Gay Parks Rainville

November 30, 2015 | The Legal Intelligencer

On Oct. 23, the U.S. Court of Appeals for the Ninth Circuit decided the following issue of first impression: Whether, when assessing the pleading adequacy of a securities class action complaint's scienter (fraudulent intent) allegations, a court may impute a corporate officer's scienter to the corporation under the "adverse interest exception" even where the officer allegedly acted out of his or her own interests and contrary to the interests of the company. In its opinion, In re ChinaCast Education Securities Litigation, No. 12-57232, 2015 U.S. App. LEXIS 18462 (9th Cir. Oct. 23, 2015), the Ninth Circuit answered this question in the affirmative, holding that, where a complaint alleges that a corporate officer acted with apparent authority, the court should impute the officer's scienter to the defendant corporation—regardless of whether the officer's fraudulent conduct was adverse to the corporation's interest. The Ninth Circuit's decision in ChinaCast is particularly noteworthy for parties litigating securities class actions in the Third Circuit because it expands the application of the Third Circuit's recent decision in Belmont v. MB Investment Partners, 708 F.3d 470 (3d Cir. 2013), which was not a class action, to the securities class action context where plaintiffs are not required to plead and prove direct reliance on a defendant's representations.

By Robert L. Hickok
and Gay Parks Rainville

6 minute read

November 30, 2015 | The Legal Intelligencer

On Oct. 23, the U.S. Court of Appeals for the Ninth Circuit decided the following issue of first impression: Whether, when assessing the pleading adequacy of a securities class action complaint's scienter (fraudulent intent) allegations, a court may impute a corporate officer's scienter to the corporation under the "adverse interest exception" even where the officer allegedly acted out of his or her own interests and contrary to the interests of the company. In its opinion, In re ChinaCast Education Securities Litigation, No. 12-57232, 2015 U.S. App. LEXIS 18462 (9th Cir. Oct. 23, 2015), the Ninth Circuit answered this question in the affirmative, holding that, where a complaint alleges that a corporate officer acted with apparent authority, the court should impute the officer's scienter to the defendant corporation—regardless of whether the officer's fraudulent conduct was adverse to the corporation's interest. The Ninth Circuit's decision in ChinaCast is particularly noteworthy for parties litigating securities class actions in the Third Circuit because it expands the application of the Third Circuit's recent decision in Belmont v. MB Investment Partners, 708 F.3d 470 (3d Cir. 2013), which was not a class action, to the securities class action context where plaintiffs are not required to plead and prove direct reliance on a defendant's representations.

By Robert L. Hickok
and Gay Parks Rainville

6 minute read

September 01, 2015 | The Legal Intelligencer

On July 25—13 months after the U.S. Supreme Court's landmark opinion in Halliburton v. Erica P. John Fund (Halliburton II), 134 S. Ct. 2398 (2014)—the U.S. District Court for the Northern District of Texas, on remand, issued its much-anticipated revised decision on the motion of lead plaintiff Erica P. John Fund Inc. for class certification in this 14-year-old securities fraud case. In Halliburton II, the Supreme Court held that, contrary to the opinions of the district court and the U.S. Court of Appeals for the Fifth Circuit below, at the class certification stage, a defendant may rebut the fraud-on-the-market presumption of reliance permitted under Basic v. Levinson, 485 U.S. 224 (1988), by demonstrating that an alleged misrepresentation had no impact on the corporate defendant's stock price.

By Robert L. Hickok and Gay Parks Rainville

9 minute read

August 31, 2015 | The Legal Intelligencer

On July 25—13 months after the U.S. Supreme Court's landmark opinion in Halliburton v. Erica P. John Fund (Halliburton II), 134 S. Ct. 2398 (2014)—the U.S. District Court for the Northern District of Texas, on remand, issued its much-anticipated revised decision on the motion of lead plaintiff Erica P. John Fund Inc. for class certification in this 14-year-old securities fraud case. In Halliburton II, the Supreme Court held that, contrary to the opinions of the district court and the U.S. Court of Appeals for the Fifth Circuit below, at the class certification stage, a defendant may rebut the fraud-on-the-market presumption of reliance permitted under Basic v. Levinson, 485 U.S. 224 (1988), by demonstrating that an alleged misrepresentation had no impact on the corporate defendant's stock price.

