We are all used to seeing securities class action lawsuit alleging that the defendants made misrepresentations or omissions in SEC filings, press releases, or in public statements. But how about in a corporate blog post? In a very interesting December 23, 2015 opinion in the Rocket Fuel securities class action lawsuit in which she mostly granted the defendants’ motions to dismiss, Northern District of California Judge Phyllis Hamilton held that certain allegedly misleading statements made in a post on the company’s website were actionable under the federal securities laws. Judge Hamilton’s opinion also includes a number of interesting conclusions about individual and corporate scienter, and loss causation. Her opinion also addresses interesting Securities Act pleading issues in light of the U.S. Supreme Court’s 2015 opinion in the Omnicare case. Judge Hamilton’s opinion can be found here.
Continue Reading Blog Post Statements Held Actionable Under the Federal Securities Laws
Ninth Circuit: Embezzler Executive’s Knowledge Can Be Imputed to Company in Innocent Third Party-Filed Securities Suit
For purposes of determining the scienter of a corporate entity defendant under the federal securities laws, a company’s executives’ knowledge generally is imputed to company. There is an exception to these general principles – the “adverse interest exception” – which provides that an executive’s knowledge will not be imputed to the company if the executive acted for his or her own purposes and contrary to the interests of the company. There is also an exception to the exception, which provides further that a rogue executive’s knowledge will nevertheless be imputed to the company when an innocent third-party has relied on the executive’s representations made with apparent authority.
In an October 23, 2015 opinion (here), the Ninth Circuit applied these principles to reverse the district court’s dismissal of the ChinaCast Education Corp. securities class action lawsuit, holding that the knowledge of the company’s CEO, who had embezzled funds and mislead investors through omissions and false statements, could be imputed to the company for purposes of innocent third-party investors’ claims.
Continue Reading Ninth Circuit: Embezzler Executive’s Knowledge Can Be Imputed to Company in Innocent Third Party-Filed Securities Suit
Barclays Libor-Scandal Securities Suit Survives Renewed Dismissal Motion
The Libor-scandal based securities suit filed against Barclays and certain of its directors and offices will now be going forward. The case was initially dismissed, but on appeal the Second Circuit vacated a part of the dismissal ruling and returned the case to the district court for further proceedings. The defendants filed a renewed motion
A Tale of Two FCPA Follow-On Securities Lawsuits
I have frequently noted in prior posts that a frequent development after a company announces the existence of an FCPA investigation is the filing of a follow on civil action (refer, for example, here). But while plaintiffs’ lawyers often are eager to file these lawsuits, in many instances they prove to be unsuccessful (as
The Sins of the Past: Ninth Circuit Revives BP’s Prudhoe Bay Oil Spill Securities Suit
In a February 8, 2014 article entitled “A Shrunken Giant” (here), the Economist magazine examined BP’s efforts to regain its footing after the disastrous April 2010 Deepwater Horizon explosion and oil spill. The article concludes by stating that “Repairing the balance sheet and books is one thing. Repairing BP’s reputation for management
Credit Crisis Residue: Economic Problems and Litigation Both Grind On
As the most dramatic evens from the financial crisis recede into the past, there is an urge to consign the downturn to the pages of history, But the banking crisis in Cyprus earlier this week, along with persistent unemployment in this country and elsewhere, show that, as much as we would all like to turn
Internal Control Misrepresentations Alone Held Sufficient to State a Securities Claim
Securities class action plaintiffs often allege that the defendants’ statements about their company’s internal controls are misleading. Typically, these internal control-related allegations are made in connection with allegations of accounting misrepresentations, as the plaintiffs contend that the alleged internal control deficienciesp allowed the accounting errors behind alleged accounting misrepresentations.
In a November 7, 2012
Failed Bank-Related Securities Lawsuits: A Dismissal and A Settlement
One of the ways in which the current wave of bank failures is different from the failures during the S&L crisis is that this time around, by comparison to that prior period, a number of the bank closures have been accompanied by shareholder lawsuits brought against the former directors and officers of the failed institutions.
What Difference Does it Make that Paulson “Instructed” Lewis Not to Disclose the Fed Backstop of the BofA/Merrill Deal?
One of the most interesting aspects of the complicated sequence of events surrounding the Bank of America/Merrill Lynch merger is the suggestion that Treasury Secretary Henry Paulson instructed BofA’s CEO Ken Lewis not to disclose to BofA shareholders that the government, in order to keep BofA from backing out of the deal, was backstopping BofA
Ninth Circuit Rejects Securities Case Based on FCPA Disclosures
In a November 26, 2008 opinion (here), the Ninth Circuit affirmed the lower court’s dismissal of a lawsuit asserting securities law violations against InVision and certain of its directors and officers based on FCPA-related disclosures. The case is noteworthy not only for its involvement of FCPA-related allegations, but also for the appellate court’s