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

Plaintiffs, purchasers of NVIDIA's stock, filed suit alleging that the company violated Section 10(b) of the Securities Exchange Act of 1934 and corresponding SEC Rule 10b-5, 15 U.S.C. 78j(b), 17 C.F.R. 240.10b-5. The district court dismissed plaintiffs' amended complaint because they failed to adequately allege scienter. The court held that Item 303 of Regulation S-K did not create a duty to disclose for purposes of Section 10(b) and Rule 10b-5. Such a duty to disclose must be separately shown according to the principles set forth in Basic, Inc. v. Levinson and Matrixx Initiatives, Inc. v. Siracusano. Further, neither the collective scienter doctrine nor the core operations doctrine alone gives rise to a strong inference of scienter in this case. There is no allegation that the issue of an inherent defect in NVIDIA's Material Set was ever publicly raised prior to NVIDIA's disclosure, nor is there any allegation that NVIDIA knowingly issued a false press release, attempting to discount any public discussion regarding its chips' defects. Accordingly, the court affirmed the judgment of the district court.View "In Re: Nvidia Corp. Sec. Litig." on Justia Law

Allergan, the pharmaceutical manufacturer of Botox, settled several qui tam suits concerning allegations that it had acted illegally in marketing and labeling Botox, and pled guilty in a criminal case. Plaintiffs, all Allergan shareholders, subsequently filed a derivative action alleging that Allergan's directors are liable for violations of various state and federal laws, as well as breaches of their fiduciary duties to Allergan. Plaintiffs failed to make a demand on Allergan's board requesting that Allergan bring the derivative claims in its own name. The court concluded that the district court misapplied governing Delaware law and improperly drew inferences against plaintiffs rather than in their favor when the district court dismissed the action on the ground that plaintiffs failed to allege particularized facts showing that demand was excused under Federal Rule of Civil Procedure 23.1. The court concluded that demand was excused where plaintiffs' particularized allegations established a reasonable doubt as to whether the Board faces a substantial likelihood of liability and as to whether the Board is protected by the business judgment rule. Accordingly, the court reversed the judgment of the district court.View "Rosenbloom v. Pyott" on Justia Law

Plaintiff appealed the dismissal of his securities fraud class action for failure to state a claim. The court, agreeing with the Eleventh Circuit, held that the announcement of an investigation, standing alone, is insufficient to establish loss causation; plaintiff cannot establish loss causation on the facts alleged in the amended complaint because he has not attempted to correlate his losses to anything other than the announcement of an internal investigation; and, therefore, the court affirmed the district court on this loss causation issue. The court did not reach plaintiff's arguments regarding scienter. View "Loos v. Immersion Corp., et al." on Justia Law

Plaintiffs, a group of investors, filed suit alleging that Electronic Game Card's former CEO and CFO violated section 10(b) of the Securities Exchange Act, 15 U.S.C. 78j, 17 C.F.R. 240.10b-5, and that others violated section 20(a) of the Act. The court concluded that the district court did not properly strike allegations and exhibits from the Third Amended Complaint because the Auditor discovery materials at issue were not obtained in violation of the Private Securities Litigation Reform Act of 1995 (PSLRA), 15 U.S.C. 78u-4(b)(3)(B). The court also concluded that the Third Amended Complaint adequately pleaded false statements and scienter. Accordingly, the court reversed and remanded for further proceedings. View "Petrie v. Electronic Game Card, Inc." on Justia Law

PRS filed a class action against Intuitive on behalf of purchasers of Intuitive common stock, alleging violations of sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 and Securities and Exchange Commission Rule 10b.5, 15 U.S.C. 78j(b), 78t(a), 17 C.F.R. 240.10b-5. PRS alleged that Intuitive, through its executives, knowingly issued false and misleading statements regarding the company's growth and financial health which caused artificial inflation of the share price. The court concluded that, read as a whole, PRS's allegations did not satisfy the heightened pleading requirements imposed in the securities fraud cases and did not identify any material misstatements made with scienter. Intuitive's statements were mostly forward-looking statements or garden variety corporate optimism, and PRS failed to suggest that the executives made false statements with knowing or reckless disregard for Intuitive's economic circumstances. Accordingly, the court affirmed the district court's dismissal of the complaint with prejudice. View "Police Retirement Sys. v. Intuitive Surgical" on Justia Law

