Scienter

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Balancing Act – Sixth Circuit Attempts Middle-of-the-Road Approach with New Corporate Scienter Standard

Balancing Act – Sixth Circuit Attempts Middle-of-the-Road Approach with New Corporate Scienter Standard In KBC Asset Mgmt. N.V. v. Omnicare, Inc. (In re Omnicare, Inc. Sec. Litig.), No. 13-5597, 2014 U.S. App. LEXIS...more

Sixth Circuit Narrows Collective-Knowledge For PSLRA Scienter

The US Sixth Circuit last week narrowed its standard for adequately pleading scienter in PSLRA cases using a collective-knowledge theory to impute knowledge to a corporate defendant from among various employees. In Omnicare,...more

Corporate State of Mind in Securities Cases: The Sixth Circuit Blazes a New Trail

Analysis of the corporate mens rea is, by definition, contrived and one with which federal courts have struggled. Unlike instances where an individual is charged with securities fraud, determining the “thinking” or...more

District Court Considers Prior SEC Complaint Evidence to Establish Scienter Under PSLRA

The US District Court for the Southern District of New York recently denied a defendant’s motion to dismiss a securities fraud class action, accepting as sufficient factual allegations of scienter that were drawn from a...more

Inside The Courts - May 2014 | Volume 6 | Issue 2

In This Issue: - AUDITOR LIABILITY: ..Athale v. Sinotech Energy Ltd., No. 11 Civ. 05831(AJN) (S.D.N.Y. Feb. 21, 2014) - BYLAWS: ..ATP Tour, Inc. v. Deutscher Tennis Bund (German Tennis...more

Sixth Circuit Affirms Dismissal of Securities Class Action for Failure to Properly Plead Scienter

On March 28, the US Court of Appeals for the Sixth Circuit affirmed a lower court’s dismissal of a shareholder class action against BioMimetic Therapeutics Inc., finding that plaintiffs had failed to sufficiently allege that...more

Case Illustrates Role Of 10b5-1 Plans In Securities Litigation

A Fourth Circuit case, Yates v. Municipal Mortgage & Equity, LLC (March 2014), recently examined the role of 10b5-1 plans in an alleged securities fraud case involving a financial statement restatement. To prevail on a Rule...more

Delaware Chancery Analyzes Scienter Requirement in Insider Trading Claim

In a derivative action alleging insider trading, the Delaware Court of Chancery recently held that demand was excused as futile where the stockholder plaintiff alleged that a majority of the corporation’s board members sold...more

Corporate and Financial Weekly Digest - Volume IX, Issue 3

In this issue: - CFTC Issues No-Action Relief to FCMs Relating to Enhanced Customer Protection Rules - Eleventh Circuit Upholds Directors’ Affirmative Defenses Based on FDIC’s Post-Receivership Conduct -...more

Third Circuit Court Of Appeals Finds Plaintiff Failed To Meet PSLRA’s Scienter Pleading Requirement

Rahman v. Kid Brands, Inc., 2013 WL 6038246 - Shah Rahman, the plaintiff and appellant, brought a federal securities class action in March 2011 against defendant Kid Brands, Inc. and against individual defendants Bruce...more

Bad Actor Disqualification And Just How Do You Know Whether A Violation is Scienter-Based?

In a recently issued Compliance & Disclosure Interpretation (Question #260.21), the SEC staff unequivocally stated that “bad actor” disqualification under Rule 506(d)(1)(v) is “triggered only by orders to cease and desist...more

“Kid, Did You Ever Go To Court?”

In a recently issued Compliance & Disclosure Interpretation (Question #260.21), the SEC staff unequivocally stated that disqualification under Rule 506(d)(1)(v) is “triggered only by orders to cease and desist from violations...more

Inside The Courts - December 2013 | Volume 5 | Issue 4

In This Issue: *U.S. SUPREME COURT: - Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317 (U.S. Nov. 15, 2013) Lawson v. FMR LLC, No. 12-3 (U.S. Nov. 12, 2013) - Chadbourne & Parke LLP v. Troice, No....more

Rule 506 FAQs: Some Answers, Some New Questions

On December 4, 2013, the SEC released a new batch of FAQs regarding new Rules 506(d) and 506(e). Before diving in to the clarifications provided and the new uncertainties raised by the SEC in the new FAQs, you might want to...more

SEC Commissioner Draws Some Clean Enforcement Lines

The SEC should put more of its efforts into pursuing regulatory violations, such as failure to supervise, instead of trying to pursue fraud theories on weak facts, according to an SEC Commissioner....more

District Court Dismisses a Shareholder Suit for Failing to Plead Scienter

The US District Court for New Jersey recently granted a motion to dismiss by defendants, Columbia Laboratories, Inc. (Columbia) and Watson Pharmaceuticals, Inc. (Watson). The plaintiff group brought an action under Section...more

Corporate and Financial Weekly Digest - November 1, 2013

In this issue: - FINRA Issues New Investor Alert on Closed-End Funds - CFTC Adopts Enhanced Customer Protection Rules - CFTC Adopts Rules Regarding the Protection of Collateral and Treatment of Securities...more

Falsity is Fundamental: The Case for Emphasizing Arguments against Falsity

In defending a securities class action, a motion to dismiss is almost automatic, and in virtually all cases, it makes good strategic sense. In most cases, there are only four main arguments...more

Die Verwandlung: How The Legislature Likely Raised The Bar On Securities Fraud Actions

With the availability of a private cause of action under SEC Rule 10b-5, is there any reason to include a cause of action under California Corporations Code Sections 25401 and 25501? Until the most recent legislative...more

Eighth Circuit Applies Negligence Standard to SEC Enforcement Claims for Violations of Section 14(a) and Rules 14a-9, 13b2-1 and...

In SEC v. Das, No. 12-2780, 2013 U.S. App. LEXIS 15327 (8th Cir. July 29, 2013), the United States Court of Appeals for the Eighth Circuit affirmed the district court’s delivery of jury instructions applying a negligence...more

Matrixx Did Not, and Could Not, Authorize Shortcuts in Reform Act Scienter Analysis, Despite Plaintiffs’ Claims to the Contrary

As I have previously written, the Sixth Circuit’s erroneous interpretation of the scienter component of the Supreme Court’s decision in Matrixx Initiatives, Inc. v. Siracusano, 131 S. Ct. 1309 (2011), is one of the biggest...more

Inside The Courts - June 2013 | Volume 5 | Issue 2

In This Issue: - AUDITOR LIABILITY - CLASS ACTIONS - CONFIDENTIAL WITNESSES - DEMAND FUTILITY - DERIVATIVE LITIGATION - FEDERAL TORT CLAIMS ACT - FOREIGN CORRUPT PRACTICES ACT - INSIDER TRADING...more

Rare Securities Trial Over Credit Crises Claims Results In Defense Verdict

On May 28, 2013, in Delshah Group LLC v. Javeri, a rare securities trial regarding credit-crisis related claims, Judge Katherine B. Forrest of the United States District Court for the Southern District of New York issued an...more

Seventh Circuit Remands for Possible Rule 11 Sanction on Counsel That Filed to Aqequately Investigate Confidential Witnesses

Plaintiffs’ counsel beware: to avoid Rule 11 sanctions you might actually have to talk to “con­fidential witnesses” yourself and corroborate their statements before citing them in a securities fraud complaint....more

Massachusetts District Court Affirms Scienter Requirement of False Statement Crime

The District Court for the District of Massachusetts recently held that in order to obtain a conviction for making a false statement to a government agent, the government must prove that the defendant knew, or reasonably...more

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