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

Plaintiff appealed the district court's grant of defendant's, Ernst & Young, LLP, motion to dismiss for claims stemming from a securities class action complaint against Broadcom Corporation for a fraudulent $2.2 billion stock options backdating scheme. At issue was whether the complaint adequately plead scienter where any of the allegations alone were sufficient to create a strong inference of scienter or, in the alternate, where a holistic view of the same allegations combine to create a strong inference of intentional conduct or deliberate recklessness. The court held that the complaint adequately plead scienter where the complaint was loaded with specific allegations of how and why defendant should have investigated deficient or missing documentation and where there was no doubt that the allegations, considering the totality of the circumstances, presented at least as strong an inference of scienter as any competing innocent inference.

Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra ("Winklevosses") sought to intervene after a district court entered judgment enforcing the Term Sheet and Settlement Agreement ("Settlement Agreement") signed by Facebook, the Winklevosses, and the Winklevosses' competing social network site, ConnectU, where the Settlement Agreement envisioned that Facebook would acquire all of ConnectU's shares in exchange for cash and a percentage of Facebook's common stock. At issue was whether the Settlement Agreement was enforceable where the Winklevosses claimed that they did not discover the facts that gave rise to their Rule 10b-5 claims under the Securities and Exchange Act of 1934 ("Act") until after they signed the Settlement Agreement's release of claims and whether the releases foreclosed their challenge to the Settlement Agreement where section 29(a) of the Act precluded a mutual release of unknown securities fraud claims arising out of negotiations to settle a pending lawsuit. The court held that the district court correctly concluded that the Settlement Agreement was enforceable and intended to release claims arising out of the settlement negotiations where the release was valid under section 29(a) when the Settlement Agreement was meant to end a dispute between sophisticated parties acting in an adversarial setting that was characteristic of litigation and could not be interpreted as leaving open the door to litigation about the settlement process.