Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

WPP Luxembourg Gamma Three Sarl (WPP) appealed from the district court's dismissal of the amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant and cross-appellants cross-appealed the district court's decision to dismiss some of WPP's claims without prejudice. WPP generally alleged violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78(a), that amidst large operating losses unknown to investors, Spot Runner executives solicited WPP to buy shares in it at the same time that executives of the company were selling personally owned shares. The court affirmed the dismissal of the Rule 10b-5(a) and (c) fraudulent scheme against all of the defendants, the dismissal of the Rule 10b-5(b) fraudulent omissions claim against the general counsel for Spot Runner and Spot Runner, and the dismissal of the Rule 10b-5 insider trading claim against Spot Runner. The court reversed the dismissal of the Rule 10b-5(b) omission claims against the founders of Spot Runner.

This case arose from the IRS's investigation of a type of tax shelter known as a "Son-of-Boss" (a variant of the Bond and Options Sales Strategy (BOSS) shelter). Petitioner appealed the Tax Court's decision in favor of the Commissioner of Internal Revenue. The court held that the IRS properly sent petitioner an affected item notice of deficiency because the deficiency required a partner-level determination. The court also held that the Tax Court had jurisdiction to redetermine affected items based on the partnership item determinations in the Final Partnership Administrative Adjustment (FPAA). Therefore, the court affirmed the judgment of the Tax Court.

Plaintiff sued defendants, the Bureau of Land Management (BLM), the Alaska Department of Transportation (Alaska), and the Alyeska Pipeline Service Company (Alyeska), in federal court, alleging causes of action for inverse condemnation, injunctive relief, nuisance, breach of fiduciary duties, and civil rights violations. At issue was whether the district court properly dismissed the action against the BLM and Alaska on the basis of sovereign immunity. The court held that federal sovereign immunity barred plaintiff's inverse condemnation, injunctive relief, and civil rights violations claims against the United States, but that the Federal Tort Claims Act, 25 U.S.C. 345, could provide a waiver of the government sovereign immunity for plaintiff's nuisance and breach of fiduciary duties claims. Additionally, the court held that the Eleventh Amendment barred plaintiff's action against Alaska in its entirety. Accordingly, the judgment was affirmed in part and reversed in part and remanded.

Defendants engaged in discovery misconduct that was sufficiently egregious to cause the district court to enter an order of default against them. Although defendants subsequently challenged the default order as erroneous, defendants did not challenge the order of default by way of a Federal Rule of Civil Procedure 55(c) or 60(b). At issue was whether Judge Real, a district court judge, had the power to impose default as a sanction for discovery misconduct and assuming such power, whether Judge Real abused his discretion by imposing default rather than lesser sanctions. The court held that defendants' failures to comply with orders of the court provided Judge Real with the power under Rule 37(b) to impose sanctions sua sponte, up to and including default and that Judge Wilson appropriately revisited previous orders of the court when he replaced Judge Real after Judge Real recused himself. The court also held that the district court possessed the power to impose the sanction of default and that the district court did not abuse its discretion by doing so. Accordingly, the judgment was affirmed.

The SEC brought suit against senior officers of Gateway Incorporated ("Gateway") claiming that they unlawfully misrepresented Gateway's financial condition in the third quarter of 2000 in order to meet financial analysts' earnings and revenue expectations. After a three week trial, a jury found former Gateway financial executives, John J. Todd and Robert D. Manza, liable on all claims by the SEC. All parties appealed the district court's order in part. The court reversed the district court's order granting in part Todd's and Manza's motions for judgment as a matter of law on the antifraud claims under the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., because substantial evidence supported the jury's verdict that Todd and Manza at least recklessly misrepresented revenue related to the Lockheed transaction, and that Todd recklessly misrepresented revenue as to the VenServ transaction, in the third quarter of 2000. The court also reversed the district court's order granting Jeffrey Weitzen's, former Gateway President and CEO, motion for summary judgment as to the Section 10(b) and Rule 10b-5 violations because there were genuine issues of material fact regarding whether Weitzen knowingly misrepresented Gateway's financial growth as "accelerated" given his knowledge of the unusual Lockheed and AOL transactions. There were also issues of material fact as to whether Weitzen was a "control person" under Section 20(a). The court affirmed Weitzen's motion for summary judgment as to the Rule 13b2-2 claim because there was no evidence that Weitzen signed a letter to Gateway's auditors knowing that it misrepresented Gateway's financial position. The court also affirmed the district court's order denying in part Todd's and Manza's motions for judgment as a matter of law on the aiding and abetting claims and their motions for a new trial.