Justia Civil Rights Opinion SummariesArticles Posted in Securities Law
Chris Ronnie v. U.S. Department of Labor
Petitioner was employed at Office Depot as a senior financial analyst. He was responsible for, among other things, ensuring data integrity. One of Ronnie’s principal duties was to calculate and report a metric called “Sales Lift.” Sales Lift is a metric designed to quantify the cost-reduction benefit of closing redundant retail stores. Petitioner identified two potential accounting errors that he believed signaled securities fraud related to the Sales Lift. Petitioner alleged that after he reported the issue, his relationship with his boss became strained. Eventually, Petitioner was terminated at that meeting for failing to perform the task of identifying the cause of the data discrepancy. Petitioner filed complaint with the Department of Labor’s Occupational Safety and Health Administration (OSHA), and OSHA dismissed his complaint. Petitioner petitioned for review of the ARB’s decision. The Eleventh Circuit denied the petition. The court explained that Petitioner failed to allege sufficient facts to establish that a reasonable person with his training and experience would believe this conduct constituted a SOX violation, the ARB’s decision was not arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with the law. The court wrote that Petitioner’s assertions that Office Depot intentionally manipulated sales data and that his assigned task of investigating the discrepancy was a stalling tactic are mere speculation, which alone is not enough to create a genuine issue of fact as to the objective reasonableness of Petitioner’s belief. View "Chris Ronnie v. U.S. Department of Labor" on Justia Law
Wong v. Restoration Robotics, Inc.
The value of shares of stock in Restoration Robotics, a Delaware corporation, dropped within months of the company’s 2017 initial public stock offering. Wong, having purchased the stock, sued Restoration in San Mateo County Superior Court, alleging that the company’s offering documents contained materially false and misleading statements in violation of the Securities Act of 1933 (15 U.S.C. 77). Although the 1933 Act generally allows a plaintiff to choose whether to file suit in state or federal court, and bars the removal to federal courts of a suit filed in state court, a “federal forum provision” (FFP) in Restoration’s certificate of incorporation states that 1933 Act claims must be brought in federal court unless Restoration consents to a different forum.The trial court declined jurisdiction on the basis of the FFP. The court of appeal affirmed, rejecting arguments that the FFP violates the 1933 Act, which states that both state and federal courts have jurisdiction over 1933 Act causes of action, that the Delaware statutory scheme permitting the FFP violates the Commerce Clause and the Supremacy Clause, and that the FFP is invalid and should not be enforced in any event because it is unfair and unreasonable. View "Wong v. Restoration Robotics, Inc." on Justia Law
Sugarman v. Brown
After a scandal that led to plaintiff's resignation from his positions at Banc of California, plaintiff filed suit against Banc, several individual directors and Banc executives, and Banc's lead auditor. Defendant filed anti-SLAPP (strategic lawsuits against public participation, Code Civ. Proc., 425.16) motions to strike various of the causes of action plaintiff alleged.In the published portion of the opinion, the Court of Appeal affirmed the Brown order granting Defendant Brown's motion in part. The court held that statements in an annual 10-K report filed with the SEC constitute statements "made in connection with an issue under consideration or review by [an] official proceeding" under section 425.16, subdivision (e)(2). View "Sugarman v. Brown" on Justia Law
Sugarman v. Benett
After a scandal that led to plaintiff's resignation from his positions at Banc of California, plaintiff filed suit against Banc, several individual directors and Banc executives, and Banc's lead auditor. Defendant filed anti-SLAPP (strategic lawsuits against public participation, Code Civ. Proc., 425.16) motions to strike various of the causes of action plaintiff alleged.In the published portion of the opinion, the Court of Appeal held that statements Banc made in its Forms 8-K and 10-Q filed with the SEC, as well as related investor presentations and conversations, are protected activity under section 425.16, subdivision (e)(2) as matters under review and consideration by the SEC. Furthermore, statements related to financial projections were also protected under section 425.16, subdivision (e)(4), as matters of public interest. View "Sugarman v. Benett" on Justia Law
Coscia v. United States
Coscia used electronic exchanges for futures trading and implemented high-frequency trading programs. High-frequency trading, called “spoofing,” and defined as bidding or offering with the intent to cancel the bid or offer before execution, became illegal in 2010 under the Dodd-Frank Act, 7 U.S.C. 6c(a)(5). Coscia was convicted of commodities fraud, 18 U.S.C. 1348, and spoofing, After an unsuccessful appeal, Coscia sought a new trial, citing new evidence that data discovered after trial establishes that there were errors in the data presented to the jury and that subsequent indictments for similar spoofing activities undercut the government’s characterization of Coscia as a trading “outlier.” He also claimed that his trial counsel provided ineffective assistance, having an undisclosed conflict of interest. The Seventh Circuit affirmed. Even assuming that Coscia’s new evidence could not have been discovered sooner through the exercise of due diligence, Coscia failed to explain how that evidence or the subsequent indictments seriously called the verdict into question. Coscia has not established that his attorneys learned of relevant and confidential information from its cited unrelated representations. Coscia’s counsel faced “the common situation” where the client stands a better chance of success by admitting the underlying actions and arguing that the actions do not constitute a crime. That the jury did not accept his defense does not render it constitutionally deficient. View "Coscia v. United States" on Justia Law
Nat’l Assoc. of Manufacturers, et al. v. SEC, et al.
