Justia U.S. 8th Circuit Court of Appeals Opinion SummariesArticles Posted in Securities Law
Douglas Kelley v. Safe Harbor Managed Acct. 101
Appellant, as a Trustee of the PCI Liquidating Trust, filed a proceeding against Appellee, Safe Harbor Managed Account 101, Ltd. (“Safe Harbor”) to recover nearly $6.9 million transferred to Safe Harbor as a subsequent transferee of an entity that Appellant had previously obtained a default judgment against for transfers made to it by a PCI subsidiary. The district court held that 11 U.S.C. Sec. 546(e) shielded Safe Harbor from Appellant’s avoiding powers. The Eighth Circuit affirmed in part, reversed in part, and remanded for further consideration. The court found that the district court did not err in determining that a financial institution’s customer may qualify as a financial institution if the intermediary bank acted as an agent for the customer during the transaction. The court did not consider Appellant’s argument that the district court failed to determine whether Wells Fargo was a custodian. Finally, although the district court erred in confusing two entities in determining who was a party to the Notes Purchase Agreement, that error is not dispositive. Therefore, the court reversed and remanded to the district court to analyze the facts and determine whether transfers from MGC finance were in connection with the Note Purchase agreement. View "Douglas Kelley v. Safe Harbor Managed Acct. 101" on Justia Law
City of Plantation Police Officers Pension Fund v. Meredith Corp.
The Eighth Circuit affirmed the district court's dismissal of the Pension Fund's amended complaint in this securities fraud class action. The Pension Fund, as lead plaintiff, alleged securities fraud under section 10(b) of the Securities Exchange Act, as well as controlling-person liability under section 20(a) of the Securities Exchange Act.The court concluded that, 137 of the 138 statements listed in the amended complaint were clearly either (1) statements identified as forward looking and accompanied by meaningful cautionary statements, (2) corporate puffery, or (3) forward-looking statements that the complaint's allegations do not imply by strong inference were made with actual knowledge of their falsity. Furthermore, although the remaining statement comes closer than the other 137 to giving the Pension Fund a section 10(b) claim, it too falls short. The court explained that, even assuming arguendo the statement was false, the confidential former employee's allegation does not give rise to a strong inference of severe recklessness. Therefore, the complaint fails to satisfy the heightened pleading standards with respect to the misrepresentation and mental-state requirements of section 10(b) liability. Consequently, the section 20(b) claims were also properly dismissed. Finally, reviewing the issue of futility de novo, the court concluded that the district court properly denied leave to amend. View "City of Plantation Police Officers Pension Fund v. Meredith Corp." on Justia Law
Oetting v. Sosne
A global settlement was approved in 2002 in securities law class actions concerning the merger of companies to form Bank of America, which included an award of approximately $58 million in fees to the attorneys appointed to represent the NationsBank Class. Two decades later, one of the lead plaintiffs for the class filed a motion to reconsider the fee award and to order disgorgement of some $38 million in fees previously paid to NationsBank Class Counsel based on their poor performance, mismanagement of the settlement fund, and abandonment of the class.The Eighth Circuit affirmed the district court's denial of plaintiff's motion for redetermination, concluding that disgorgement of attorneys' fees was barred by the equitable doctrine of laches. The court concluded that the delay in asserting plaintiff's claim is manifestly unreasonable and inexcusable, prejudicing the other parties; the court and/or the district court previously rejected plaintiff's challenges; the challenged actions, from the inclusion of an exculpatory clause in the settlement checks to opposing cy pres distribution, occurred seven to fifteen years before plaintiff sought total disgorgement in his motion for redetermination; and plaintiff's failure to seek disgorgement in the proper manner and before the proper court was inexcusable delay. Finally, the court concluded that the district court has not failed to honor its ongoing fiduciary duty to the class in overseeing a complex settlement fund distribution made more complex and dilatory by the contentious actions of its participants, and the court has not allowed the class to be abandoned by those responsible for distributing the settlement fund. View "Oetting v. Sosne" on Justia Law
Knowles v. TD Ameritrade Holding Corp.
The Eighth Circuit affirmed the district court's order dismissing with prejudice plaintiff's second amended complaint (SAC) against TD Ameritrade. Plaintiff's claims stemmed from a systemic glitch of TD Ameritrade's tax-loss harvesting tool (TLH Tool), which failed to reinvest plaintiff's funds in an effort to avoid violating the "Wash Sale Rule." Plaintiff filed a class action, alleging claims for breach of contract and negligence.The court held that the Securities Litigation Uniform Standards Act of 1998 (SLUSA) preempts plaintiff's class action claims because he failed to demonstrate these claims are rooted in a violation of any specific contract provision. The court explained that, while, on its face, the operative complaint focuses on TD Ameritrade's alleged improper administration of the TLH Tool, the allegations are insufficient to demonstrate TD Ameritrade breached any contract terms. Therefore, plaintiff's class action claims are rooted in TD Ameritrade's omissions in disclosing information about the operation of the TLH Tool, which triggers SLUSA preemption.Applying Nebraska law, the court also concluded that plaintiff's contract claim was properly dismissed under Federal Rule of Civil Procedure 12(b)(6) where plaintiff failed to allege TD Ameritrade breached any contract terms or promises in the administration of the TLH Tool. Therefore, the allegations failed to provide TD Ameritrade with reasonable notice of the breach of contract claim as required by Rule 8. The court further concluded that the duty plaintiff alleges in his negligence claim arose out of the contract between the parties and thus activated the economic loss rule, which precludes a negligence cause of action. Finally, the court concluded that the district court did not abuse its discretion in dismissing the SAC with prejudice and denying leave to amend as futile. View "Knowles v. TD Ameritrade Holding Corp." on Justia Law
Panircelvan Kaliannan v. Ee Hoong Liang
Plaintiffs, Singapore residents and citizens who invested in a now-defunct North Dakota company called North Dakota Developments, LLC (NDD), filed suit seeking damages from defendant for his role in convincing plaintiffs to buy fraudulent, unregistered securities.The Eighth Circuit affirmed the district court's denial of defendant's motion to dismiss for lack of personal jurisdiction, concluding that the district court did not err in determining that it had personal jurisdiction over defendant because his conduct and connection with North Dakota were such that he should have reasonably anticipated being haled into court there. The court also agreed with the district court that venue was proper where plaintiffs' claims arose from the sale or solicitation of unregistered, fraudulent North Dakota securities related to real property located in North Dakota. The court declined to consider the issue of forum non conveniens because defendant failed to raise the claim in the district court. Finally, the court concluded that the district court correctly granted summary judgment where defendant decided to stop participating in the district court litigation, including not responding to the motion for summary judgment. View "Panircelvan Kaliannan v. Ee Hoong Liang" on Justia Law
Donelson v. Ameriprise Financial Services, Inc.
