Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

Articles Posted in Securities Law

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Plaintiffs, investors, filed suit contending that defendants sold securities representing shares in SaiNaith L.L.C. based on false statements that a hotel was owned by that company. The court focused on one of plaintiffs’ theories under Louisiana Revised Statutes 51:712(A)(2) and 51:714, which allows purchasers of securities to recover their investment from the seller of the securities, who made the sale based on false representations. The court agreed with the district court that the summary judgment evidence establishes that SaiNaith never owned the hotel and the investors received interests in a shell company and defendants violated Louisiana law by representing otherwise. Accordingly, the court affirmed the judgment in favor of plaintiffs against defendants personally under the Louisiana statutes. View "Meadaa v. Karsan" on Justia Law
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The Court Appointed Receiver for the Stanford International Bank Ltd. filed a fraudulent transfer claim against defendant, a former international advisor to the Stanford entities. The court concluded that there was a legally sufficient evidentiary basis for the jury’s finding that the Receiver did not discover and could not reasonably have discovered the transfers to defendant and their fraudulent nature until after February 15, 2010, and that, therefore, the Receiver’s fraudulent transfer claim was timely under the Texas Uniform Fraudulent Transfer Act’s, Tex. Bus. & Com. Code 24.010 statute of repose. Therefore, the district court did not err in denying defendant's post-verdict motion for judgment as a matter of law as to the fraudulent transfer. The court did not reach the alternative issues raised by defendant. Finally, the court denied defendant's request to abate this appeal where defendant did not object during trial to this specific language in the jury instruction and he did not request a jury finding on market value even though the parties presented conflicting evidence of market value at trial. Further, defendant failed to brief this issue on the merits. Accordingly, the court affirmed the judgment. View "Janvey v. Romero" on Justia Law

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Plaintiffs filed a putative class action against Allen Standford's lawyers, Thomas Sjoblom, and the law firms where he worked, arguing that they aided and abetted Stanford’s fraud and conspired to thwart the SEC’s investigation of Stanford’s Ponzi scheme. The district court subsequently denied defendants' motion to dismiss the complaint as barred by the attorney immunity under Texas law. The court held that, under Texas law, attorney immunity is a true immunity of suit, such that denial of a motion to dismiss based on attorney immunity is appealable under the collateral order doctrine. The court reversed the district court’s order denying defendants’ motions to dismiss based on attorney immunity now that the Texas Supreme Court has clarified that there is no “fraud exception” to attorney immunity. Accordingly, the court rendered judgment that the case is dismissed with prejudice. View "Troice v. Proskauer Rose, L.L.P." on Justia Law

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Plaintiff, a putative class of purchasers of Diodes common stock, filed suit alleging that Diodes and its officers committed securities law violations. Despite publicly admitting that labor problems existed at its Shanghai production facility, and accurately predicting the impact of the problems on its quarterly financial results, Diodes is alleged to have omitted significant information about the extent and causes of the problems. The district court granted Diodes' motion to dismiss the complaint for failure to state a claim under the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4. The court affirmed the judgment, concluding that plaintiff's amended complaint failed to plead with particularity facts giving rise to a strong inference of scienter on the part of defendants. View "Local 731 v. Diodes, Inc." on Justia Law
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The FDIC filed suit against defendants for securities fraud, alleging that they made false and misleading statements in selling and underwriting residential mortgage backed securities. The FDIC filed its lawsuit within three years of its appointment as receiver, and therefore within the federal limitations period in the FDIC Extender Statute, 12 U.S.C. 1821(d)(14), but it filed suit more than five years after the securities at issue were sold, running afoul of the limitations period under state law. The district court granted judgment on the pleadings for defendants, holding that the FDIC Extender Statute preempts only state statutes of limitations, not state statutes of repose. The court reversed and remanded, concluding that the FDIC Extender Statute preempts all limitations periods, whether characterized as statutes of limitations or as statutes of repose. View "FDIC v. RBS Securities Inc." on Justia Law
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Plaintiffs, a putative class of former Guaranty stockholders whose equity interests were wiped out when Guaranty failed, filed suit alleging federal securities law claims against four former Guaranty executives. Plaintiffs alleged that the executives made materially false and misleading statements regarding Guaranty’s assets. The district court dismissed the claims. The court concluded that, under a holistic review, the Second Amended Complaint confirms that plaintiffs have failed to adequately plead facts that raise a strong inference of scienter. Because plaintiffs have not raised a strong inference of scienter as to any defendant, the court need not reach the issue of loss causation. Accordingly, the court affirmed the judgment of the district court. View "Owens v. Jastrow" on Justia Law
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Pilgrim's Pride was the successor-in-interest to Pilgrim's Pride Corporation of Georgia f/k/a Gold Kist, Inc., which was the successor-in-interest to Gold Kist, Inc. In 1998, Gold Kist sold its agriservices business to Southern States Cooperative, Inc. To facilitate the purchase, Southern States obtained a bridge loan that was secured by a commitment letter between Southern States and Gold Kist. The letter permitted Southern States to require Gold Kist to purchase certain securities from Southern States. In early 2004, Gold Kist and Southern States negotiated a price at which Southern States would redeem the securities. Gold Kist’s Board of Directors, instead of accepting the offer, decided to abandon the securities for no consideration. The issue this case presented for the Fifth Circuit's review centered on whether whether Pilgrim’s Pride Corporation's loss from its abandonment of securities was an ordinary loss or a capital loss. The Tax Court (in what appeared to be the first ruling of its kind by any court) ruled that 26 U.S.C. 1234A(1) applied to the abandonment loss and required that it be classified as capital. However, the Fifth Circuit disagreed. Because section 1234A(1) only applied to the termination of contractual or derivative rights, and not to the abandonment of capital assets, the Court reversed the Tax Court and rendered judgment in favor of Pilgrim's Pride. View "Pilgrim's Pride Corporation v. CIR" on Justia Law

