Case Summaries
Securities Law
[09/08]
McKissick v. Yuen
In an action against plaintiff's former company and two of its former officers, accusing them of perpetrating a fraud that rendered her stock options in the company worthless, summary judgment for defendant is affirmed where: 1) the parties' separation agreement unambiguously barred plaintiff's claims; and 2) although the separation agreement entitled defendant to recoup the attorney's fees it incurred in defending the suit, the agreement did not permit the company to recover the fees it incurred in prosecuting a counterclaim against plaintiff.
[09/03]
U.S. Sec. & Exch. Comm'n v. Hyatt
District court's order of contempt and award of attorney's fees against nonparties for their failure to adequately respond to two subpoenas duces tecum served on them by the Securities and Exchange Commission in connection with litigation between the SEC and another party is vacated where: 1) Rule 45(e) does not require the court to first order compliance before imposing the sanction of contempt, although Rule 45(c) requires an intervening court order if the recipient of the subpoena objects in writing to the production of documents or things, and here, the nonparties did not serve a written objection; and 2) SEC's notice and motion for a rule to show cause did not provide sufficient notice that the district court would decide the contempt issue at the initial hearing as the notice sought only the issuance of a show-cause order and asked the court to set a hearing at which the merits of the contempt issue would later be adjudicated.
[08/26]
Bank of Am., N.A. v. UMB Fin. Servs., Inc.
In an appeal from a series of orders in which the district court declined to compel plaintiff to submit to arbitration and declined to stay litigation pending the outcome of such arbitration, the orders are affirmed where: 1) plaintiff never signed an agreement containing an arbitration clause, and the document plaintiff did sign, the employment agreement, did not incorporate the arbitration clause of the FINRA contracts by reference or otherwise; and 2) the court need not reach the question of waiver since the district court properly determined there was no existing right to arbitration in this case.
[08/20]
Lustgraaf v. Behrens
In an action for damages arising out of a Ponzi scheme perpetrated by a registered representative of one defendant and general agent of another, the dismissal of the complaint is affirmed in part where the complaint did not allege the additional facts necessary to demonstrate that defendant actually exercised control over its subsidiary's general operations rather than merely possessing the ability to do so. However, the order is reversed in part where plaintiffs met their burden of alleging falsity under the Private Securities Litigation Reform Act.
[08/20]
Schleicher v. Wendt
In a securities-fraud suit against some managers of a large, publicly traded financial-services holding company, district court's conclusion that investors can use the fraud-on-the-market doctrine as a replacement for person-specific proof of reliance and causation in granting the class certification is affirmed as, the district court assured itself that the market for the company's stock was thick enough to transmit defendants' statements to investors by way of the price, and as such, the district court did not commit a legal error, or abuse of discretion, in deciding that the fraud-on-the-market doctrine should not be conscripted to serve some other function.
[08/18]
In re: Mercury Interactive Corp. Sec. Litig.
In a securities class action, the district court's order awarding attorneys' fees of twenty-five percent of the $117.5 million settlement fund to class counsel is vacated where the district court erred under Federal Rule of Civil Procedure 23(h) in setting the schedule for objecting to counsel's fee request.
[08/16]
ParkCentral Global, L.P. v. Brown Inv. Mgmt., L.P.
In defendant's appeal from the Vice Chancellor's order requiring defendant to provide its list of limited partners to plaintiff, the order is affirmed where plaintiff complied with the Partnership Agreement, and limited partners were not "third parties" to the partnership.
[08/16]
Malack v. BDO Seidman, LLP
In plaintiff's putative securities fraud class action against an accounting firm that assisted American Business Financial Services, Inc. (American Business), a subprime mortgage originator based on section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, claiming that defendant defrauded plaintiff and other investors by providing American Business clean audit opinions that were used to register the notes at issue with the Securities and Exchange Commission (SEC), district court's denial of class certification is affirmed as the fraud-created-the-market theory lacks a basis in common sense, probability, or any of the other reasons commonly provided for the creation of a presumption, and as such, the court declines to recognize a presumption of reliance based on the theory.
