Justia U.S. 4th Circuit Court of Appeals Opinion Summaries

In these appeals arising from the dismissal of a securities fraud class action complaint, the complaint alleged that the Company conjured up and carried out a scheme that enabled surgeons to utilize the AxiaLIF system and secure fraudulent reimbursements from various health insurers and government-funded healthcare programs. In regard to appeal No. 15-2579, the Fourth Circuit held that the Complaint satisfied the misrepresentation and scienter elements of the section 10(b) claim of the Securities Exchange Act. Therefore, the court vacated the district court's ruling holding otherwise. In regard to appeal No. 16-1019, the court affirmed the district court's ruling that the complaint sufficiently alleged the loss causation element. The court remanded for further proceedings. View "Singer v. Reali" on Justia Law

A disinterested observer could not reasonably conclude that the Commission violated SEC Rule of Practice 900(a). Although Rule 900(a) sets timelines by which the Commission would ideally adjudicate cases, the permissive language of the text could not lead an employee to reasonably conclude that failing to meet such aspirational guidelines would amount to a "violation." Plaintiff petitioned for review of the Board's decision affirming the ALJ's determination that plaintiff was not entitled to relief under the Whistleblower Protection Enhancement Act, 5 U.S.C. 2302(b)(8). After plaintiff was fired from his position at the SEC, plaintiff claimed that his supervisor terminated him in reprisal for raising concerns about his section's alleged chronic inefficiency. The Second Circuit held that the ALJ did not err in rejecting plaintiff's Rule 900(a) claim and that the ALJ more than adequately explained why an employee in plaintiff's position could not have reasonably concluded that Rule 900(a) was violated. Because the ALJ did not actually analyze plaintiff's claims that he made protected disclosures when he raised concerns that Adjudication violated Rule 900(b), the court remanded the issue to the ALJ. Finally, the court declined to address plaintiff's claims of evidentiary and discovery error. Accordingly, the court denied in part, granted in part, and remanded for further proceedings. View "Flynn v. SEC" on Justia Law

The Fourth Circuit affirmed the district court's dismissal of Maguire Financial's amended complaint in a securities fraud class action. The court held that Maguire Financial's amended complaint failed to adequately allege scienter where a statement by the CEO of PowerSecure, to securities analysts that the company had secured a "contract renewal" could not form the basis for liability under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78(b), and Rule 10b-5, 17 C.F.R. 240.10b-5, and the Private Securities Litigation Reform Act, 15 U.S.C. 78u-4(b)(2). View "Maguire Financial, LP v. Powersecure International, Inc." on Justia Law

Scottsdale are respondents in an ongoing disciplinary proceeding before FINRA for allegedly selling unregistered securities in violation of Section 5 of the Securities Act of 1933, 15 U.S.C. 77e, and FINRA Rule 2010. Scottsdale sought an injunction in federal district court before FINRA completed its proceedings, claiming the FINRA proceeding is unauthorized because FINRA may only discipline members for violations of the Securities Exchange Act of 1934, 15 U.S.C. 78a et seq. The district court dismissed for lack of subject-matter jurisdiction. Because Scottsdale can obtain meaningful judicial review of its claim in this court following the appeal process outlined in the Exchange Act, the court held that its challenge to FINRA’s authority is the type of claim Congress intended to be reviewed within the statutory scheme. Therefore, the court concluded that the district court properly dismissed for lack of subject-matter jurisdiction and affirmed the judgment. View "Scottsdale Capital Advisors v. FINRA" on Justia Law

In 2015, the Securities and Exchange Commission instituted an administrative proceeding against Dawn Bennett and her law firm (collectively, Bennett) to determine whether Bennett had violated the anti-fraud provisions of the federal securities laws. The Commission assigned the initial stages of the proceeding to an ALJ, and the ALJ scheduled a hearing on the merits of Bennett’s case. Bennett subsequently filed suit challenging the constitutionality of the administrative enforcement proceeding. Specifically, the Complaint alleged that the SEC’s administrative enforcement proceedings violated Article II of the United States Constitution. The district court dismissed the suit on jurisdictional grounds. The Fourth Circuit affirmed, holding that Congress has impliedly divested district-court jurisdiction over the agency action. View "Bennett v. U.S. Securities & Exchange Commission" on Justia Law

