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

The Ninth Circuit affirmed the dismissal of putative class actions because the Securities Litigation Uniform Standards Act (SLUSA), Pub L. 105-353, 112 Stat. 3227, deprived the court of subject matter jurisdiction. Plaintiffs filed suit alleging a breach by a securities dealer of the "duty of best execution" in completing trades. The panel held that plaintiffs had Article III standing because they alleged overpaying for securities trades and losses from trades not executed promptly and those concrete injuries, if proven, were redressable through monetary damages. However, plaintiffs' claims were barred by SLUSA, because all of plaintiffs' pleaded causes of action allege deceptive conduct actionable under federal securities law; the challenged conduct occurred in connection with the purchase or sale of a security; the complaint plainly pleaded a manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security; and thus the claims were SLUSA-barred. View "Fleming v. Charles Schwab Corp." on Justia Law

The Ninth Circuit affirmed the district court's dismissal of a securities fraud action brought against Yelp and others. Plaintiffs argued that the district court erred by holding that they did not adequately plead falsity, materiality, loss causation, and scienter. The panel held that the disclosure of consumer complaints, without more, in the circumstances of this case did not form a sufficient basis for a viable loss causation theory. Furthermore, allegations of suspicious insider sales of stock without allegations of historical trading data did not create a strong inference of scienter. Finally, the panel affirmed the district court's dismissal of the complaint with prejudice because amendment of the complaint as to loss causation would be futile under current precedent. View "Curry v. Yelp, Inc." on Justia Law

The Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 77p(b)–(f), 78bb(f)), bars private class actions based on state law in cases where the plaintiff alleges a material falsehood or omission connected to the purchase or sale of most federally-regulated securities. In this case, plaintiff filed suit for breach of contract and various fiduciary duties under Massachusetts law. The district judge held that SLUSA barred his claims, and dismissed them with prejudice. The panel held that dismissals pursuant to SLUSA's class-action bar must be for lack of subject-matter jurisdiction—and therefore without prejudice—rather than on the merits. Therefore, the panel affirmed the district court's judgment to the extent it concluded that plaintiff's claims were barred. View "Hampton v. Pacific Investment Management Co." on Justia Law

Plaintiffs appealed the district court's dismissal of their amended securities fraud class action complaint, alleging that Atossa and its Chairman and CEO, Steven Quay, made a series of public statements about Atossa's breast cancer screening products that were materially false or misleading. The district court dismissed the complaint. The Ninth Circuit held that plaintiffs have properly alleged falsity and materiality as to some, but not all, of these statements. In this case, plaintiffs have sufficiently alleged that the following were materially false or misleading: (1) Quay's statement quoted in Atossa's December 20, 2012 Form 8–K filing describing the ForeCYTE Test as "FDA-cleared"; (2) Quay's statement during his interview with NewsMedical.Net that the ForeCYTE test had "gone through all of the FDA clearance process"; (3) Atossa's Form 8–K filing on February 25, 2013, giving notice of the FDA's warning letter; and (4) Quay's statement during his interview with the Wall Street Transcript that "FDA clearance risk has been achieved." Accordingly, the court affirmed in part, reversed in part, vacated in part, and remanded. View "Levi v. Atossa Genetics, Inc." on Justia Law

Plaintiffs filed this would-be class action on behalf of all persons or entities who purchased or otherwise acquired the common stock of QSI, alleging that during the Class Period, QSI and its officers made false or misleading statements about the current and past state of QSI's sales "pipeline," and used those statements to support public guidance to investors about QSI's projected growth and revenue. The Ninth Circuit reversed the district court's dismissal of the complaint and remanded for further proceedings. The panel held that some of defendants' statements were mixed statements, containing non-forward-looking statements as well as forward-looking statements of projected revenue and earnings; a defendant may not transform non-forward-looking statements into forward-looking statements that are protected by the safe harbor provisions of the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-5, by combining non-forward-looking statements about past or current facts with forward-looking statements about projected revenues and earnings; many of defendants' non-forward-looking statements were materially false or misleading; and some of defendants' forward-looking statements were materially false or misleading, were not accompanied by appropriate cautionary statements, and were made with actual knowledge of their false or misleading nature. View "City of Miami Fire Fighters' and Police Officers' Retirement Trust v. Quality Systems, Inc." on Justia Law