In response to the Congo war, Congress created Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 78m(p), which requires the SEC to issue regulations requiring firms using "conflict minerals" to investigate and disclose the origin of those minerals. The Association challenged the SEC's final rule implementing the Act, raising claims under the Administrative Procedure Act (APA), 5 U.S.C. 500 et seq.; the Securities Exchange Act, 15 U.S.C. 78a et seq.; and the First Amendment. The district court rejected all of the Association's claims and granted summary judgment for the Commission and intervenor Amnesty International. The court concluded that the Commission did not act arbitrarily and capriciously by choosing not to include a de minimus exception for use of conflict materials; the Commission could use its delegated authority to fill in gaps where the statute was silent with respect to both a threshold for conducting due diligence and the obligations of uncertain issuers; the court rejected the Association's argument that the Commission's due diligence threshold was arbitrary and capricious; the Commission did not act arbitrarily and capriciously and its interpretation of sections 78m(p)(2) and 78m(p)(1)(A)(i) was reasonable because it reconciled these provisions in an expansive fashion, applying the final rule not only to issuers that manufacture their own products, but also to those that only contract to manufacture; and the court rejected the Association's challenge to the final rule's temporary phase-in period, which allowed issuers to describe certain products as "DRC conflict undeterminable." The court also concluded that it did not see any problems with the Commission's cost-side analysis. The Commission determined that Congress intended the rule to achieve "compelling social benefits," but it was "unable to readily quantify" those benefits because it lacked data about the rule's effects. The court determined that this benefit-side analysis was reasonable. The court held that section 15 U.S.C. § 78m(p)(1)(A)(ii) & (E), and the Commission’s final rule violated the First Amendment to the extent the statute and rule required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be 'DRC conflict free.'" The label "conflict free" is a metaphor that conveys moral responsibility for the Congo war. By compelling an issuer to confess blood on its hands, the statute interferes with the exercise of the freedom of speech under the First Amendment. Accordingly, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Nat'l Assoc. of Manufacturers, et al. v. SEC, et al." on Justia Law
State v. Philbrook
After a jury trial, Defendant was convicted of theft by misapplication of property and securities fraud. Defendant appealed, contending that the court's jury instructions impermissibly shifted the burden of proof onto him to prove his innocence. The Supreme Court affirmed, holding that the burden of proof was not improperly shifted onto Defendant to prove his innocence where (1) there was no obvious error in the instructions the trial court gave because, as a whole, the instructions correctly stated the law; and (2) the court correctly stated the State's burden of proof and Defendant's presumption of innocence several times during the jury selection, at the beginning of the trial, in its final instructions, and in its written instructions sent to the jury room. View "State v. Philbrook" on Justia Law
Goldstein v. Galvin
Plaintiff filed a 42 U.S.C. 1983 action against Defendant, the Secretary of the Commonwealth of Massachusetts, alleging that, in retaliation for Plaintiff's anti-regulatory stance, Defendant used his oversight powers to retaliate unlawfully against Plaintiff. The federal district court dismissed the complaint on immunity grounds. At issue before the First Circuit Court of Appeals was the scope and extent of the immunities offered to state officials, such as Defendant, whose duties encompass both prosecutorial and adjudicatory functions. The First Circuit affirmed the district court, holding that, notwithstanding Defendant's dual roles, Defendant was, with one exception, entitled to absolute immunity from Plaintiff's suit. View "Goldstein v. Galvin" on Justia Law
Aslin v. Fin. Indus. Regulatory Auth., Inc.
In 2011, BEST fired Aslin, a securities broker, to remain compliant with the Financial Industry Regulatory Authority “Taping Rule,” which requires securities firms to adopt monitoring measures when too many of their brokers have recently worked for “Disciplined Firms.” Instead of adopting such measures, the employer may terminate brokers. FINRA, a private corporation, is registered with the Securities and Exchange Commission as a “national securities association.” The Maloney Act provides for establishment of private self-regulatory organizations to oversee securities markets, 15 U.S.C. 78o. The SEC must approve FINRA’s rules and may abrogate, add to, and delete FINRA rules. Aslin filed suit alleging that FINRA violated his due process rights by including him on the list of brokers from Disciplined Firms without providing him the opportunity to challenge the designation. The district court dismissed, concluding that Aslin failed to state a claim because he was not deprived of a protected property or liberty interest. The Seventh Circuit affirmed Since Aslin sought only injunctive and declaratory relief to prevent application of the rule to him, the controversy ended in 2012, after which Aslin was no longer included on the list of brokers from Disciplined Firms and the case was moot. View "Aslin v. Fin. Indus. Regulatory Auth., Inc." on Justia Law
United States v. Bruteyn
Defendant sold investors secured debt obligations (SDOs) based on the loans his company made to used-car purchasers. Defendant misrepresented his credentials and insurance coverage on the investments and marketed his investment offerings as though they were as safe as FDIC-backed certificates of deposit. After a jury trial in which Defendant represented himself, Defendant was convicted of securities fraud. The district court sentenced him to twenty-five years in prison, three years' supervised release, and almost $7.3 million in restitution. The Fifth Circuit Court of Appeals affirmed the conviction and sentence, holding (1) the district court did not plainly err in admitting a civil order at trial; (2) the jury did not convict Defendant on an invalid alternative theory; (3) the district court properly managed Defendant's pro se representation; (4) the evidence was sufficient to support the convictions; and (5) the district court did not err in imposing the sentence.