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

The district court granted summary judgment for plaintiff in a derivative suit on behalf of 1-800-Flowers.com against Master Fund, ruling that Master Fund was the beneficial owner of more than ten percent of the shares of 1-800-Flowers, Inc., which were bought and sold within a period of six months, and requiring Master Fund to disgorge $4,909,393 in short-swing profits for violating section 16(b) of the Securities Exchange Act of 1934. Master Fund appealed and plaintiff cross-appealed.The Second Circuit concluded that factual questions remain on the issue of Master Fund's beneficial ownership and therefore remanded. In this case, RCM is a registered investment advisor; Master Fund, Offshore, and QP are customers of RCM; and William C. Martin holds positions in RCM, Master Fund, and Offshore, and indirectly has a role in QP. The relationship among RCM, Master Fund, Offshore, and QP is governed by an Investment Management Agreement (IMA), which was signed by Martin on behalf of all four parties to the agreement.The court concluded that it would be inconsistent with principles concerning section 16(b) of the Securities Exchange Act of 1934 to accept the district court's first reason for rejecting Master Fund's delegation of voting and investing authority to RCM. The court explained that, although Rule 13d-3(a) includes within the definition of a beneficial owner "any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has" voting or investment authority, 17 C.F.R. 240.13d-3(a), using generalized wording such as "intertwined" or "not unaffiliated" to bring a person within the coverage of Rule 13d-3(a) would extend the reach of section 16(b) beyond the text of both the statute and the rule. The court also concluded that making an investment advisor a customer's agent for the specified purpose of carrying out the advisor's traditional functions for a customer does not make the advisor an agent for all purposes. Finally, the court concluded that there remains to be determined as a factual matter whether, under all the relevant circumstances, Martin is in control of Master Fund and the feeder funds with authority to commit these entities to altering or terminating the IMA. View "Packer v. Raging Capital Management, LLC" on Justia Law

This case arose from defendants' ownership in a manufacturing facility that used and disposed perfluorooctanoic acid (PFOA) which contaminated the water supply in the Village of Hoosick Falls, New York. Plaintiff, a construction company operating in the Village and the property owner, filed suit alleging property damage resulting from defendants' negligence in using and disposing of PFOA. On appeal, defendant challenged the district court's denial of defendants' motion under Federal Rule of Civil Procedure 12(b)(6) to dismiss the claims that defendants' negligence caused the corporate plaintiff to lose revenues and caused the individual plaintiff to suffer devaluation of his land.The Second Circuit held that the district court properly denied the motion to dismiss the claim of the property owner but erred in denying the motion to dismiss the claim of the company. The court saw no error in the district court's conclusion that the principle of 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 8 280, 727 N.Y.S.2d 49 (2001), is inapposite to the claim of the owner, because he alleged physical contamination of his property, and thus is entitled to seek damages not only for that intrusion but also for the diminution in value of the property. Therefore, the motion to dismiss the owner's negligence claim was properly denied. However, the company's negligence claim to recover its purely economic damages should have been dismissed. The court affirmed in part and reversed in part, holding that the remaining claims lacked merit. View "R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp." on Justia Law

Shareholders of Goldman filed a class action alleging that Goldman and several of its executives committed securities fraud by misrepresenting Goldman's freedom from, or ability to combat, conflicts of interest in its business practices. The district court certified a shareholder class, but the Second Circuit vacated the order in 2018. On remand, the district court certified the class once more.The court affirmed the district court's order on remand, holding that the district court correctly applied the inflation-maintenance theory. The court explained that the inflation-maintenance theory did not require proof of fraud-induced inflation, and that the district court applied the correct standard in concluding that Goldman's share price was inflated. The court also held that the district court did not abuse its discretion by holding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence. View "Arkansas Teacher Retirement System v. Goldman Sachs Group, Inc." on Justia Law

The Second Circuit reversed the district court's dismissal of plaintiffs' Sherman Act, RICO Act, and common-law claims against defendants for lack of Article III standing. Plaintiffs are a group of investment funds and defendants are a collection of financial institutions. Plaintiffs' claims stemmed from a scheme to fix the benchmark interest rates used to price financial derivatives in the Yen currency market.The court held that plaintiffs alleged an injury in fact sufficient for Article III standing, because plaintiffs plausibly alleged that defendants' conduct caused them to suffer economic injury. In this case, plaintiffs alleged that they entered into financial agreements on unfavorable terms because defendants manipulated benchmark rates in their own favor. Accordingly, the court remanded for further proceedings. View "Sonterra Capital Master Fund Ltd. v. UBS AG" on Justia Law

