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

In a putative securities class action, investors who purchased or acquired American Depository Shares (ADSs) of The Royal Bank of Scotland (RBS), alleged that RBS and several of its top executives made false and misleading statements that inflated the ADSsʹ prices, in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), 78t(a), and Rule 10b‐5, 17 C.F.R. 240.10b‐5. RBS had experienced rapid growth by repackaging residential subprime mortgages and leveraged loans into residential mortgage backed securities, collateralized debt obligations, and collateralized loan obligations. The housing market bubble burst in 2006, mortgage delinquencies soared, and subprime assets lost much of their value. The district court dismissed and denied plaintiffsʹ motions for reconsideration, to alter or amend the judgment, and for leave to amend. The Second Circuit affirmed, finding that many of the statements at issue were “inactionable puffery.” In light of the total mix of information available to the reasonable investor, RBSʹs statements were not a basis for a securities fraud claim. View "IBEW Local Union v. Royal Bank of Scotland" on Justia Law

The district court dismissed a suit brought by Sanderson, individually and on behalf of all others similarly situated, alleging that auditors (defendants) committed securities fraud by falsely representing that they performed their audits of Advanced Battery Technologies in accordance with professional standards and that the company’s filings accurately reflected its financial condition from the 2007 through the 2010 fiscal years. The court found that the complaint failed adequately to plead scienter as required by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u‐4. Sanderson sought to correct these deficiencies by moving to file an amended complaint. The court denied the motion, concluding that even the new allegations failed to “rise to the level of recklessness.” The Second Circuit affirmed, finding that the factual allegations did not give rise to a strong inference of either fraudulent intent or conscious recklessness, rather than mere negligence. View "In re: Advanced Battery Techs., Inc." on Justia Law

Between 2004 and 2009, Stryker submitted information to the Securities and Exchange Commission’s Enforcement Division regarding alleged wrongdoing by ATG and an involved individual. In 2009, the SEC opened an investigation and interviewed Stryker. The SEC subsequently filed an enforcement action against ATG and the individual, charging them with violating Section 5 of the Securities Act of 1933. In 2010, the SEC reached a settlement with the respondents to the enforcement action. The district court approved the settlement, whereby ATG and the individual were held liable for more than $19 million. In 2011, Stryker sought a whistleblower award under Section 21F of the Dodd-Frank Act, 15 U.S.C. 78u-6, based on the successful enforcement action. The SEC denied the award because the information was submitted before enactment of Dodd-Frank. The Second Circuit affirmed, concluding that the SEC’s interpretation was within its authority and consistent with the legislation. View "Stryker v. Secs. & Exch. Comm'n" on Justia Law

Claimants, former investors of BLMIS, asked that the appointed trustee for the liquidation of BLMIS adjust their proportional share of customer property to reflect inflation and one claimant also asks for an interest adjustment, to reflect the time-value of money. The bankruptcy court upheld that trustee's determination that no adjustment for inflation or interest could be made. The court agreed, holding that the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa, et seq., does not permit an inflation or interest adjustment to "net equity" claims for customer property. Accordingly, the court affirmed the bankruptcy court's order approving the trustee's adjusted net equity calculation and overruling claimants' objections. View "Securities Investor Protection Corp. v. 2427 Parent Corp." on Justia Law

Plaintiffs petitioned for rehearing from the court's summary order and from the opinion filed the same day. The complaint alleged that Bear Stearns was liable as the clearing broker for Baron's fraud. The court reaffirmed its holding that Bear Stearns' conduct as alleged in the Amended Complaint is not sufficient to state a claim for relief under Section 10(b) and Rule 10(b)(5) of the Securities Exchange Act, 15 U.S.C. 78j, 17 C.F.R. 10b-5. Therefore, the petition for panel rehearing with respect to Bear Stearns is denied. The court next addressed the SEC's arguments made in an amicus brief. The court concluded that plaintiffs' and the SEC's concerns that the court's opinion disregarded ATSI Commc'ns, Inv. v. Shaar Fund, Ltd. are wholly unfounded. The facts alleged in this complaint do not involve any ongoing market affected by false pricing signals by Isaac Dweck. Rather, they involve misrepresentations to the victims by Baron salespeople as to how the price they were charging for particular securities was arrived. There is no presumption of reliance based on any identifiable market, and given the lack of an allegation that any plaintiff knew of the stock parking or prices used therein, no allegation of reliance upon the parking transactions at issue. View "Fezzani v. Bear, Stearns & Co." on Justia Law