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Defendant appealed the district court's judgment imposing liability on him for violations of the Louisiana Securities Law, La. Rev. Stat. Ann. 51.701 et seq. The court denied plaintiffs' motion to dismiss defendant's appeal for lack of jurisdiction; plaintiffs' argument that defendant should be held liable under federal law are not properly before the court because they failed to file a cross-appeal; the district court erred in requiring the jury to find the elements of a Rule 10b-5 of the Securities and Exchange Ac tof 1934, 15 U.s.C. 78j(b), claim to impose liability under Section 712 of the Louisiana Securities Law, but this error was committed at defendant's insistence and his complaints are foreclosed; defendant's claim that the evidence does not support the district court's judgment of liability under Louisiana Securities Law fails; whether or not plaintiffs are correct that the jury found the requisite elements to hold defendant liable under Rule 10b-5, this argument is not properly before the court; as a codefendant was liable to plaintiffs as a seller of securities under Section 714(A), defendant should have been held jointly and severally liable for the total damages award under Section 714(B); but, because plaintiffs have not cross-appealed, they are without jurisdiction to correct this error. Accordingly, the court affirmed the judgment. View "Heck v. Triche" on Justia Law
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An employee of Halliburton, Anthony Menendez, submitted a complaint to management about the company's questionable accounting practices and also filed a complaint with the SEC. The Review Board subsequently determined that Halliburton's disclosure to Menendez's colleagues of his identity as the SEC whistleblower who had caused an official investigation, resulting in Menendez's workplace ostracism, constituted illegal retaliation under section 806 of the Sarbanes-Oxley Act (SOX), 18 U.S.C. 1514A(a). The court held that to maintain an antiretaliation claim under SOX, as in these circumstances here, the employee must prove that his protected conduct was a contributing factor in the employer's adverse action. The court rejected Halliburton's argument that the Review Board committed legal error by failing to require proof that the company had a wrongful motive. The court rejected Halliburton's contention that the damages awarded to Menendez for emotional distress and reputational harm are not noneconomic compensatory damages available under SOX. The court agreed with the Tenth Circuit that the plain language of SOX's text relating to remedies for retaliation affords noneconomic compensatory damages and this conclusion comports with the decisions of the Seventh and Eighth Circuits respecting essential identical statutory text in the False Claims Act, 31 U.S.C. 3729-3733. The court concluded that Halliburton failed to show that the Review Board's decision was arbitrary, capricious, an abuse of discretion, or otherwise contrary to law. Accordingly, the court affirmed the judgment. View "Halliburton, Inc. v. Administrative Review Board, Dept. of Labor" on Justia Law

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Plaintiffs filed suit against Amedisys and others, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4). Plaintiffs claimed that Amedisys defrauded investors by concealing a Medicare fraud scheme. The district court granted a motion to dismiss for failure to state a claim under Rule 12(b)(6) and dismissed the suit with prejudice. Plaintiffs filed a motion for reconsideration but the district court denied the motion. The court concluded that the motion to dismiss should be denied as to the element of loss causation. The district court's application of the "actual fraud" standard to the partial disclosures at issue, and when viewed against the stark results of Amedisys's second quarter of 2010 earnings report, requires reversal and vacating the prior dismissal. View "Bach, et al. v. Amedisys, Inc., et al." on Justia Law
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