BP shareholders filed a class action alleging that the company knowingly, or with deliberate recklessness, made false and misleading statements about the condition of the Alaskan pipelines and BP's pipeline maintenance and leak detection practices prior to and in the wake of the first oil spill. On appeal, plaintiffs challenged the district court's partial dismissal of their complaint under federal securities laws. The court concluded that plaintiffs have adequately pled falsity and materiality, as well as scienter for statements regarding the corrosion rate; plaintiffs have adequately pled falsity and materiality, as well as scienter for statements distinguishing the WOA and EOA lines; plaintiffs did not sufficiently allege scienter for statements regarding BP's "World Class" leak detection system and corrosion monitoring program; plaintiffs adequately pled falsity and scienter for an annual report statement regarding compliance with environmental laws and regulations; and when the court considered the allegations holistically and accepted them to be true, the inference that BP was, at the very least, deliberately reckless as to the false or misleading nature of their public statements was at least as compelling as any opposing inference. Accordingly, the court reversed in part and affirmed in part. View "Reese v. Malone" on Justia Law

World Trade petitioned for review of the Commission's Order Sustaining Disciplinary Action Taken by FINRA, which upheld a variety of fines and sanctions against petitioners for their violations of Sections 5(a) and 5(c) of the Securities Act of 1933, 15 U.S.C. 77e(a), 77(e)(a), 77e(c), which prohibited the sale or offer of sale of a security without filing a registration statement. The court concluded that substantial evidence supported the Commission's finding that World Trade violated Sections 5(a) and 5(c) of the Act, and the court held that World Trade did not meet their duty of inquiry necessary to claim the Section 4(4) broker's exemption; and the court deferred to the Commission's discretionary determination as to the appropriate fines and sanctions because they were within FINRA's guidelines and were supported by evidence in the record. Accordingly, the court denied the petition for review. View "WTFC v. SEC" on Justia Law

This appeal stemmed from the City's offering of municipal bonds to finance the development of a cable and Internet system. Nuveen subsequently brought federal and state securities claims against the City, alleging that the City misrepresented the risks to investors. The court concluded that Nuveen has not shown a triable issue of fact on the issue of loss calculation in regards to its federal claims under Section 10b-5 and Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. 78u-4(b)(4); the City enjoys statutory immunity from suit on Nuveen's state claims where California courts have applied section 818.8 of California's Government Claims Act to immunize public entities from liability for misrepresentations sanctioned by those entities; and, although the City was entitled to summary judgment, Nuveen had reasonable cause to bring suit and the evidence suffices to establish its good faith. Accordingly, the court affirmed the district court's denial of the City's motion for defense costs, as well as the district court's grant of summary judgment in favor of the City. View "Nuveen Municipal v. City of Alameda" on Justia Law

The SEC brought a civil enforcement action against numerous defendants allegedly involved in a scheme to sell unregistered securities of CMKM. The district court granted summary judgment in favor of the SEC, ruling that Global, Helen Bagley, and Brian Dvorak participated in an unregistered distribution of securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e. The court concluded that a material issue of fact remained regarding whether Global and Bagley were necessary participants and substantial factors in the distribution of CMKM securities sufficient to impose liability under Section 5. Accordingly, the court reversed the grant of summary judgment as to Global and Bagley, remanding for further proceedings. The court affirmed the magistrate judge's denial of Dvorak's motion to stay and the district court's disgorgement order as to Dvorak. View "SEC v. CMKM Diamonds, Inc." on Justia Law

Plaintiff sought to add a claim under Section 11 of the Securities Act of 1933, 15 U.S.C. 77k, against former outside directors of Peregrine. The district court denied leave to amend the complaint, concluding that amendment would be futile because the "negative causation" defense barred plaintiff's proposed claim. The court concluded that Section 11 imposed broad liability without regard to reliance or fraudulent intent for any material misstatements or omissions contained in a registration statement for the first year that the registration statement was available. In this instance, plaintiff sufficiently alleged that the material misstatements at issue caused his losses, and thus amending the complaint would not be futile. Accordingly, the court reversed and remanded. View "Hildes v. Arthur Andersen LLP" on Justia Law