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Securities Archives

Sprint to Pay Out $131 Million to Settle Investor Class-Action Lawsuit

Six years ago a group of investors brought a class-action lawsuit against Sprint, accusing the wireless carrier of fraudulently inflating bond and stock prices after the company merged with Nextel Communications in 2005. The lead plaintiffs claimed they were defrauded, with damages estimated at $1.079 billion.

SEC Proposes Rule to Regulate High-Frequency Trading Outlets

The Securities and Exchange Commission ("SEC") has proposed a new rule that will attempt to bring firms that engage in high-frequency trading ("HFT") under regulatory supervision. "The proposed amendments to Rule 15b9-1 would eliminate the current proprietary trading exemption and replace it with a narrower rule to exempt only off-exchange transactions by floor-based dealers that are solely meant to hedge the risks of its floor-based activities."1 Specifically, the SEC is proposing that brokers and brokerage firms that are not trading on exchanges to join a national securities association, bringing them under the oversight of the Financial Industry Regulatory Authority ("FINRA").2

Federal Judge Denies Intercept Pharmaceutical's Motion to Dismiss in Investor Suit

In the case captioned Atwood v. Intercept Pharmaceuticals, Inc. (2014 U.S. Dist. LEXIS 69717), two classes of investors brought suit against Intercept Pharmaceuticals, Inc. ("Intercept") for withholding information in order to prop up its stock price in preparation for an April 2014 stock offering. Judge Naomi Reice-Buchwald of the United States District Court for the Southern District of New York denied Intercept's motion to dismiss, holding that there was evidence showing that company executives may have purposefully withheld the information to deceive investors.1

Supreme Court to Review Commercial Exception Under FSIA

In 2013, the Ninth Circuit agreed to rehear Sachs v. Republic of Austria (737 F.3d 584) and, after the rehearing, reversed its previous decision, issued in September 2012. Upon rehearing, the Ninth Circuit held that a foreign company conducting substantial commercial activity in the United States is not immune from suit under the Foreign Sovereign Immunities Act ("FSIA").1 On January 23, 2015, the Supreme Court granted certiorari to hear the appeal from OBB Personenverkehr AG ("OBB"), an Austrian train company.2

General Motors Hit With Class Action Complaint From Investors

Legal complaints continue to be filed in connection with defective ignition switches made by General Motors. The defective switches can cause cars to shut down suddenly, and 45 fatalities have been linked to the defects. The company has recalled about 2.6 million affected vehicles. Now, in addition to legal claims brought by families of the deceased, a class action lawsuit has been filed by GM investors.

Know the risks of opt-out litigation

We recently discussed the nature of class action lawsuits and how they can provide a level playing field for plaintiffs who would otherwise not have the resources to take on a large corporation or other entity. "What is a class action and how is one started?" has more on that subject.

What issues might be the basis of whistleblower claims?

"Don't tattle." That's the admonition many children receive while growing up. At least it used to be. The idea behind the reproach has been that telling when someone did something wrong was seen as being some sort of violation of loyalty or a nasty ploy to get someone in trouble.

Supreme Court Grappling with False Opinion Issue in Omnicare Case

The Supreme Court granted certiorari to hear a case involving allegations that Omnicare, Inc. ("Omnicare") offered false opinions to investors (Ind. State Dist. Council v. Omnicare, Inc., 719 F.3d 498 (2013)). Under Section 11 of the Securities and Exchange Act, the Sixth Circuit Court of Appeals held that issuers of shares can be held responsible for providing stockholders with opinions that turned out to be wrong. Section 11 specifically states that issuers are liable if correspondence with shareholders "contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading."1 The Sixth Circuit decision provides an objective measure in determining fault. The Court found that the issuer of shares can be held liable under Section 11 of the Securities and Exchange Act regardless of whether the issuer knew the statement was false at the time it made the claim.2

Fannie Mae Agrees To Settlement With Shareholders

The Federal National Mortgage Association ("Fannie Mae") has agreed to pay two classes of its shareholders $170 million to settle a class action suit regarding its role in causing massive losses for its investors. The plaintiffs allege that Fannie Mae, a government-sponsored corporation that securitizes mortgages into mortgage-backed securities ("MBS") in order to increase the number of lenders in the mortgage market, did not indicate the extent of its "exposure to subprime loans" as the 2008 financial crisis hit the United States.1 Specifically, the complaint "alleged that the defendants made false and misleading statements concerning the company's internal controls and its exposure to subprime and other risky mortgage loan products."2 The settlement agreement was reached in the United States District Court for the Southern District of New York, with a class of common shareholders set to receive $123.76 million and a class of preferred shareholders to get $46.24 million.