[08/13]
CFTC v. Walsh
In an action by the CFTC and SEC alleging securities fraud, the Second Circuit certified the following question to the New York Court of Appeals: 1) does "marital property" within the meaning of New York Domestic Relations Law section 236 include the proceeds of fraud?; and 2) does a spouse pay "fair consideration" according to the terms of New York Debtor and Creditor Law section 272 when she relinquishes in good faith a claim to the proceeds of fraud?
[08/12]
US v. Kumar
Defendants' convictions and sentences for conspiracy, securities and wire fraud, obstruction of justice, and perjury are affirmed in part where: 1) regardless of whether defendant's false testimony violated 18 U.S.C. section 1512(c)(2), it plainly violated section 1503(a), and the indictment charged at least that offense; 2) the Fifth Amendment did not protect false testimony; and 3) application of the 2005 Guidelines to defendants' fraud offenses, which were completed in 2000, did not violate the Ex Post Facto clause. However, one defendant's sentence is vacated where the district court erroneously failed to award defendant a two-point reduction for acceptance of responsibility that he should have received.
[08/12]
Northstar Fin. Advisors, Inc. v. Schwab Invs.
In an action by investors claiming that a large American investment trust operating a series of mutual funds unlawfully deviated from the investment policies set forth in its registration statement, to the detriment of the fund's shareholders and in violation of section 13(a) of the Investment Company Act, a denial of defendant's motion to dismiss the complaint is reversed where nothing in section 13(a) as originally enacted or as subsequently amended either created a private cause of action or recognized one existed with the clarity and specificity required under Supreme Court precedent.
[08/11]
In re: Aetna, Inc. Sec. Litig.
In plaintiff shareholders' securities fraud class action suit against Aetna, Inc., claiming that defendants misled investors about Aetna's pricing of insurance policies and then sold shares of Aetna's stock before the fraudulent scheme was revealed to the public, district court's order dismissing the suit under the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. section 78u-5(c)(1), which contains a safe harbor for forward-looking statements, is affirmed as the PSLRA safe harbor for forward-looking statements immunizes defendants from liability for securities fraud as the allegedly misleading statements were forward looking, identified as such, accompanied by adequate cautionary statements, and immaterial as a matter of law.
[08/09]
Hale v. Chu
In plaintiffs' corporate derivative suit against China Online, Inc., claiming that the defendants breached their fiduciary obligations and duties owed to the corporation and its shareholders, district court's grant of defendants' motion to dismiss is affirmed as plaintiffs have waived their argument that that the district court should have known that their complaint was really a direct action brought by China Online in its own name, as the record contains no evidence that the plaintiffs ever alerted the district court that China Online was pursuing a direct claim against the defendants despite having ample opportunity to do so.
[08/09]
Miller v. Thane Int'l., Inc.
In a securities fraud class action alleging that a corporation's pre-merger prospectus contained materially misleading representations because it implied that the company's shares would list on the NMS, judgment for defendant is reversed where: 1) in a prior order, the court did not comment on the reliability of the company's stock prices, other than to state what is undisputed, namely, that the stock traded in an inefficient market; and 2) stock price evidence may be used in a loss causation assessment when the market for a stock is not Cammer-level efficient.
[08/09]
World Holdings LLC v. Fed. Repub. of Germany
In an action to obtain payment on certain bonds issued by the Federal Republic of Germany, the denial of Germany's motion to dismiss for lack of subject matter jurisdiction is affirmed where Article II of the Agreement Between the United States of America and the Federal Republic of Germany Regarding Certain Matters Arising from the Validation of German Dollar Bonds stated that no bond "shall be enforceable unless and until it shall be validated," but that did not necessarily mean that a plaintiff may not bring a legal action in the U.S. courts to seek enforcement of a bond that had not been validated.
