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

Plaintiff appealed from the district court's judgment dismissing her claims against her ex-husband and his brother for failure to state a claim and untimeliness. Plaintiff alleged that, in representing a certain investment as worthless and concealing the $5.5 million received on its account, defendants conspired in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962(d), committed common law fraud, and breached fiduciary duties, and that her ex-husband was unjustly enriched. The court held that the district court's reasons for dismissing the fraud-based claims were erroneous and that the district court erred in ruling on the existing record that the RICO, common law fraud, and breach of fiduciary duty claims were time-barred. The court sustained the dismissal of the unjust enrichment claim as untimely. Accordingly, the court affirmed in part and vacated and remanded in part. View "Cohen v. Cohen" on Justia Law

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

Saint Vincent's alleged that Morgan Stanley - the fiduciary manager of the fixed-income portfolio of Saint Vincent Catholic Medical Centers Retirement Plan - violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Saint Vincent's alleged that Morgan Stanley disproportionately invested the portfolio's assets in mortgaged-backed securities, including the purportedly riskier subcategory of "nonagency" mortgage-backed securities, despite warning signs that these investments were unsound. Although Saint Vincent's, as the fiduciary administrator of an ERISA-governed plan, was in a position to plead its claims with greater factual detail than was typically accessible to plaintiffs prior to discovery, and although it received two opportunities to amend its complaint, the Amended Complaint failed to plead sufficient, nonconclusory factual allegations to show that Morgan Stanley failed to meet its fiduciary responsibilities under ERISA. Accordingly, the court affirmed the district court's dismissal of the Amended Complaint. View "Pension Benefit Guaranty Corp. v. Morgan Stanley Inv. Mgmt. Inc." on Justia Law

Willow Creek sued UBS, claiming a violation of Rule 10(b)-16 of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), because UBS failed to fully disclose its generally applicable margin rules until after it demanded that Willow Creek provide additional collateral for its margin account. Willow Creek also alleged that UBS failed to provide adequate notice before it revised those rules. The district court granted UBS's motion for judgment on the pleadings, concluding that the initial disclosure statement provided by UBS satisfied Rule 10b-16's disclosure requirements. The court concluded that, in this instance, where a broker disclosed its margin policies regarding the circumstances that could lead it to reevaluate the adequacy of the collateral in a customer's account and also indicated that more specific information about its margin policies was available to the customer, it need not disclose the precise, complex formulas it used to calculate its collateral requirements. Nor did Rule 10b-16(b) require UBS to provide advance notice to Willow Creek before it changed its margin rules. Accordingly, the court affirmed the judgment. View "WC Capital Mgmt. v. UBS Sec., LLC" on Justia Law

This appeal arose out of a proceeding brought to remedy securities fraud and recover assets that were the fruits of the fraud. The issues on appeal related to enforcement of, and compliance with, an order freezing various assets. The Trust and various individuals appealed from the magistrate judge's sanctioning of certain individuals. The court dismissed the appeals of Jill Dunn and David Wojeski for lack of jurisdiction, affirmed the sanction order as to Lynn Smith, and remanded to allow the Trust to contest the court's order regarding the disposition of trust property and for the magistrate judge to give additional guidance to the receiver as to disposition of the Trust property. View "SEC v. McGinn, et al." on Justia Law

Plaintiffs, former customers of Sterling Foster, for which Bear Stearns, as a clearing broker, performed certain settlement and record-keeping functions, alleged that Bear Stearns violated section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), by participating in Sterling Foster's market manipulation scheme. Bear Stearns pursued this interlocutory appeal from a decision and order of the district court granting in part and denying in part plaintiffs' motion for certification of a class pursuant to Rule 23(b)(3). The court concluded that plaintiffs' allegations failed to trigger a duty of disclosure to Sterling Foster's clients such that the Affiliated Ute Citizens of Utah v. United States presumption of reliance applied. Therefore, plaintiffs failed to satisfy Rule 23(b)(3)'s predominance requirement. Accordingly, the court reversed the judgment of the district court. View "Levitt v. J.P. Morgan Securities, Inc." on Justia Law

Plaintiffs in this consolidated action sought relief on behalf of two large putative classes - one whose members bought auction rate securities and one whose members issued them - alleging that defendants triggered the market's collapse by conspiring with each other to simultaneously stop buying auction rate securities for their own proprietary accounts. The district court dismissed plaintiffs' complaints pursuant to Rule 12(b)(6). The court affirmed, holding that plaintiffs' complaints did not successfully allege a violation of Section 1 of the Sherman Act, 15 U.S.C. 1. Although the court did not reach the district court's implied-repeal analysis under Credit Suisse Securities (USC) LLC v. Billing, the district court was ultimately correct that the complaints failed to state a claim upon which relief could be granted. View "Mayor and City Council of Baltimore v. Citigroup, Inc." on Justia Law

Defendants Michael Nouri, Eric Nouri, and Anthony Martin appealed convictions stemming from their involvement with a market manipulation scheme with Smart Online, Inc. stock. On appeal, defendants contended that the district court erred in instructing the jury on fraud by deprivation of honest services, especially in the context of securities fraud, and that there was insufficient evidence to sustain convictions for securities fraud. Martin also contended that there was insufficient evidence to convict him of honest-services wire fraud, that the district court erroneously limited his examination of a witness, and that his sentence was unreasonable. The court affirmed the judgment, finding no merit in defendants' arguments. View "United States v. Nouri" on Justia Law

Plaintiff appealed the district court's dismissal of its complaint for failure to state a claim. At issue was whether plaintiff had stated plausible claims under sections 11 and 12(a)(2) of the Securities Act of 1933, 15 U.S.C. 77a et seq. The court held that allegations in the complaint stated a plausible claim that the offering documents for the security misstated the applicable underwriting standards in violation of sections 11, 12(a)(2), and 15. The court also held that the alleged misstatements were not immaterial as a matter of law. Finally, the court vacated the district court's holding that plaintiff, even as the representative of a proposed class, lacked standing to pursue claims based on securities in which it had not invested. Rather than addressing this issue, the court instructed the district court to reconsider it in light of the court's intervening opinion in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co. Accordingly, the court reversed in part, vacated in part, and remanded for further proceedings. View "New Jersey Carpenters Health Fund v. The Royal Bank of Scotland" on Justia Law

Appellants, investors who lost money in the multi-billion dollar Ponzi scheme perpetrated by BLMIS, appealed from the district court's judgment affirming the bankruptcy court order affirming the trustee's denial of appellants' claims against BLMIS under the Securities Investor Protection Act (SIPA), 15 U.S.C. 78aaa et seq., based on the trustee's determination that appellants did not qualify as BLMIS "customers" under SIPA. The court agreed and affirmed the judgment, concluding that appellants could not reasonably have thought that the Feeder Funds deposited their money with or established accounts for them at BLMIS. The bankruptcy court did not err in concluding that the Feeder Funds were not BLMIS agents. View "In Re: Bernard L. Madoff Investment Securities LLC" on Justia Law