Justia Class Action Opinion Summaries

To recover damages in a private securities-fraud action under section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5, a plaintiff must prove reliance on a material misrepresentation or omission made by the defendant. The Supreme Court has endorsed a “fraud-on-the-market” theory, which permits plaintiffs to invoke a rebuttable presumption of reliance on public, material misrepresentations regarding securities traded in an efficient market. The theory facilitates the certification of securities-fraud class actions by permitting reliance to be proved on a class-wide basis. Connecticut Retirement sought FRCP 23(b)(3) certification of a securities-fraud class action against a biotechnology company (Amgen). The district court certified the class. The Ninth Circuit affirmed, rejecting an argument that Connecticut Retirement was required to prove materiality before class certification under Rule23(b)(3)’s requirement that “questions of law or fact common to class members predominate over any questions affecting only individual members.” The Supreme Court affirmed. Proof of materiality is not a prerequisite to certification of a securities-fraud class action. Materiality is judged by an objective standard and can be proved through evidence common to the class. Failure of proof of materiality would not result in individual questions predominating, but would end the case. A requirement that putative class representatives establish that they executed trades “between the time the misrepresentations were made and the time the truth was r¬vealed” relates primarily to typicality and adequacy of representation, not to the predominance inquiry. The Court rejected Amgen’s argument that, because of pressure to settle, materiality may never be addressed by a court if it is not evaluated at the class-certification stage. The potential immateriality of Amgen’s alleged misrepresentations and omissions was no barrier to finding that common questions predominate. View "Amgen Inc. v. CT Ret. Plans & Trust Funds" on Justia Law

Plaintiffs brought this putative class action under sections 11, 12, and 15 of the Securities Act, alleging that a prospectus and registration statement (the offering documents) issued by AMAG Pharmaceutical, Inc. in connection with a secondary stock offering held in 2010 contained two serious omissions: (1) a failure to disclose almost two dozen reports of serious adverse effects linked to a make-or-break drug for AMAG's future; and (2) failure to disclose information the FDA revealed in a warning letter issued after the offering. The district court dismissed the entire complaint on the ground that Plaintiffs failed sufficiently to plead section 11 claims pursuant to an SEC regulation. The First Circuit Court of Appeals (1) reversed the dismissal of the claims of actionable omissions because of the undisclosed reports because the reports gave rise to uncertainties AMAG knew would adversely affect future revenues and risk factors that made the offering risky and speculative; (2) affirmed as to the claims of omissions regarding the FDA information; and (3) reversed the dismissal of Plaintiffs' sections 12 and 15 causes of action. Remanded. View "Silverstrand Invs. v. Amag Pharms., Inc." on Justia Law

Plaintiffs purchased variable universal life insurance policies from defendant. Plaintiffs subsequently filed a class action suit against defendant under the Securities Litigation Uniform Standards Act (SLUSA), 15 U.S.C. 78bb(f)(1), for levying excessive cost of insurance charges. The court concluded that claims of breach of contract and breach of the duty of good faith and fair dealing were not precluded by SLUSA, even if such claims related to the purchase or sale of a covered security. The court reversed the district court's dismissal of the two contract claims, on the condition that plaintiffs amend their complaint to remove any reference to deliberate concealment or fraudulent omission. The court affirmed the dismissal of the class claim for unfair competition in violation of California law. View "Freeman Investments, L.P., et al v. Pacific Life Ins. Co." on Justia Law

National Elevator, lead plaintiff on behalf of investors who purchased VeriFone stock, appealed the dismissal of its securities fraud class action. National Elevator alleged that VeriFone, the CEO and former Chairman of the Board of Directors, and the company's former CFO and Executive Vice President, violated sections 10(b), 20(a), and 20A of the Securities and Exchange Act of 1934, 15 U.S.C. 78j(b), 78t-1(a), and 78t(a), and Securities and Exchange Commission Rule 10-b, 17 C.F.R. 240.10b-5(b), in connection with a December 2007 restatement of financial results. The court held that National Elevator adequately pleaded violations of section 10B and Rule 10b as to all defendants; its section 20A claim against the individual defendants was sufficiently pled; but the section 20(a) claim was properly dismissed. Accordingly, the court affirmed in part and dismissed in part. View "National Elevator Industry Pension Fund v. VeriFone Holdings, Inc., et al" on Justia Law

Plaintiff appealed the district court's order dismissing a putative securities class action brought under sections 11, 12(a)(2), and 15 of the Securities Act of 1993, 15 U.S.C. 77k, l(a)(20, o, on behalf of all persons who acquired certain mortgage-backed certificates issued under the same allegedly false and misleading shelf registration statement, but sold in 17 separate offerings by 17 unique prospectus supplements. The court held that plaintiff had class standing to assert the claims of purchasers of certificates backed by mortgages originated by the same lenders that originated the mortgages backing plaintiff's certificates, because such claims implicated "the same set of concerns" as plaintiff's claims. The court further held that plaintiff need not plead an out-of-pocket loss in order to allege a cognizable diminution in the value of an illiquid security under section 11. Accordingly, the court affirmed in part and vacated in part the judgment of the district court and remanded with further instructions to reinstate plaintiff's sections 11, 12(a)(2), and 15 claims to the extent they were based on similar or identical misrepresentations in the Offering Documents associated with certificates backed by mortgages originated by the same lenders that originated the mortgages backing plaintiff's certificates. View "Neca-Ibew Health & Welfare Fund v. Goldman Sachs & Co." on Justia Law