This case arose out of the 2009 bankruptcy of Old GM, which resulted in a sale under 11 U.S.C. 363 of the bulk of its assets to a new entity that has continued the business (the new General Motors). The New General Motors assumed the liability of Old GM with respect to post‐Sale accidents involving automobiles manufactured by Old GM. The claims assumed included those by persons who did not transact business with Old GM, such as individuals who never owned Old GM vehicles and persons who bought Old GM cars after the Sale. At issue was whether the New General Motors was liable for punitive damages with respect to such claims.The Second Circuit held that the new General Motors did not contractually assume liability for punitive damages in its predecessor's bankruptcy sale, and thus the Post-Closing Accident Plaintiffs may not assert claims for punitive damages based on the predecessor's conduct. Accordingly, the court affirmed the district court's decision affirming the bankruptcy court's decision on the issue of punitive damages. View "In re Motors Liquidation Co." on Justia Law

The Second Circuit affirmed the district court's decision declining to reconsider its original decision granting the Town's motion to dismiss the amended complaint alleging claims of, inter alia, breach of contract, innocent misrepresentation, and fraud in connection with plaintiff's loan to a licensee of the Town that was allegedly secured by the Town.The court held that PHL's arguments with regard to dismissals of the unjust enrichment and negligent misrepresentation claims were not properly before the court. Even if they were properly before the court, the court would still reject PHL's arguments. The court also held that PHL's amended complaint failed to state a claim on which relief can be granted for breach of contract or equitable relief because it failed to plausibly allege a valid contract; PHL's claims for misrepresentation failed because PHL failed to allege that it reasonably or justifiably relied on the misrepresentation; and there was no merit to PHL's contention that it should have been allowed to file a second amended complaint. View "PHL Variable Insurance Co. v. Town of Oyster Bay" on Justia Law

IQ filed suit against three large dental supply distributors, alleging that defendants violated federal and state antitrust laws, as well as common law tort claims. The Second Circuit affirmed the district court's dismissal of IQ's claim that it has antitrust standing to challenge the boycott of SourceOne and the state dental associations (SDAs) that had partnered with SourceOne. However, the court found that IQ's antitrust and tort claims may go forward on the direct boycott allegations. In this case, IQ was an efficient enforcer of the antitrust laws solely with respect to its allegations that it has been directly boycotted by the actions of defendants. Accordingly, the court vacated in part and remanded for further proceedings. Finally, IQ's state law antitrust claims and common law tort claims were also vacated and remanded, but only to the extent that they relied on IQ's allegations that it suffered harm as a result of the direct boycott. View "IQ Dental Supply, Inc. v. Henry Schein, Inc." on Justia Law

The Second Circuit affirmed the district court's dismissal of plaintiff's claims for breach of contract, copyright infringement, misappropriation, and unfair competition arising from its sale of equipment and software for an automated assembly system. The court held that defendants' conduct did not breach Section 8.2(d) of the Equipment Purchase Agreement (EPA) and was non‐infringing because that provision permitted defendants to reproduce and use the station and server source code; defendantsʹ adaptation of the server source code was non‐infringing because it was authorized by 17 U.S.C. 117(a); Universalʹs contract claim that defendantsʹ modification of the server source code breached the EPA was preempted by the Copyright Act; Universalʹs claim of misappropriation of trade secrets was time‐barred; and MTA did not unfairly compete with Universal because its conduct was not in bad faith. View "Universal Instruments Corp. v. Micro Systems Engineering, Inc." on Justia Law

The Second Circuit affirmed the district court's dismissal of LBE's action alleging claims under the Sherman Act and the Racketeer Influenced and Corrupt Organizations Act (RICO). LBE alleged that Barbri and law schools entered into agreements whereby Barbri donates money to the schools, bribes their administrators, and hires their faculty to teach bar review courses. LBE further alleged that, in exchange, the law school gives Barbri direct access to promote and sell its products on campus.The court adopted the district court's well-reasoned and thorough analysis of LBE's allegations and held that the district court properly dismissed the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a plausible claim of relief. The district court concluded that internal contradictions and conclusory assertions in the complaint did not plausibly support LBE's claim that Barbri and the law schools conspired to enable Barbri to gain a monopoly. View "LLM Bar Exam, LLC v. Barbri, Inc." on Justia Law

The Second Circuit vacated the district court's dismissal of plaintiff's complaint, based on forum non conveniens grounds, alleging claims for damages under federal and state law in connection with a ʺgoing private mergerʺ by which certain controlling defendants purchased American Depositary Shares (ADSs) from Dangdang's minority shareholders.The court held that the district court abused its discretion by failing to consider the forum selection clause contained in the relevant documents and its impact on the forum non conveniens analysis. The court rejected defendants' claim that plaintiffs waived their reliance on the forum selection clause by failing to raise the issue in the district court. The court also held that remand to the district court was necessary for the district court to consider the scope and enforceability of the forum selection clause. View "Fasano v. Li" on Justia Law