaction lacked the "potential for speculative abuse" that Section 16(b) was designed to curb. The court held that such transactions were covered by Section 16(b) and that defendants, who were limited partnerships, were beneficial owners for the purpose of Section 16(b) liability, notwithstanding their delegation of voting and investment control over their securities portfolios to their general partners' agents. Accordingly, the court affirmed the judgment of the district court.

UBS appealed the denial of their motion for a preliminary injunction enjoining defendants from proceeding with an arbitration before the Financial Industry Regulatory Authority (FINRA), and alternatively requiring that the arbitration proceed in New York County. In the arbitration, defendants sought damages for UBS's alleged fraud in connection with defendants' issuances of auction rate securities. The court held that defendants were entitled to arbitration because they became UBS's "customer" under FINRA's rules when they undertook to purchase auction services from UBS. The court also held that the enforceability of the forum selection clause was a procedural issue for FINRA arbitrators to address and that the district court lacked jurisdiction to resolve it.