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

Plaintiff filed suit against Archon, alleging breach of contract stemming from Archon's issuance of a Notice of Redemption to holders of outstanding shares of preferred stock. The court concluded that the district court properly held that it lacked federal question subject matter jurisdiction under 28 U.S.C. 1331 because plaintiff did not assert a federal claim, and the Securities Litigation Uniform Standards Act, 15 U.S.C. 77p(d)(1)(A), does not provide an independent basis for federal question jurisdiction over plaintiff's state-law claim. The court also concluded that it lacked diversity jurisdiction over the class action suit under section 1332(d)(2) because of the exception provided in section 1332(d)(9)(C). Finally, the court concluded that the district court properly held that it lacked diversity jurisdiction over plaintiff's individual claim under section 1332(a) and therefore could not exercise section 1367 supplemental jurisdiction over the class members’ claims. Accordingly, the court affirmed the district court's dismissal of the complaint. View "Rainero v. Archon Corp." on Justia Law

Plaintiff filed a putative securities class action against defendants in connection with public statements made about Arena’s weight-loss drug, lorcaserin. When Arena filed its application with the FDA, the FDA’s advisory panel published a briefing document that disclosed, for the first time, that Arena had been in a “highly unusual” back-and-forth with the FDA regarding the results of cancer studies on rats (the “Rat Study”). Plaintiff filed suit after news of the Rat Study broke. The district court dismissed the First, Second, and Proposed Third Amended Complaints. The court agreed that once defendants touted the safety and likely approval of the drug based on animal studies, defendants were obligated to disclose the Rat Study's existence to the market. The court concluded that plaintiff has alleged scienter with sufficient particularity to survive a motion to dismiss. In this case, there is no question that plaintiff has alleged that defendants knew that the Rat Study existed, that defendants knew that the FDA’s request for bi-monthly reports and follow-up studies was highly unusual and out-of-process, and defendants went ahead and told investors about their confidence in lorcaserin’s approval based on preclinical animal studies. Therefore, the court concluded that plaintiff has properly pleaded scienter under Federal Rule of Civil Procedure 9(b) and the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78u-4. The court reversed and remanded. View "Schwartz v. Arena Pharmaceuticals, Inc." on Justia Law

The SEC filed suit against Peter Jensen and Thomas Tekulve, the former Chief Executive Officer and Chief Financial Officer of the now-defunct Basin Water, Inc., alleging that they had participated in a scheme to defraud Basin investors by reporting millions of dollars in revenue that were never realized. On appeal, the SEC challenged the district court's judgment in favor of defendants. The court reversed the district court’s rulings interpreting Rule 13a–14 of the Securities Exchange Act (Exchange Act), 17 C.F.R. 240.13a-14, and Section 304 of the Sarbanes-Oxley Act (SOX 304),15 U.S.C. 7201 et seq. The court concluded that Rule 13a–14 provides the SEC with a cause of action not only against CEOs and CFOs who do not file the required certifications, but also against CEOs and CFOs who certify false or misleading statements. The court also concluded that the disgorgement remedy authorized under SOX 304 applies regardless of whether a restatement was caused by the personal misconduct of an issuer’s CEO and CFO or by other issuer misconduct. The court reversed the district court’s bench trial order, vacated the judgment, and remanded for a jury trial, concluding that the SEC was entitled to a jury trial and did not consent to Jensen and Tekulve’s withdrawal of their jury demand. Nor did the SEC waive its right to a jury trial when it objected consistently and repeatedly before trial to the district court’s decision to hold a bench trial. The court approved the district court’s grant of defendants’ motion in limine to exclude evidence about the injunction against Basin’s Director of Finance. Accordingly, the court vacated and remanded. View "SEC v. Jensen" on Justia Law

The NCUA filed suit under the Securities Act of 1933, 15 U.S.C. 77a et seq., against Wachovia and Nomura for making false and misleading statements in their offerings of residential mortgage-backed securities (RMBS) purchased by Wescorp. The district court dismissed the claims, ruling that 12 U.S.C. 1787(b)(14) (the Extender Statute) did not supplant the statute of repose contained within 15 U.S.C. 77m, and therefore that the NCUA’s claims were time-barred. The court concluded that the district court erred in holding that the Extender Statute does not supplant the 1933 Act's statute of repose. The court held that the Extender Statute replaces all preexisting time limitations - whether styled as a statute of limitations or a statute of repose - in any action by the NCUA as conservator or liquidating agent. The court further held that the Extender Statute’s scope - “any action brought by the [NCUA]” - includes actions such as this one, in which the NCUA asserts statutory claims rather than common law tort or contract claims. Because the court concluded that NCUA claims were timely filed, the court vacated and remanded the district court's dismissal of the claims as time-barred. View "NCU Admin. Bd. v. Nomura Home Equity Loan" on Justia Law

