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Mealey's Securities

September 20, 2024
Preliminary Approval Of $40M Settlement Sought In Securities Fraud Class Suit

BALTIMORE — Lead plaintiffs in a securities fraud class suit filed against a COVID-19 vaccine contractor that experienced contamination issues at its Bayview, Md., manufacturing facility and several of its executives seek preliminary approval of a $40 million settlement reached between the parties.
September 18, 2024
Appeal Filed, Attorney Fee Bid Contested In Suit Over Missouri’s ESG Factor Rules

JEFFERSON CITY, Mo. — Missouri state officials have filed a notice of appeal regarding a ruling that imposed a statewide permanent injunction barring enforcement of parts of two new rules a trade association said would have required “a state-authored script” for “incorporating a social or nonfinancial objective into investment advice.”
September 17, 2024
Split 6th Circuit Affirms Ruling For SEC In Challenge To Proxy Voting Rule Changes

CINCINNATI — A split Sixth Circuit U.S. Court of Appeals panel upheld a ruling that the Securities and Exchange Commission’s partial rescission of a 2020 rule regulating proxy voting advice survives review under the Administrative Procedure Act (APA), with the dissenting member opining that the rescission is “both procedurally and substantively invalid” and “should be vacated in its entirety.”
September 17, 2024
SEC Files Rule Compliance Notice In Fraud Suit Against Owner Of Defunct Insurers

WINSTON-SALEM, N.C. — The U.S. Securities and Exchange Commission on Sept. 16 filed a notice of compliance with local rules in a North Carolina federal court regarding its brief responding to a motion to compel discovery filed by insurance magnate Greg Lindberg, a former owner of insurers now in receivership, in a suit alleging that he, his advisory services company and its former executive defrauded clients of more than $75 million.
September 16, 2024
Bump-Up Exclusion Unambiguously Bars Coverage, Insurers Argue To 4th Circuit

RICHMOND, Va. — Asserting that an appellant insured “has it backward,” insurers asked the Fourth Circuit U.S. Court of Appeals to affirm a lower federal court’s holding that a “bump-up” exclusion unambiguously precludes directors and officers liability insurance coverage for the $90 million settlement of two underlying lawsuits arising from a 2015 merger.
September 12, 2024
New Disclosures Explain J&J Stock Drop, Not Coincidence, Securities Class Says

PHILADELPHIA — Even entertaining Johnson & Johnson’s incorrect claim that any corrective disclosures in a case must be of “pristine newness,” a trial judge properly certified a class after concluding Johnson & Johnson entities never fully explained away a multi-billion-dollar drop in stock price, a securities class told the Third Circuit U.S. Court of Appeals in an answering brief.
September 11, 2024
SEC Drops Appeal On Proxy Voting; Separate Appeal Continues From Advocacy Group

WASHINGTON, D.C. — The District of Columbia Circuit U.S. Court of Appeals granted the Securities and Exchange Commission’s motion to voluntarily dismiss its appeal of a federal judge’s ruling that the SEC acted in excess of its authority when it issued rule changes redefining proxy voting advice as a type of “solicitation”; an appeal of the order filed by an advocacy group will continue.
September 10, 2024
7th Circuit Remands Question Of Commodities Trading Registration To District Court

CHICAGO — A panel of judges in the Seventh Circuit U.S. Court of Appeals held that an Illinois federal judge did not err when granting summary judgment in the Commodity Futures Trading Commission’s (CFTC) favor in an enforcement action it brought against an investment company and its chief executive officer on fraud claims, but the panel said it was unclear whether the company was required to register as a commodity trading adviser (CTA)
September 10, 2024
Pension Fund Tells High Court 6th Circuit Made New Rule For Risk Disclosures

WASHINGTON, D.C. — A pension fund says in its petition for a writ of certiorari in the U.S. Supreme Court that a partially split Sixth Circuit U.S. Court of Appeals panel erred when it affirmed an Ohio federal judge’s decision to dismiss the fund’s putative class complaint alleging securities fraud on the part of a car insurance provider, arguing that the Sixth Circuit was incorrect to hold that statements made by the company about potential risks were not misleading even though the risks had already occurred.
September 03, 2024
Judge: Investors’ Claims Against TikTok’s Content Moderator Survive Dismissal

MIAMI — A federal judge in Florida denied a motion from a French telecommunications company that provided content moderation for TikTok Inc. to dismiss a putative class complaint brought against them by investors who claim that the company made false statements to investors about its use of child sexual abuse material (CSAM) images to train moderators, holding that the investors adequately substantiated falsity and scienter to survive dismissal.
September 03, 2024
Reinsurer’s Purchaser Wins Preliminary Injunction In Suit Over Forced Deal

NEW YORK — A New York federal judge on Aug. 30 granted a motion for preliminary injunction in an insurer’s suit over its April 14 purchase of Bermuda-based reinsurer JRG Reinsurance Company Ltd.
August 30, 2024
7th Circuit: No Enforceable Contract To Support Company’s Securities Claims

CHICAGO — A panel of the Seventh Circuit U.S. Court of Appeals held that an Illinois federal judge was correct to dismiss claims of securities fraud and other claims brought by a company against a software startup, holding that the plaintiff company failed to show that an enforceable agreement regarding an exchange of ownership interest for an investment existed.
August 29, 2024
Judge Denies Motion To Dismiss SEC’s ‘Pyramid Scheme’ Claims Against AI Company

ORLANDO, Fla. — A federal judge in Florida denied an artificial intelligence startup and its founder’s motion to dismiss claims brought against them by the Securities and Exchange Commission, finding that the SEC adequately alleged that the company and its founder lured investors with false promises of early access to profits from an AI “ecosystem.”
August 28, 2024
Dispute Over FCA Public Disclosure Bar Distributed For Conference In Supreme Court

