Articles Posted in Securities Law

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Plaintiffs, shareholders of ATP, filed a securities class action concerning ATP's collapse into bankruptcy. Plaintiffs alleged that defendants, each of whom was an officer or director of ATP, misrepresented the production of Well 941 #4, ATP's liquidity and whether the company had the available funds to complete the Clipper pipeline, and the true reason that Matt McCarroll resigned as CEO of ATP. The district court dismissed plaintiffs' Second Amended Complaint with prejudice. The court concluded that, viewing plaintiffs' allegations as a whole, plaintiffs failed adequately to allege scienter with regard to Defendant Reese's statements; plaintiffs' allegations of scienter as to ATP's liquidity and the Clipper project failed as a matter of law; and there was no basis for the court to conclude that Defendants Bulmahn and Reese knew or were reckless in not knowing McCarroll's true reasons for resigning. Accordingly, the court affirmed the judgment. View "Neiman v. Bulmahn" on Justia Law

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The SEC brought an enforcement action against LPHI and two of its senior officers, Pardo and Peden, alleging violations of reporting and anti-fraud provisions of the federal securities laws. The SEC alleged that LPHI, a company in the business of facilitating the sales of existing life insurance policies to investors, knowingly underestimated life expectancies for the insureds in public filings with the SEC. A jury found defendants liable for violations of section 17(a) of the Securities Act of 1933 and section 13(a) of the Securities Exchange Act of 1934, 15 U.S.C. 77q(a), 78m(a). The district court sustained the jury's verdict as to section 13(a), but the district court set aside the verdict as to section 17(a). The district court then imposed civil penalties and issued injunctions restraining them from committing additional violations of the securities laws. The district court declined to order Pardo to reimburse LPHI for compensation under section 304 of the Sarbanes-Oxley Act (SOX), 15 U.S.C. 7243(a). Both parties appealed. The court found no abuse of discretion in the admission of the SEC expert witness's opinion; the evidence was sufficient to support the jury verdict that defendants aided and abetted LPHI's violation of section 13(a) and the rules thereunder; the court affirmed the district court's imposition of second-tier penalties; remanded the case specifically for recalculation of the number of violations without the flaws conceded by the SEC and for reassessment of the amounts of civil penalties imposed on defendants; and affirmed the district court's injunctions. As for the SEC's cross-appeal, the court concluded that the jury's section 17(a) verdict must stand and reversed the district court's grant of judgment as a matter of law, remanding for determination of appropriate remedies; the district court erred in concluding that the restatements were not required by LPHI's misconduct in connection with its underestimated life expectancy estimates; and the court reversed the district court's judgment, remanding for that court to determine the appropriate amount of SOX reimbursements. View "SEC v. Life Partners Holdings, Inc." on Justia Law

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

Posted in: Securities 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

Posted in: Securities 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

Posted in: Securities 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

Posted in: Securities Law