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

Dynegy filed a voluntary Chapter 11 bankruptcy petition. Charles Silsby then filed a securities class action complaint against Dynegy and others alleging dissemination of false and misleading information and failure to disclose material facts about Dynegy's financial performance and prospects, in violation of securities laws. Stephen Lucas was appointed lead plaintiff in Silsby v. Icahn, the securities class action litigation. In this appeal, Lucas challenged the district court's conclusion that he lacked standing to opt out of or object to the joint reorganization plan on behalf of the putative class in the securities litigation. The court concluded that Lucas' status as lead plaintiff of the putative class in the district court securities litigation did not automatically extend to the bankruptcy proceedings; because Lucas did not seek application of Rule 23 in bankruptcy court, he represented no one but himself; and since he opted out of the release in his individual capacity, Lucas lacks standing to appeal the order confirming the Plan. Accordingly, the court affirmed the judgment. View "In re: Dynegy, Inc.," on Justia Law

This case arose out of the collapse of SIV, managed by Cheyne and structured by Morgan Stanley. PSERS and Commerzbank appealed from the final order of judgment denying class certification, dismissal of Commerzbank's claim for lack of standing; and dismissal of PSERS's claim because its presence as a party would destroy complete diversity, the sole basis of subject matter jurisdiction. The court affirmed the denial of class certification and dismissal of PSERS; held that it was not a permissible exercise of discretion for the district court to limit Commerzbank's ability to establish its standing; certified to the New York Court of Appeals the question of whether a reasonable trier of fact could find that Commerzbank had acquired from a third party that had purchased securities a fraud claim against Morgan Stanley; and certified the question whether, if Commerzbank has standing, a reasonable trier of fact could hold Morgan Stanley liable for fraud based on the present record. View "Pennsylvania Public School Employees’ Retirement System v. Morgan Stanley" on Justia Law

Plaintiffs, international hedge funds, filed suit alleging violations of U.S. securities laws because defendants made various fraudulent statements and took various manipulative actions to deny and conceal Porsche's intention to take over Volkswagen AG (VW), a German corporation. The securities transactions upon which plaintiffs brought suit were so-called "securities-based swap agreements" relating to the stock of VW. The district court granted defendants' motion to dismiss the complaint because the swaps were essentially transactions in securities on foreign exchanges. The court affirmed on the basis of different reasoning, concluding that the imposition of liability under section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j(b), on these foreign defendants with no alleged involvement in plaintiffs' transactions, on the basis of defendants' largely foreign conduct, for losses incurred by plaintiffs in securities-based swap agreements based on the price movements of foreign securities would constitute an impermissibly extraterritorial extension of the statute. The court remanded for further proceedings.View "Parkcentral v. Porsche" on Justia Law

Plaintiff, a citizen and resident of Taiwan, filed suit alleging that by firing him Siemens had violated the antiretaliation provision of the Dodd-Frank Act, 15 U.S.C. 78u-6(h)(1)(A). The court concluded that the district court properly dismissed the complaint because legislation is presumed to apply only domestically unless there is evidence Congress intended otherwise; (2) there is no indication Congress intended the whistleblower protection provision to have extraterritorial application; and (3) the facts in the complaint unequivocally demonstrate that applying the statute in this case would constitute an extraterritorial application. Therefore, section 78u-6(h) does not protect a foreign worker employed abroad by a foreign corporation where all events related to the disclosures occurred abroad. View "Liu v. Siemens AG" on Justia Law

Plaintiff filed suit against AECOM and AME under the whistleblower retaliation provision created by the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A. The district court dismissed plaintiff's claim against AECOM and plaintiff appealed. The court concluded that an alleged whistleblowing employee's communications need not "definitively and specifically" relate to one of the listed categories of fraud or securities violations in section 1514A in order for that employee to claim protection under the statute; a complaint under section 1514A must, however, plausibly plead that plaintiff engaged in protected activity - that plaintiff reasonably believed the conduct he challenged constituted a violation of an enumerated provision; in this case, plaintiff did not plausibly allege that it was objectively reasonable for him to believe that there was such a violation here; and, therefore, the court affirmed the judgment of the district court.View "Nielsen v. AECOM Technology Corp." on Justia Law

Plaintiffs, purchasers of securities issued by JinkoSolar in two public offerings, appealed from the district court's dismissal of their complaint alleging violations of the federal securities laws. JinkoSolar manufactures various solar cells and solar panel products. The court vacated and remanded, concluding that serious pollution problems rendered misleading statements in a prospectus describing prophylactic measures taken to comply with Chinese environmental regulations.View "Meyer v. JinkoSolar Holding Co." on Justia Law

Plaintiff appealed the district court's grant of insider defendants' motion to dismiss her short-swing trading complaint. The court agreed with the district court that the requirements of a claim under section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78p(b), mandating disgorgement of short-swing profits by statutory insiders, had not been satisfied. The prepaid variable forward contracts in this case were properly analyzed under traditional, and not hybrid, derivative analysis. When that was done, it became evidence that no "purchase" occurred against which a "sale could be matched for section 16(b) purposes. View "Chechele v. Sperling" on Justia Law

Plaintiffs filed a class action on behalf of all persons who purchased common stock from Xerox during a certain period, alleging that Xerox violated the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. Plaintiffs alleged that Xerox and executive officers violated federal securities law by materially misrepresenting that Xerox's worldwide restructuring initiative was financially beneficial to the corporation, when, in fact, one specific component of the restructuring - the "Customer Business Organization Reorganization" - was causing significant and ongoing economic distress to the company. The court affirmed the district court's grant of summary judgment in favor of defendants because there was no genuine dispute of material fact with respect to the sufficiency of Xerox's disclosures about the successes and failures of this component of its worldwide restructuring. View "Dalberth v. Xerox Corp." on Justia Law

Plaintiff appealed the district court's judgment dismissing her claims under Rule 12(b)(6) under the Commodities Exchange Act (CEA), 7 U.S.C. 1 et seq., and declining to exercise supplemental jurisdiction over her state law claims. Applying the domestic transaction test in Morrison v. National Australia Bank Ltd., the court agreed with the district court that a private right of action brought under CEA section 22 is limited to claims alleging a commodities transaction within the United States. The court affirmed the district court's judgment because plaintiff failed to allege a domestic commodities transaction and, because the court affirmed on the basis of section 22, the court did not reach plaintiff's argument regarding the territorial reach of the antifraud provision in CEA section 4o. View "Loginovskaya v. Batratchenko" on Justia Law

The SEC filed a civil enforcement action against defendant, alleging that defendant failed to follow directives issued by the mutual funds and his employer to cease his market timing, and that he used different "financial advisor numbers" when mutual funds blocked trading from the ones he customarily used. The jury found that defendant engaged in no intentional misconduct but that he violated Section 17 of the Securities Act of 1933, 15 U.S.C. 77q, which has no scienter element, with respect to six out of sixty mutual funds. The court concluded that the evidence established without contradiction that the funds were inconsistent in their proscriptions on market timing and that the employer supported defendant's practices - and the jury could not find negligence in these circumstances without evidence as to an appropriate standard of care. Accordingly, the court reversed and remanded for the district court to dismiss the complaint against defendant. View "SEC v. O'Meally" on Justia Law