The Ninth Circuit affirmed the dismissal of plaintiff's suit alleging securities fraud under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, 15 U.S.C. 78j(b) and 78t(a), 17 C.F.R. 240.10b-5. Plaintiff alleged that defendants violated these statutes in connection with statements regarding Align's goodwill valuation of its subsidiary, Cadent. The Ninth Circuit held that the three standards for pleading falsity of opinion statements articulated in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, apply to Section 10(b) and Rule 10b-5 claims; plaintiff has failed to sufficiently plead falsity under any of the three Omnicare standards; plaintiff has also failed to sufficiently plead scienter; and, because plaintiff has inadequately alleged a primary violation of federal securities law, plaintiff cannot establish control person liability. View "City of Dearborn Heights Act 345 Police & Fire Retirement System v. Align Technology" on Justia Law

Victor Messina and International Market Ventures (IMV), challenged their liability as relief defendants in the SEC's enforcement action against Phil Ming Xu and various Xu-related entities for federal securities law violations arising out of a fraudulent investment scheme. The SEC alleged that Messina and IMV received $5 million of the tens of millions of dollars Xu unlawfully raised through investor deposits worldwide, but Messina and IMV asserted that they received those funds as a loan. At issue was whether putative relief defendants may divest a district court of jurisdiction to proceed against them using summary procedures simply by asserting a claim of entitlement to the disputed funds in their possession. The court concluded that the district court properly exercised its jurisdiction to determine the legal and factual legitimacy of Messina and IMV's claim to the $5 million; the district court acted correctly under its precedent approving the invocation of relief defendant procedures in SEC enforcement actions and did not clearly err in finding that Messina and IMV had no legitimate claim to the funds; the evidence demonstrated that far more than $5 million was raised by Xu and his various entities in the United States, and the district court correctly concluded that the funds sought were proceeds of illegal activity and subject to disgorgement; and thus the district court did not abuse its discretion in later ordering disgorgement from Messina and IMV as relief defendants. Accordingly, the court affirmed the judgment. View "SEC v. Messina" on Justia Law

This appeal relates to a last-minute addition to the anti-retaliation protections of the Dodd-Frank Act (DFA), Pub. L. No. 111-203, 124 Stat. 1376, to extend protection to those who make disclosures under the Sarbanes-Oxley Act and other laws, rules, and regulations. 15 U.S.C. 78u-6(h)(1)(A)(iii). At issue was whether, in using the term "whistleblower," Congress intended to limit protections to those who come within DFA's formal definition, which would include only those who disclose information to the SEC. If so, it would exclude those, like plaintiff here, who were fired after making internal disclosures of alleged unlawful activity. The Second Circuit, viewing the statute itself as ambiguous, applied Chevron deference to the SEC's regulation. The court agreed with the district court, and followed the Second Circuit's approach, that the regulation was consistent with Congress's overall purpose to protect those who report violations internally as well as those who report to the government. The court explained that this intent was reflected in the language of the specific statutory subdivision in question, which explicitly references internal reporting provisions of Sarbanes-Oxley and the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. Therefore, the court concluded that the SEC regulation correctly reflected congressional intent to provide protection for those who make internal disclosures as well as to those who make disclosures to the SEC. Accordingly, the court affirmed the judgment. View "Somers v. Digital Realty Trust" on Justia Law

Sharemaster filed an application for Commission review of FINRA's final disciplinary sanction. The Commission dismissed Sharemaster's application for review, finding that it lacked jurisdiction over the matter under Section 19(d) of the Securities and Exchange Act, 15 U.S.C. 78s(d)(2), because there was no longer a live sanction for it to act upon after FINRA lifted the suspension. The court held that the Commission's interpretation of Section 19(d)(2) as limiting its review authority to final disciplinary sanctions that remain live is entitled to Chevron deference. However, the court held that the Commission unreasonably decided that the monetary penalty that FINRA imposed on Sharemaster was not a sanction and thus not a live disciplinary sanction. Accordingly, the court granted the petition for review. The court remanded to the Commission to determine whether, if Sharemaster prevails on the merits of its argument regarding the applicability of a registered-accountant requirement, the Commission may direct FINRA to reinstate Sharemaster nunc pro tunc. View "Sharemaster v. SEC" on Justia Law

HP shareholders filed a putative class action alleging violations of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq. At issue is whether shareholders may bring a claim for securities fraud when a CEO and Chairman violates the corporate code of ethics after publicly touting the business’s high standards for ethics and compliance. The court held that Retail Wholesale, lead plaintiff in the putative class action, has failed to state a claim under the Act. The court explained that Retail Wholesale's fraud allegations must satisfy the particularity standard of Federal Rule of Civil Procedure 9(b), as well as the heightened pleading standard for securities fraud created by the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u–4. In this case, the court concluded that there were no material misrepresentations or actionable material omissions. Further, even if the complaint adequately alleged the existence of a misrepresentation or a misleading omission, it would not have been actionable, as it was immaterial. Accordingly, the court affirmed the district court's dismissal of the action. View "Retail Wholesale Union v. Hewlett-Packard Co." on Justia Law