Justia Corporate Compliance Opinion Summaries

Karen Cook was appointed receiver over the assets of a number of related corporations and individuals, who the SEC alleged violated multiple federal securities laws. Cook discovered that before the SEC filed its civil complaint, the corporate entities involved had made charitable contributions to the American Cancer Society (ACS). Cook moved to recover the donations on behalf of the receivership, arguing that they qualified as fraudulent transfers under Texas' Uniform Fraudulent Transfer Act (TUFTA), Tex. Bus. & Co. Code 24.005(a). The court held that the receiver's attempt to liken the scheme in question to a "Ponzi-like fraud," and therefore reduce her burden to proving "presumed intent to defraud," failed for lack of evidence. Accordingly, the court reversed the judgment of the district court. View "The American Cancer Society v. Cook" on Justia Law

A class representing purchasers of securities sued the company and two high-ranking officers, alleging that the company issued false or misleading public statements about demand for its products in violation of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and related regulations. The district court granted summary judgment to the company. The First Circuit affirmed. Once a downward trend became clear, the company explicitly acknowledged that its forecasts had been undermined. Whether it was negligent to have remained too sanguine earlier, there was no evidence of anything close to fraud. View "OK Firefighters Pension v. Smith & Wesson Holding Corp." on Justia Law

In November 2010 Ladish agreed to be acquired by Allegheny for $24 cash plus .4556 shares of Allegheny stock per share. At the closing price after the announcement, the package was worth $46.75 per Ladish share, a premium of 59% relative to Ladish's trading price before the announcement. The transaction closed in May, 2011. Ladish became ATI. Investors' reactions implied that Allegheny bid too high: the price of its shares fell when the merger was announced. No Ladish shareholder dissented and demanded an appraisal. But one shareholder filed a suit seeking damages, claiming breach of federal securities law and Wisconsin corporate law by failing to disclose material facts. The district court granted judgment on the pleadings in defendants' favor. On appeal, the shareholder abandoned federal claims. The Seventh Circuit affirmed on the state law claims, citing the business judgment rule. View "Dixon v. Ladish Co. Inc." on Justia Law

This appeal concerned the maintenance of a suit for rescission under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., by plaintiffs Kenneth Weiss and his wholly-owned corporation. The district court granted summary judgment to defendants on all claims and awarded defendants attorneys' fees. The court held that a plaintiff suing under section 10(b) seeking rescission must demonstrate economic loss and that the misrepresentation or fraud conduct caused the loss. The court found that the record revealed that rescission was not feasible in the instant case. Yet employing a rescissionary measure of damages, Weiss would be able to convince the finder of fact that he was entitled to relief. On that basis, the court reversed the district court's grant of summary judgment of Weiss's federal and state securities claims and remanded for consideration under a rescissionary measure of damages. With respect to the statue of limitations issue, the court remanded for consideration in light of Merck & Co., Inc. v. Reynolds. The court affirmed the district court's judgment on Weiss's state law claims of common law fraud, negligent misrepresentation, mutual mistake, and unjust enrichment. The court vacated the district court's attorneys' fee award and dismissed the appeal of this award as moot. View "Strategic Diversity, Inc., et al. v. Alchemix Corp., et al." on Justia Law

Defendants appealed from a judgment of the district court in favor of plaintiff on claims of Section 16(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78p(b). At issue was whether a beneficial owner's acquisition of securities directly from an issuer - at the issuer's request and with the board's approval - should be exempt from the definition of a "purchase" under Section 16(b), on the theory that such a transaction lacked the "potential for speculative abuse" that Section 16(b) was designed to curb. The court held that such transactions were covered by Section 16(b) and that defendants, who were limited partnerships, were beneficial owners for the purpose of Section 16(b) liability, notwithstanding their delegation of voting and investment control over their securities portfolios to their general partners' agents. Accordingly, the court affirmed the judgment of the district court. View "Huppe v. WPCS Int'l, Inc." on Justia Law

Appellant, a former shareholder in Wachovia, sought to recover personally for the decline in value of his shares of Wachovia stock during the recent financial crisis. The district court dismissed the suit, concluding that appellant's complaint stated a claim derivative of injury to the corporation and that he was therefore barred from bringing a direct or individual cause of action against defendants. The court held that because appellant's varied attempts to recast his derivative claim as individual were unavailing, the judgment of the district court was affirmed. View "Rivers, Jr. v. Wachovia Corp., et al." on Justia Law

This case involved a dispute over earn-out payments related to a merger between Viacom and Harmonix where plaintiff was one of the selling stockholders of Harmonix. Plaintiff sued on behalf of the selling stockholders, alleging that Viacom and Harmonix purposefully renegotiated the distribution contract with EA so as to reduce the earn-out payments payable to the Harmonix stockholders, and thus breached the covenant of good faith and fair dealing implied in the Merger Agreement. The court dismissed plaintiff's claim and held that it would be inequitable for the court to imply a duty on Viacom and Harmonix's part to share with the selling stockholders the benefits of a renegotiated contract addressing EA's right to distribute Harmonix products after the expiration of the earn-out period. View "Winshall v. Viacom Int'l, Inc., et al." on Justia Law

This case involved the interpretation of two provisions in a merger agreement between defendant corporation and a company whose former stockholders were represented by plaintiff. The two provisions at issue dealt with contingent payments due in certain circumstances from defendant to those stockholders. The court found that the language of the merger agreement was unambiguous, and that per its provisions, defendant's obligations under the merger agreement were assumed by the acquiring company, thus avoiding the acceleration of the remaining revenue contingent payments. Therefore, the court denied plaintiff's motion for summary judgment and granted summary judgment in favor of defendant. View "Coughlan v. NXP B.V." on Justia Law

Plaintiff contended that holders of common stock of Wesco were entitled to appraisal rights under Section 262 of the General Corporation Law, 8 Del. 262, in connection with a forward triangular merger among Wesco, its parent, and an acquisition subsidiary. The parties cross-moved for partial summary judgment on the availability of appraisal rights. The court held that because Wesco common stockholders were not required to accept consideration other than stock listed on a national securities exchange and cash in lieu of fractional shares, they were not entitled to appraisal rights. Accordingly, summary judgment on this issue was entered in favor of defendants. View "Krieger v. Wesco Financial Corp., et al." on Justia Law

UBS appealed the denial of their motion for a preliminary injunction enjoining defendants from proceeding with an arbitration before the Financial Industry Regulatory Authority (FINRA), and alternatively requiring that the arbitration proceed in New York County. In the arbitration, defendants sought damages for UBS's alleged fraud in connection with defendants' issuances of auction rate securities. The court held that defendants were entitled to arbitration because they became UBS's "customer" under FINRA's rules when they undertook to purchase auction services from UBS. The court also held that the enforceability of the forum selection clause was a procedural issue for FINRA arbitrators to address and that the district court lacked jurisdiction to resolve it. View "UBS Financial Servs, Inc. v. West Virginia University Hosp." on Justia Law