Plaintiff filed suit against Defendants Sachse, Ameriprise, and individual Ameriprise officers, alleging violations of federal securities law. Plaintiff also sought to represent other Sachse and Ameriprise clients in a class action. Defendants filed motions to strike plaintiff's class action allegations and to compel arbitration, which the district court denied.The Eighth Circuit reversed and remanded for entry of an order striking plaintiff's class action allegations and compelling arbitration. The court concluded that it has appellate jurisdiction to review the district court's denial of defendants' motions to strike class action allegations because this denial was contained in an order reviewable under 9 U.S.C. 16(a)(1)(B). The court also concluded that defendants have not waived their right to arbitrate by moving to strike plaintiff's class action allegations at the same time they moved to compel arbitration where the action was not inconsistent with their right to arbitrate and did not substantially invoke the litigation machinery. On the merits, the court concluded that a valid arbitration clause exists and that it encompasses the dispute between the parties. In this case, the court agreed with defendants that the arbitration clause was valid because it was supported by mutual assent, was supported by consideration, and was not unconscionable. View "Donelson v. Ameriprise Financial Services, Inc." on Justia Law
Carpenters’ Pension Fund of Illinois v. Target Corp.
Investors who purchase Target Corporation stock filed suit against Target and its executives, alleging that Target misled investors about problems in its Canadian stores. Investors' claims stemmed from Target's efforts to open stores in Canada.The Eighth Circuit affirmed the district court's dismissal, and denial of investors' motion for reconsideration and leave to amend. The court held that the district court did not err in determining that investors failed to plead fraud with particularity under the Private Securities Litigation Reform Act of 1995 (PSLRA). In this case, none of the investors' allegations satisfied the PSLRA's mental state requirement and, for one allegation, its falsity requirement. The court also held that the district court did not abuse its discretion in denying leave to amend, because investors failed to allege that Target's executives knew they were making false or misleading statements to investors. Finally, the court held that, because investors' section 10(b) of the Securities and Exchange Act of 1934 claim failed, dismissal of their section 20(a) claim was also appropriate. View "Carpenters' Pension Fund of Illinois v. Target Corp." on Justia Law
COR Clearing, LLC v. Calissio Resources Group, Inc.
COR, a securities clearing and settlement firm, filed suit against Calissio seeking to recover losses resulting from a dividend transaction that it has not already recovered in other proceedings. The Eighth Circuit affirmed the district court's grant of summary judgment dismissing all claims against SST (the transfer agent) and the Broker Defendants. The court held that the transfer agent had no knowledge of a misrepresentation in the use of a seemingly appropriate "CUSIP" number for additional shares of the same class as existing shares and the transfer agent reasonably relied on attorney opinion letters in issuing the new shares. Furthermore, COR failed to show it reasonably relied on the transfer agent's alleged misrepresentation. Accordingly, the transfer agent was entitled to judgment on plaintiff's fraudulent misrepresentation claims.The court also held that the district court properly dismissed claims against the Broker Defendants. In this case, COR has no conversion claim against the Broker Defendants, who simply acted as pass-through agents of the buyers in receiving and distributing due bill credits. Likewise, COR's unjust enrichment claim failed because the Broker Defendants received due bill credits from DTC for the benefit of their account holders and passed the benefit to their account holders without delay. View "COR Clearing, LLC v. Calissio Resources Group, Inc." on Justia Law
Campbell v. Transgenomic, Inc.
A shareholder of Transgenomic filed a class action against former shareholders, alleging materially misleading statements and omissions in the proxy statement. The Eighth Circuit reversed the district court's ruling that any omissions or misstatements in the proxy statement were not materially misleading, and held that the district court improperly resolved the materiality of the omission as a matter of law. The court also held that issues regarding whether a revenue table was misleading were also questions for the trier of fact. Finally, plaintiff's section 20(a) of the Securities Exchange Act allegation was sufficiently pled. Accordingly, the court remanded for further proceedings. View "Campbell v. Transgenomic, Inc." on Justia Law
Oetting v. Sosne
The class representative of federal securities class actions appealed the dismissal of the unsecured creditor claim and amended claim he filed in the pending Chapter 7 bankruptcy proceeding of lead class counsel, Green Jacobson, P.C. The Eighth Circuit held that the claim for the cy pres distribution was no longer an issue because the distribution had been returned by the charity and deposited with the district court clerk for ultimate distribution for the benefit of the NationsBank class; the negligent supervision claim was time-barred; the disgorgement claim was not time-barred by Missouri's five year statute of limitations; and the bankruptcy court did not err in disallowing the bankruptcy claim as premature and lacking in supporting foundation. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Oetting v. Sosne" on Justia Law