By Robert L. Hickok and Gay Parks Rainville

9 minute read

June 02, 2015 | The Legal Intelligencer

In the two months since the U.S. Supreme Court issued its landmark decision in Omnicare v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015), several federal district courts have applied the court's new two-prong standard for determining opinion statement liability under Section 11 of the Securities Act of 1933 to claims of false statements of belief under Section 10(b) of the Securities Exchange Act of 1934.

By Robert L. Hickok and Gay Parks Rainville

5 minute read

June 01, 2015 | The Legal Intelligencer

In the two months since the U.S. Supreme Court issued its landmark decision in , 135 S. Ct. 1318 (2015), several federal district courts have applied the court's new two-prong standard for determining opinion statement liability under Section 11 of the Securities Act of 1933 to claims of false statements of belief under Section 10(b) of the Securities Exchange Act of 1934.

By Robert L. Hickok and Gay Parks Rainville

5 minute read

March 03, 2015 | The Legal Intelligencer

On Feb. 9, one of the plaintiffs in the federal securities class action against Nvidia Corp., Roberto Cohen, filed a petition for writ of certiorari with the U.S. Supreme Court, seeking review of the U.S. Court of Appeals for the Ninth Circuit's Oct. 2, 2014, decision affirming dismissal of the action, specifically, the court's holding that Item 303 of U.S. Securities and Exchange Commission (SEC) Regulation S-K does not create a duty to disclose for purposes of an omission actionable under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. Cohen's petition (Cohen v. Nvidia, Petition No. 14-975) argues that this holding by the Ninth Circuit in In re Nvidia Securities Litigation, 768 F.3d 1046 (9th Cir. 2014), conflicts with the Second Circuit's recent holding in Stratte-McClure v. Morgan Stanley, No. 13-0627, 2015 U.S. App. LEXIS 428 (2d Cir. Jan. 12, 2015), and the Third Circuit's 15-year-old decision in Oran v. Stafford, 226 F.3d 275 (3d Cir. 2000). Although the Ninth Circuit's opinion states that its holding regarding Item 303 disclosures is consistent, not in conflict, with Oran, a split among these circuits exists nonetheless.

By Robert L. Hickok and Gay Parks Rainville

8 minute read

March 02, 2015 | The Legal Intelligencer

On Feb. 9, one of the plaintiffs in the federal securities class action against Nvidia Corp., Roberto Cohen, filed a petition for writ of certiorari with the U.S. Supreme Court, seeking review of the U.S. Court of Appeals for the Ninth Circuit's Oct. 2, 2014, decision affirming dismissal of the action, specifically, the court's holding that Item 303 of U.S. Securities and Exchange Commission (SEC) Regulation S-K does not create a duty to disclose for purposes of an omission actionable under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. Cohen's petition (, Petition No. 14-975) argues that this holding by the Ninth Circuit in , 768 F.3d 1046 (9th Cir. 2014), conflicts with the Second Circuit's recent holding in , No. 13-0627, 2015 U.S. App. LEXIS 428 (2d Cir. Jan. 12, 2015), and the Third Circuit's 15-year-old decision in , 226 F.3d 275 (3d Cir. 2000). Although the Ninth Circuit's opinion states that its holding regarding Item 303 disclosures is consistent, not in conflict, with , a split among these circuits exists nonetheless.

By Robert L. Hickok and Gay Parks Rainville

8 minute read

December 02, 2014 | The Legal Intelligencer

Last month, the U.S. Securities and Exchange Commission's Office of the Whistleblower released its 2014 annual report to Congress on the Dodd-Frank whistleblower program.

By Robert L. Hickok and Gay Parks Rainville

7 minute read

September 02, 2014 | The Legal Intelligencer

On Aug. 14, the U.S. Court of Appeals for the Second Circuit issued a decision that helps clarify the territorial reach of the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 USC Section 78u-6(h). In Liu Meng-Lin v. Siemens AG, No. 13-4385 (2d. Cir. Aug. 14, 2014), the court held that Congress did not intend the provision to apply extraterritorially to claims by a foreign whistleblower employed abroad by a foreign corporation where all events related to the whistleblower's disclosures occurred outside the United States. After affirming the district court's dismissal of Liu Meng-Lin's retaliation claim against Siemens AG on this ground, the court declined to address the additional argument advanced by Siemens that the Dodd-Frank anti-retaliation provision does not protect whistleblowers, like Liu, who fail to report potential securities violations to the U.S. Securities and Exchange Commission (SEC) before the alleged retaliation.

By Robert L. Hickok, Gay Parks Rainville and William A. Liess

7 minute read