Plaintiffs, a class of investors, filed this suit claiming that Chelsea Therapeutics International, LTD. and several of its corporate officers violated the Securities Exchange Act by making misleading statements and material omissions about the development and likelihood of regulatory approval for a new drug. The district court dismissed the claim under Fed. R. Civ. P. 12(b)(6), concluding that Plaintiffs’ securities fraud claims failed because their allegations were insufficient to establish that Defendants acted with the required scienter. The Fourth Circuit vacated the district court’s judgment dismissing Plaintiffs’ complaint, holding that the district court erred in (1) taking judicial notice of three documents filed with the Securities and Exchange Commission because those documents were not explicitly referenced in, or an integral part of, Plaintiffs’ complaint, and the error was not harmless; and (2) concluding that Plaintiffs’ allegations of scienter were insufficient as a matter of law, as, based on Defendants’ failure to disclose critical information about the weaknesses of the new drug application, Plaintiffs’ allegations were sufficient to support the required inference of scienter. Remanded. View "Zak v. Chelsea Therapeutics Int’l" on Justia Law

After SouthPeak, a video game publishing company, terminated its CFO after she raised concerns about a misstatement on one of the company's filings with the SEC, a jury found that the company and two of its top officers violated the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1514A(a). The court affirmed the district court's judgment, holding that the retaliatory discharge claims are subject to the four-year statute of limitations under 28 U.S.C. 1658(a), and not the two-year limitations period under section 1658(b)(1); the administrative complaint in this case satisfies the exhaustion requirement; and emotional distress damages are available under the statute. The court rejected SouthPeak's claims regarding perceived inconsistencies in the verdict where the district court did not commit any error. Finally, the court affirmed the district court's decision as to attorneys' fees. View "Jones v. Southpeak Interactive Corp." on Justia Law

Plaintiffs filed suit against MuniMae defendants, alleging that they committed securities fraud by falsely representing that the Company was in full compliance with a new accounting standard enacted in 2003; and concealing the substantial cost of correcting the accounting error. The court affirmed the district court's dismissal of plaintiffs' claims under section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. 78j(b), and SEC Rule 10b-5, 17 C.F.R. 240.10b-5, for failing to adequately plead scienter; affirmed the district court's dismissal of plaintiffs' claim under sections 11 of the Securities Act of 1933, 15 U.S.C. 77k(a), as time-barred under section 13's statute of repose; affirmed the district court's dismissal of plaintiffs' claim under section 12(a)(2) of the Securities Act, 15 U.S.C. 77(a)(2), for lack of standing; and affirmed the district court's dismissal of the section 15 claim because plaintiffs failed to adequately plead a primary violation of the Securities Act. View "Yates v. Municipal Mortgage & Equity" on Justia Law

This is an adversary proceeding arising out of the bankruptcy of debtor (Derivium). Plaintiff (Grayson), assignee of the Chapter 7 bankruptcy trustee, appealed from a district court judgment affirming the bankruptcy court's decision to grant summary judgment for defendants (Wachovia). The court concluded that the district court did not err in affirming the grant of summary judgment for Wachovia on Grayson's Customer Transfers claim; summary judgment for Wachovia on Grayson's Cash Transfers claim; the bankruptcy court's determinations that the stockbroker defense applied to commissions; and the bankruptcy court's ruling that in pari delicto barred Grayson's tort claims against Wachovia. View "Grayson Consulting, Inc. v. Wachovia Securities, LLC" on Justia Law

Defendants, individual investors, sought to arbitrate claims against plaintiff that arose when the investors purchased allegedly fraudulent securities directly from Inofin. Defendants contended that they were plaintiff's customers because they purchased Inofin securities on the advice of an attorney who, though lacking any formal affiliation with plaintiff, was a business and personal acquaintance of a registered representative of plaintiff. The court held that defendants were not "customers" of plaintiff within the meaning of the Financial Industry Regulatory Authority (FINRA) arbitration provisions. To compel arbitration here would be to expand the scope of the arbitration agreement beyond what the text permitted and the parties intended. Therefore, the court affirmed the judgment of the district court. View "Raymond James Financial Services v. Cary" on Justia Law