Plaintiffs filed suit under Sections 10(b) and 20(a) of the Securities and Exchange Act, 15 U.S.C. 78j(b) and 78t(a), alleging that Morgan Stanley and six of its officers and former officers made material misstatements and omissions during the class period in an effort to conceal the company's exposure to and losses from the subprime mortgage market. The district court dismissed all claims for failure to state a claim. The court affirmed, concluding that the district court properly dismissed plaintiffs' claim that defendants' omission of information purportedly required to be disclosed under Item 303 of Regulation S-K, 17 C.F.R. 229.303(a)(3)(ii), violated Section 10(b). The court also affirmed the district court's order dismissing plaintiffs' other claims in a summary order issued simultaneously with this decision. View "Fjarde AP-Fonden v. Morgan Stanley" on Justia Law

Plaintiffs, pension funds, filed suit, seeking to hold BNYM responsible for the losses allegedly caused by Countrywide's breach of its representations and warranties in connection with 530 residential mortgage-backed securities (RMBS) created between 2004 and 2008 for which BNYM acts as trustee. The court affirmed the portion of the district court's order dismissing plaintiffs' claims related to the trusts in which they did not invest for lack of standing because plaintiffs' claims do not implicate the "same set of concerns" as those of absent class members who purchased certificates issued by trusts in which no named plaintiff invested; reversed the portion of that order denying BNYM's motion to dismiss plaintiffs' Trust Indenture Act (TIA), 15 U.S.C. 77aaa-77aaaa, claims related to the PSA-governed (pooling and servicing agreements) New York trusts where the New York certificates at issue are exempt from section 304(a)(2) of the TIA; and the court remanded in part for further proceedings. View "Retirement Board v. Bank of New York Mellon" on Justia Law

BNY Mellon appealed the district court's judgment declaring that the Notice of Special Early Redemption issued by Chesapeake on March 15, 2013, was timely and effective to redeem certain senior notes (the "Notes") at the "Special Price" of 100% of the principal amount, plus interest accrued to the date of redemption. BNY Mellon argued that section 1.7(b) of the Supplemental Indenture authorized redemption at the Special Price only if accomplished no later than March 15, 2013, with notice given 30 to 60 days before, also during the Special Early Redemption Period. The court conclude that the terms of section 1.7 unambiguously terminated Chesapeake's right to redeem the Notes at the Special Price on March 15, 2013. Notice of such redemption needed to be given no later than February 13, 2013. Therefore, the notice given by Chesapeake on March 15, 2013 for redemption to occur on May 15, 2013 was untimely. Accordingly, the court reversed and remanded with instructions. View "Chesapeake Energy Corp. v. Bank of New York Mellon Trust Co., N.A." on Justia Law

The district court approved a settlement agreement between representative plaintiffs and Bank of America in a class action lawsuit alleging violations of the Securities Act of 1933, 15 U.S.C. 77a et seq., and the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The underlying litigation stemmed from Bank of America's negotiations with Merrill Lynch in 2008, which resulted in the two financial institutions merging in 2009. The court concluded that the district court did not violate the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(a)(2)(A)(vi), 78u-4(a)(4), when it awarded reimbursement costs to representative plaintiffs; the notice of the statement of average amount of damages per share was not constitutionally deficient in violation of appellants' due process rights and the district court did not exceed the bounds of its discretion in approving the notice; the award of attorneys' fees was reasonable and appellants failed to identify any specific abuse of discretion on the part of the district court; and appellants' remaining arguments are without merit. Accordingly, the court affirmed the judgment. View "In re Bank of America" on Justia Law

NASDAQ conducted the initial public offering (IPO) for Facebook in May 2012. UBS subsequently initiated an arbitration proceeding against NASDAQ seeking indemnification for injuries sustained in the Facebook IPO, as well as damages for breach of contract, breach of an implied duty of good faith and fair dealing, and gross negligence. NASDAQ initiated a declaratory judgment action to preclude UBS from pursuing arbitration. The district court granted a preliminary injunction and UBS appealed. The court concluded that federal jurisdiction is properly exercised in this case; the district court properly decided the question of arbitrability because the parties never clearly unmistakably expressed an intent to submit that question to arbitration, and such an intent cannot be inferred where, as here, a broad arbitration clause contains a carved-out provision that, at least arguably covers the instant dispute; UBS's claims against NASDAQ are not subject to arbitration because they fall within the preclusive language of NASDAQ Rule 4626(a), and the parties specifically agreed that their arbitration agreement was subject to limitations identified in, among other things, NASDAQ Rules; and, therefore, the court affirmed the district court's order preliminarily enjoining UBS from pursuing arbitration against NASDAQ. The court remanded for further proceedings. View "NASDAQ OMX Grp., Inc. v. UBS Sec., LLC" on Justia Law