ESG was a group of investors formed to purchase pre-Initial Public Offering (pre-IPO) Facebook shares. ESG’s managing agent negotiated the purchase with a man he believed to be "Ken Davis." "Ken Davis" was an alias for Troy Stratos, an alleged con artist. Venable represented "Dennis" in the Facebook deal, which is the subject of this securities fraud suit. After learning that ESG had been defrauded, managing agent Burns panicked and hid the news from ESG. ESG claims it did not learn of the alleged fraud and that their money had been stolen until November 2012. ESG filed suit against Stratos and Venable and attorney Meyer on March 6, 2013, alleging eight causes of action. The district court dismissed ESG's complaint, and subsequently the first amended complaint (FAC), with prejudice. The court held that ESG's federal securities fraud claim is sufficiently pled under FRCP 9(b) and the Private Securities Litigation Reform Act, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b–5; ESG's state law fraud claim, which parallels the federal securities fraud claim, is sufficiently pled under FRCP 9(b); ESG’s nonfraud state law claims for conversion, unjust enrichment, unfair competition, aiding and abetting fraud, and conspiracy to commit fraud are sufficiently pled under FRCP 8(a)(2); and ESG's breach of fiduciary duty claim is barred by Cal. Civ. Proc. Code 340.6's one-year statute of limitations. Finally, the court concluded that neither the aiding and abetting fraud claim nor the conspiracy to commit fraud claim is barred by Cal. Civ. Code 1714.10’s Agent’s Immunity Rule. Accordingly, the court affirmed in part, reversed in part, and remanded. View "ESG Capital Partners v. Venable LLP" on Justia Law

Plaintiff, a retiree with significant trading experience, received $500,000 following her husband’s death. After consulting with Jennifer Huang, her long-time commodity trading advisor, and James Kelly, an account executive at her futures commission merchant (FCM), Peregrine, plaintiff decided to place the funds in a new account with Peregrine. Plaintiff subsequently filed suit claiming that Kelly and Peregrine disregarded her account instructions and permitted Huang to conduct unauthorized trades in the account, in violation of 7 U.S.C. 6b(a) and 17 C.F.R. 166.2–166.3. The ALJ ruled in favor of plaintiff, but the CFTC reversed. Applying a substantial evidence standard, the court concluded that substantial evidence supports the CFTC’s decision that Kelly made no material misrepresentation or omission, that there was no unauthorized trading, and that the record does not support a finding of fraud. Accordingly, the court denied the petition for review. View "Chenli Chu v. US Commodity Futures Trading Comm'n" on Justia Law

Jacksonville filed a putative class action against CVB alleging violations of Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), and Rule 10b-5 promulgated thereunder, 17 C.F.R. 240.10b-5. The district court granted CVB's motion to dismiss. The court concluded that vague optimistic statements by CVB officials are not actionable and the district court correctly dismissed the claims based on these boasts, characterizing them as puffery. Further, CVB's statements describing the Southern California real estate market and Generally Accepted Accounting Principles (GAAP) violations were not misleading. The court concluded, however, that the second amended complaint (SAC) sufficiently alleges falsity and scienter as to the “no serious doubts” statements in the 10-K on March 4, 2010, and the 10-Q on May 10, 2010. The court also concluded that the SAC adequately plead loss causation. The court held that the announcement of an investigation can “form the basis for a viable loss causation theory” if the complaint also alleges a subsequent corrective disclosure by the defendant. Therefore, the court dismissed the second amended complaint with respect to the "no serious doubts" representations made in the 10-K and the 10-Q and remanded for further proceedings. The court otherwise affirmed the judgment. View "Jacksonville Pension Fund v. CVB" on Justia Law

After the parties reached a settlement in a securities class action, the district court approved the settlement and awarded attorneys' fees. Class counsel appealed, contending that the fee award was arbitrary. The court concluded that the district court's choice to apply the lodestar method, rather than the percentage-of-fund method, was well within the district court’s discretion. However, the court vacated and remanded for recalculation of the fee, concluding that the district court's near total failure to explain the basis of its award was an abuse of discretion. View "McGee v. China Electric Motor, Inc." on Justia Law

ChinaCast founder and CEO Ron Chan embezzled millions from his corporation and misled investors through omissions and false statements. At issue was whether Chan’s fraud can be imputed to ChinaCast, his corporate employer, even though Chan’s actions was adverse to ChinaCast’s interests. The court agreed with the Third Circuit and concluded that Chan's fraudulent misrepresentations - and, more specifically, his scienter or intent to defraud - can be imputed to ChinaCast. The court concluded that imputation is proper because Chan acted with apparent authority on behalf of the corporation, which placed him in a position of trust and confidence and controlled the level of oversight of his handling of the business. Accordingly, the court dismissed the complaint alleging securities fraud under Rule 12(b)(6). View "Costa Brava P'ship v. ChinaCast Educ. Corp." on Justia Law

In 2011, Eminence Investors, LLLP (Plaintiff) brought suit against against The Bank of New York Mellon (Defendant). Nearly two years later, Plaintiff filed an amended complaint adding class allegations on behalf of more than 100 class members and requesting compensatory damages expected to exceed $10 million. Within thirty days of the filing of the complaint, Defendant removed the action to federal court pursuant to the Class Action Fairness Act (CAFA). Plaintiff moved to remand the case to state court. The district court remanded the case to state court, concluding that removal was untimely. Defendant appealed. A panel of the Ninth Circuit dismissed for lack of subject matter jurisdiction the appeal, holding that the securities exception from CAFA removal applied to this case. View "Eminence Investors, LLLP v. Bank of New York Mellon" on Justia Law