WASHINGTON, D.C. — The U.S. Supreme Court on Aug. 28 distributed for conference a petition for certiorari filed by pharmaceutical companies seeking review of the Ninth Circuit U.S. Court of Appeals’ ruling that the public disclosure bar was not triggered in a case where it reversed a district court’s dismissal of a suit accusing the companies of violating the False Claims Act (FCA) by artificially inflating drug prices.
August 28, 2024
Investor Asks Supreme Court To Consider Opt-Outs In Shareholder Settlements

WASHINGTON, D.C. — An investor in a movie theater chain tells the U.S. Supreme Court that the Delaware Supreme Court was wrong to affirm a settlement between the chain and other investors because the settlement contained no opt-out clause for objecting investors such as herself; the investor says that the case provides the ideal vehicle to solve a circuit split over such opt-out clauses.
August 27, 2024
Congress Members Tell 8th Circuit SEC Climate Rules Necessary For Investors

ST. LOUIS — Two U.S. senators and two U.S. congressmen, all Democrats, on Aug. 26 filed an amicus curiae brief before the Eighth Circuit U.S. Court of Appeals arguing that petitioners including nearly half of the nation’s states are incorrect to say the Securities and Exchange Commission lacked authority to enact disclosure rules related to climate change issues, telling the Eighth Circuit that the rules comport with the SEC’s “past pattern and practice with respect to risk disclosures.”
August 27, 2024
Split 9th Circuit Says Showing Of Intent Unnecessary For Ponzi Determination

SAN FRANCISCO — A split panel of judges in the Ninth Circuit U.S. Court of Appeals affirmed a California federal court’s designation of a defunct company as a Ponzi scheme in a dispute stemming from a fraudulent conveyance suit arising out of the company’s bankruptcy, with the majority holding that jurors need not find intent when determining that an organization is operating as a Ponzi scheme.
August 27, 2024
Investors: Norfolk Southern Broke Securities Laws Related To Ohio Train Derailment

ATLANTA — Investors have filed a brief in Georgia federal court opposing a motion to dismiss their securities fraud class action against Norfolk Southern Corp. and its principals, arguing that they have laid out in “exacting detail” that the defendants misled investors about the purported safety of the railroad’s operations while the company implemented cost-cutting procedures that “systematically dismantled critical safety measures in pursuit of profits, culminating in the derailment” of a Norfolk Southern train in East Palestine, Ohio, which resulted in toxic chemical pollution in that town.
August 27, 2024
Judge Sets Briefing Over ChatGPT-Created ‘Gobbledygook’ Admission In Stock Case

NEW YORK — A federal judge in New York overseeing a “pump and dump” stock case on Aug. 26 set deadlines for a pretrial motion, saying he hopes for prompt resolution of a dispute in which the government portrayed some of the evidence a man hopes to introduce under the hearsay exception as ChatGPT-created “gobbledygook.”
August 23, 2024
9th Circuit Won’t Revive Crypto Law Firm’s Suit Against SEC

SAN FRANCISCO — A panel of judges in the Ninth Circuit U.S. Court of Appeals held Aug. 22 that a cryptocurrency-focused law firm lacked standing to bring a suit against the Securities and Exchange Commission because the firm failed to show that it was in danger of being subject to enforcement action over its use of the cryptocurrency network Ethereum, affirming a California federal judge’s decision to dismiss the firm’s case last year.
August 22, 2024
9th Circuit: Shareholders Of Electric Vehicle Maker Lack Standing For Claims

SAN FRANCISCO — The Ninth Circuit U.S. Court of Appeals affirmed a California federal judge’s decision to dismiss a putative class complaint brought by investors alleging that an electric car company and the special purpose acquisition company (SPAC) that acquired it misled investors; unlike the judge who dismissed on the claims on their merits, though, the panel held that the investors lacked standing to bring their claims in the first place.
August 22, 2024
Amici Tell High Court 9th Circuit’s Falsity Ruling Could Damage Financial Industry

WASHINGTON, D.C. — The Digital Chamber filed one of four amicus curiae briefs before the U.S. Supreme Court in support of a computer manufacturer and its CEO, arguing that a Ninth Circuit U.S. Court of Appeals finding that plaintiff retirement funds could rely on expert testimony to support their claims of security fraud under the Private Securities Litigation Reform Act of 1995 (PSLRA) could have potentially disastrous effects, particularly in the cryptocurrency space.
August 20, 2024
2nd Circuit: Recent High Court Finding Narrowly Affects Securities Suit

NEW YORK — The Second Circuit U.S. Court of Appeals on Aug. 19 remanded to a New York federal court a securities dispute brought by investors who said an infrastructure company made misleading claims to investors, holding that a recent ruling from the U.S. Supreme Court stemming from the case only narrowly impacts the Second Circuit’s previous findings.
August 20, 2024
Hedge Fund Manager Appeals Finding Of No Attorney Fees In SEC Enforcement

BOSTON — A hedge fund manager and his funds have appealed to the First Circuit U.S. Court of Appeals a Massachusetts federal judge’s holding that they are not entitled to attorney fees under the Equal Access to Justice Act (EAJA) after partially prevailing on claims brought by the Securities and Exchange Commission because the SEC’s initial position was substantially justified.
August 19, 2024
D.C. Circuit: No Award To Whistleblowing Lawyer Who Tipped Client To SEC

WASHINGTON, D.C. — A panel of judges in the District of Columbia Circuit U.S. Court of Appeals affirmed the Security and Exchange Commission’s decision to deny a whistleblower award to a company’s in-house attorney whose tip led to SEC enforcement action against the company and certain of its executives, with the panel holding in a June opinion that was unsealed Aug. 16 that the attorney’s tip was not made to serve his client’s interests.