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

Plaintiffs, a group of foreign and domestic institutional investors, filed a putative class action against UBS and others, alleging violations of sections 10(b) and 20(a) 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. The district court dismissed all claims with prejudice. The court concluded that the Supreme Court's decision in Morrison v. National Australia Bank Ltd. precluded claims brought under the Exchange Act by purchasers of shares of a foreign issuer on a foreign exchange, even if those shares were cross-listed on a United States exchange; claims brought under the Securities Act of 1933, 15 U.S.C. 77a et seq., based on disclosures made in connection with a UBS June 13, 2008 registered rights offering were properly dismissed because they were immaterial and/or inactionable "puffery;" and Exchange Act claims arising out of defendants' statements regarding positions in, and valuation of, mortgage-related assets were properly dismissed for failure to adequately plead a material misrepresentation or scienter. Accordingly, the court affirmed the judgment of the district court. View "City of Pontiac v. UBS AG et al." on Justia Law

Plaintiffs filed suit against defendants, alleging, inter alia, that Barclays knowingly misrepresented its cost of borrowing funds by submitting false information for the purpose of calculating the London Interbank Offered Rate (LIBOR), in violation of section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5. The court held that the district court erred in concluding, prior to any discovery, that plaintiffs failed to plead loss causation where plaintiffs' allegations that the June 28, 2012 decline in Barclay's stock price resulted from the revelation of Barclay's misrepresentations of its 2007-2008 LIBOR rates and defendant Diamond's conference call misrepresentation of Barclays's borrowing costs presented a plausible claim. The court also held that the district court correctly concluded that Barclays's statements in its SEC filings relating to the company's internal control requirements were not materially false. Accordingly, the court vacated in part, affirmed in part, and remanded. View "Carpenters Pension Trust v. Barclays PLC, et al." on Justia Law

Defendant executed several illegal insider trades involving the stock of the supermarket chain Albertson's using material nonpublic information received from an employee of UBS. On appeal, defendant challenged the district court's judgment ordering him to disgorge profits from illegal insider trading, enjoining him from further violating the securities laws, and ordering him to pay prejudgment interest on the entire disgorgement amount. The court concluded that the district court did not abuse its discretion in ordering disgorgement because the court's cases have established that tippers can be required to disgorge profits realized by their tippees' illegal insider trading. This case was distinguishable only insofar as defendant himself executed the fraudulent trades rather than leave that task to a tippee. The court found no abuse of discretion in the district court's imposition of an injunction on defendant or in its order that he pay prejudgment interest. Accordingly, the court affirmed the judgment of the district court. View "SEC v. Contorinis" on Justia Law

Plaintiff, on behalf of Leap, filed suit against Goldman, seeking to hold Goldman liable under Section 16(b) of the Securities Exchange Act, 15 U.S.C. 78p(b), and Rule 16b-6(d), 17 C.F.R. 240.16b-6(d), for Goldman's failure to disgorge "short-swing profits" derived from writing call options on Leap stock. The court concluded that for the purposes of Section 16(b), the expiration of a call option within six months of its writing was to be deemed a "purchase" by the option writer to be matched against the "sale" deemed to occur when that option was written. The court also concluded that Section 16(b) required statutory insider status at the time of both purchase and sale, and so Goldman was not required to disgorge profits where it was a statutory insider only when the options were written, but not when they expired. Accordingly, the court affirmed the district court's dismissal of the action for failure to state a claim. View "Roth v. The Goldman Sachs Group, Inc., et al." on Justia Law

Plaintiff, a former minority shareholder of Xcelera, filed securities fraud claims alleging that Xcelera insiders purchased Xcelera stock by making a tender offer through a shell corporation without disclosing any information about Xcelera's financial state. The district court dismissed plaintiff's claims and she appealed. The court held that the duty of corporate insiders to either disclose material nonpublic information or abstain from trading was defined by federal common law and applied to unregistered securities. Accordingly, the district court erred in dismissing plaintiff's insider trading claims under sections 10(b), 20(a), and 20A(a) of the Securities Exchange Act, 15 U.S.C. 78a et seq. The court vacated the dismissal of those claims and remanded for further proceedings. The court affirmed as to the dismissal of plaintiff's market manipulation claims and her section 14(e) insider trading claims. View "Steginsky v. Xcelera Inc." on Justia Law

