Hampton v. Pacific Investment Management Co., LLC

The dismissal of a securities class action on the ground it violates prohibition on lawsuits on behalf of 50 or more plaintiffs alleging state law claims of misrepresentation in connection with the purchase of a federally registered security is a 12(b)(1) dismissal for lack of jurisdiction, not a 12(b)(6) dismissal on the merits; as a…

In re Atossa Genetics, Inc. Securities Litig. (Levi v. Atossa Genetics, Inc.)

Plaintiffs pled a viable 10b-5 claim against defendant pharmaceutical company for representing that its cancer test was FDA-cleared when, in fact, the FDA had not yet approved the test.  Plaintiffs pled a viable 10b-5 claim against defendants for representing that Atossa’s ForeCYTE breast cancer test was FDA-cleared when, in fact, the FDA had not yet…

California Public Employees Retirement System v. ANZ Securities, Inc.

American Pipe tolling, an equitable doctrine, cannot override the Securities Act’s explicit three-year statute of repose.  Section 13 of the Securities Act (15 USC 77m) sets two time limits on suits for misrepresentations in initial securities offerings under Section 11 of the Securities Act.  The first requires suit to be filed within one year after…

Somers v. Digital Realty Trust, Inc.

The Sarbanes-Oxley Act’s whistleblower protection section applies to protect employees who report potential securities law violations internally to their supervisors as well as employees who report violations to the SEC.  Following the SEC (17 C.F.R. 240.21F-2) and the Second Circuit (Berman v. Neo@Ogilvy, LLC (2d Cir. 2015) 801 F.3d 145) and disagreeing with the Fifth…

Emerald Aero LLC v. Kaplan

A $30 million arbitration award is vacated as the arbitrator exceeded his powers by awarding punitive damages that the claimant first requested the day before the arbitration hearing.  This decision reverses a judgment confirming an arbitration award of $30 million, most of it punitive damages, in a securities fraud case.  The arbitrator exceeds his powers…

People v. Black

A promissory note for a loan to aid defendant’s development scheme, which was not offered to the general public, is not considered a “security.”  An individually negotiated and issued promissory note for a loan to aid a defendant’s development scheme is not a “security” within the meaning of California’s Corporate Securities Law since the note…

Retail Wholesale & Dept. Store Union Local 338 Retirement Fund v. Hewlett-Packard Co.

Disclosure of defendant company’s president’s misdeeds did not render the company’s previous touting of its ethics code an actionable misrepresentation or omission under Rule 10b-5, since ethics codes are inherently aspirational, not an actual depiction of corporate practice.  Plaintiffs failed to allege any actionable misrepresentation or omission and so their 10b-5 suit was properly dismissed. …

Rainero v. Archon Corp.

The Securities Litigation Uniform Standards Act does not confer federal jurisdiction over a complaint alleging state law securities claims within the exception to SLUSA’s general prohibition of state law securities class actions, except for the limited purpose of determining whether a putative class action is banned by SLUSA’s general preclusion of such suits.  The Securities…

Salman v. United States

To establish liability under Rule 10b-5 plaintiff need not show that the person who breached a duty of trust by giving inside information to a trading relative or friend acquired a pecuniary or similarly valuable item in exchange for the information.  Rule 10b-5 prohibits undisclosed trading on inside information by persons bound by a duty…

Schwartz v. Arena Pharmaceuticals, Inc.

The district court erred in dismissing plaintiff’s 10b-5 complaint based on lack of scienter, since defendant told its investors a misleading half-truth by disclosing that animal studies had confirmed the drug’s efficacy but omitting the fact that rats who received the drug had shown increased incidence of cancer.  Plaintiff adequately alleged scienter.  It was error…

United States Securities & Exchange Commission v. Jensen

The SEC may sue for violation of its Rule 13a14, which requires CEOs and CFOs to personally verify the accuracy of financial reports, if the verification is false, as well as if no verification is provided.  Once any party has properly demanded a jury trial in a federal case, the demand may be withdrawn under…