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…

Louisiana Municipal Police Employees’ Retirement System v. Wynn

In this derivative suit, shareholders failed to allege facts sufficient to show futility of demanding that the board of directors remedy corporation’s alleged bribery of foreign officials, since complaint did not sufficiently aver that insiders controlled a majority of the board or that board members likely faced personal liability for the corporation’s acts.  Shareholders failed…

ESG Capital Partners LP v. Stratos

Buyer of bogus securities states a federal securities fraud claim against the promoter’s lawyer who represented that the promoter was who he purported to be and who misdirected buyer’s downpayment to promoter personally rather than seller company.  Buyers duped by a con artist into paying $11 million for supposed pre-IPO Facebook shares stated a 10b-5…

Innes v. Diablo Controls, Inc.

Corp. Code 1601 is interpreted to require a California corporation to allow a shareholder to inspect the corporation’s records, but only at the location where those records are ordinarily maintained.  Following Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238, this decision holds that Corp. Code 1601 requires a California corporation to allow a shareholder…