This appeal stemmed from the collapse of the hedge fund Lipper Convertibles. On appeal, plaintiffs challenged the district court's grant of summary judgment on their federal claims against Lipper Convertibles' auditor, PwC, under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq., as well as their state law claims of fraud and negligent misrepresentation. The court concluded that there was a genuine dispute as to whether plaintiffs suffered a direct injury at the time of investment by purchasing their shares in Lipper Convertibles funds at fraudulently inflated prices. Accordingly, the court vacated the district court's grant of summary judgment on the Section 10(b) claims and remanded to the district court to consider in the first instance PwC's scienter argument and for further proceedings. The court affirmed the state law claims. View "CILP Assocs., L.P. v. PriceWaterhouse Coopers LLP" on Justia Law

The SEC settled an enforcement action against firms that executed trading orders on the New York Stock Exchange and placed the money obtained as a result of the enforcement actions into funds for distribution to injured customers. The SEC ordered the remaining funds to be disbursed to the United States Treasury. On appeal, petitioner, who had filed class actions against the firms, challenged the SEC's disbursement order seeking to invoke the court's statutory jurisdiction under 15 U.S.C. 78y. The court concluded that petitioner failed to plead an injury in fact sufficient to afford it Article III standing. For every Covered Transaction in which petitioner was identified as the injured customer, petitioner had already received a distribution from the Fair Funds that fully compensated it for that Covered Transaction. Accordingly, the court dismissed the petition for lack of subject matter jurisdiction. View "Martin v. U.S. S.E.C." on Justia Law

Plaintiffs alleged that various foreign investment vehicles secretly funneled investors' assets to Madoff Securities. The district court granted defendants' motion to dismiss plaintiffs' claims against JPMorgan and BNY on the ground that the claims were precluded by the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. 78bb(f), and, alternatively, by New York's Martin Act, N.Y. Gen. Bus. Law 352 et seq. In this instance, the allegations were more than sufficient to satisfy SLUSA's requirement that the complaint alleged a "misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security." Accordingly, the court affirmed the judgment, concluding that plaintiffs' claims against JPMorgan and BNY were properly dismissed as precluded by SLUSA. View "Trezziova v. Kohn" on Justia Law

Defendant challenged the restitution order entered against him under the Mandatory Victims Restitution Act of 1996, 18 U.S.C. 3663A. The order awarded over $17 million to victims for losses stemming from defendant's role in the manipulation of the price of a publicly traded security. The court concluded that the district court was authorized to enter the restitution order despite section 3664(d)(4)'s ninety-day requirement; the district court did not abuse its discretion in awarding restitution despite the complexity and duration of the restitution proceedings; the district court's decision that it was not required to expand the evidentiary hearings to include the live testimony and cross-examinations of affiants was within its discretion and did not violate defendant's Fifth Amendment right to due process; the district court carried its burden under the Act where it credited the government's expert's well-supported proffer of a widely accepted methodology, trained towards a logical measure of loss, and tailored to the particular circumstances of this case; and the court rejected defendant's remaining grounds for appeal which all focused on the accuracy of the amount of the district court's restitution award. Accordingly, the court affirmed the judgment of the district court. View "United States v. Gushlak" on Justia Law

Lead Plaintiffs filed suit under sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. 77k(a), 77(a)(2), and 77o, alleging that defendants made material misstatements and omissions in the offering of materials associated with the sales of Callable Dollar Preference Shares of Barclays. The district court dismissed the claims with prejudice because the claims were either time-barred, inadequately pled or without an adequate lead plaintiff. After the district court's decision, this court decided Fait v. Regions Fin. Corp., which held, inter alia, that defendants could be liable under section 11 and 12(a)(2) for misstatements of belief and opinion. The court concluded that Lead Plaintiffs' proposed amendments satisfactorily incorporated the clarification in the applicable law that occurred after the district court's decision and also addressed the other concerns identified by the district court. Accordingly, the court remanded to give Lead Plaintiffs the opportunity, with respect to the Series 5 Offering, to proceed with the claims in the Proposed Complaint and with a new-Lead Plaintiff. The court affirmed the dismissal of Series 2, 3, and 4 Offering claims as time-barred. View "In Re: Barclays Bank PLC Security" on Justia Law