Former Fifth Third employees participated in a defined contribution retirement plan with Fifth Third as trustee. Participants make voluntary contributions and direct the Plan to purchase investments for their individual accounts from preselected options. The options included Fifth Third Stock, two collective funds, or 17 mutual funds. Fifth Third makes matching contributions for eligible participants that are initially invested in the Fifth Third Stock Fund but may be moved later to other investment options. Significant Plan assets were invested in Fifth Third Stock. Plan fiduciaries incorporated by reference Fifth Third’s SEC filings into the Summary Plan Description. Plaintiffs allege that Fifth Third switched from being a conservative lender to a subprime lender, its loan portfolio became increasingly at-risk, and it either failed to disclose or provided misleading disclosures. The price of the stock declined 74 percent. The district court dismissed a complaint under the Employee Retirement Income Security Act, 29 U.S.C. 1001, based on a presumption that the decision to remain invested in employer securities was reasonable. The Sixth Circuit reversed, holding that the complaint plausibly alleged a claim of breach of fiduciary duty and causal connection regarding failure to divest the Plan of Fifth Third Stock and remove that stock as an investment option. View "Dudenhoefer v. Fifth Third Bancorp" on Justia Law

In 2004, securities fraud class actions were filed against AIG and other corporate and individual defendants, including Gen Re. The district court consolidated the actions and appointed as lead plaintiffs three Ohio public pension funds, for a putative class of investors who purchased AIG’s publicly traded securities between October 28, 1999, and April 1, 2005. The complaint alleged that AIG and Gen Re violated Rule 10b-5(a) and (c), (Securities Exchange Act, 15 U.S.C. 78j(b)), by entering into a sham $500 million reinsurance transaction designed to mislead the market and artificially increase AIG’s share price. After the parties reached a settlement agreement, the district court denied plaintiffs’ motion to certify a settlement class, finding that the class could not satisfy the predominance requirement of FRCP 23(b)(3) because the fraud-on-the-market presumption does not apply to the class’s securities fraud claims. The Second Circuit vacated, holding that, under Amchem Products, Inc. v. Windsor, 521 U.S. 591(1997), a securities fraud class’s failure to satisfy the fraud-on-the-market presumption primarily threatens class certification by creating “intractable management problems” at trial. Because settlement eliminates the need for trial, a settlement class ordinarily need not demonstrate that the fraud-on-the-market presumption applies to its claims to satisfy the predominance requirement. View "In Re: Am. Int'l Grp. Sec. Litigation" on Justia Law

Two individuals brought suit as individuals and on behalf of a putative class of investors, alleging that Stifel, Nicolaus & Co. (Stifel) and two of its employees, Neil Harrison and Roger Compton, violated federal securities law. Stifel and Compton (Defendants) filed a motion to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6) and the Private Securities Litigation Reform Act of 1995 (PSLRA). The district court concluded that Plaintiffs' allegations failed to satisfy the requirements for class action claims under Fed. R. Civ. P. 23(b)(3) and dismissed Plaintiffs' compliant with prejudice. The Eighth Circuit Court of Appeals (1) reversed the district court's order with respect to Plaintiffs' individual claims, holding the district court erred in dismissing the claims without either staying the claims pending arbitration or undertaking an analysis of the claims under the PSLRA; and (2) affirmed the district court's order as it applied to Plaintiffs' class claims, holding that the court correctly determined that the complained failed to state viable class claims under Rule 23. Remanded. View "McCrary v. Stifel, Nicolaus & Co." on Justia Law

Acticon is the lead plaintiff in a consolidated putative class action suit against China North East Petroleum Holdings Limited (NEP) brought under the Securities Exchange Act of 1934, 15 U.S.C. 78j(b) & 78t(a), and under SEC Rule 10b-5. Acticon alleges that NEP misled investors about its reported earnings, oil reserves, and internal controls. It further alleges that NEP revealed this information through a series of corrective disclosures and that in the trading days after each disclosure was made, NEP’s stock price dropped. NEP argues that these allegations are not sufficient to allege economic loss because its share price rebounded on certain days after the final disclosure to the point that Acticon could have sold its holdings and avoided a loss. The district court held that because Acticon had foregone multiple opportunities to sell its shares at a profit, it had not suffered an economic loss and dismissed. The Second Circuit vacated. Price recovery does not defeat an inference of economic loss. View "Rosado AG v. China North East Petroleum Holdings, Ltd." on Justia Law

The issue before the Eleventh Circuit concerned a private securities fraud class action suit brought against a bank holding company and its management. State-Boston Retirement System, a shareholder and lead plaintiff, sought to prove that the holding company had misrepresented the level of risk associated with commercial real estate loans held by its subsidiary. After the trial, the District Court submitted the case to the jury on a verdict form seeking general verdicts and answers to special interrogatories. When the jury returned a verdict partially in favor of State-Boston, the holding company moved for judgment as a matter of law. Perceiving an inconsistency between two of the jury's interrogatory answers, the District Court discarded one of them and granted the motion on the basis of the remaining findings. The Eleventh Circuit concluded that was error: "[w]hen a court considers a motion for judgment as a matter of law -even after the jury has rendered a verdict- only the sufficiency of the evidence matters. . . .The jury’s findings are irrelevant." Despite the District Court’s error, the Eleventh Circuit concluded that the evidence was insufficient to support a finding of loss causation, an element required to make out a securities fraud claim. The Court therefore affirmed. View "State-Boston Retirement System v. BankAtlantic Bancorp, Inc." on Justia Law