Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

Articles Posted in Securities Law

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The First Circuit affirmed the judgment of the district court dismissing this federal securities class action under the Private Securities Litigation Reform Act (PSLRA), 15 U.S.C. 78a-4, for failing adequately to plead scienter, holding that Plaintiffs failed to plead facts such that one could draw the "strong inference" of scienter required by the PSLRA. Plaintiffs brought this suit against Biogen Inc. and three Biogen executives alleging that Defendants committed fraud in violation of regulations promulgated by the Securities and Exchange Commission pursuant to the Securities and Exchange Act, 15 U.S.C. 78a et seq., by falsely stating that Tecfidera, Biogen's product, was safer and more widely used than it was. The district court granted Defendants' motion to dismiss for failing to plead facts "giving rise to a strong inference" of scienter, 15 U.S.C. 78a-4(b)(2)(A). The First Circuit affirmed, holding that the district court properly ruled that, under the PSLRA, Plaintiffs failed adequately to plead scienter for purposes of surviving a motion to dismiss for failure to state a claim. View "Metzler Asset Management GMBH v. Kingsley" on Justia Law

Posted in: Securities Law

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In this case brought under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962, 1964, the First Circuit affirmed the district court's ruling dismissing Plaintiff's claims against all defendants, holding that Plaintiff's claims against his securities broker may only be resolved through arbitration, the claims against the broker's wife and the couple's conjugal partnership were also subject to the arbitration agreement, and Plaintiff's claims against a bank were out of time. Plaintiff, a building contractor in Puerto Rico, argued that his securities broken, in collusion with the investment firm and affiliated bank, fraudulently stole more than $400,000 from his investment account. Plaintiff also named as defendants his broker's wife and their conjugal partnership . The district court dismissed all claims against all defendants. The First Circuit affirmed, holding (1) subject to the binding agreement between the parties, Plaintiff's claims against the broker may only be resolved through arbitration; (2) the claims against the broker's wife and the conjugal partnership were derivative of the claims against the broker and therefore also subject to the arbitration agreement; and (3) Plaintiff's claims against the bank were time-barred under 18 U.S.C. 1964. View "Alvarez-Mauras v. Banco Popular of Puerto Rico" on Justia Law

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In these appeals involving bonds issued in 2008 by the Employees Retirement System (the System) of the Government of the Commonwealth of Puerto Rico, which were purchased by bondholders (the Bondholders), the First Circuit held that the Bondholders satisfied the filing requirements for perfection of their security interest as of December 17, 2016, thus reversing the district court’s ruling that the Bondholders’ interest was not perfected and so could be avoided. The bond documentation here offered as security certain property belonging or owed to the System. When the Bondholders claimed a perfected security interest in that property, the System filed suit seeking declaratory judgments relating to the Bondholders’ asserted security interest. The Bondholders counterclaimed. The district court granted summary judgment in favor of the System, concluding that the Bondholders’ interest was not perfected. The First Circuit disagreed, holding that while financing statements filed in 2008 did not perfect the Bondholders’ security interest in the pledged property, financing statement amendments filed in 2015 and 2016 satisfied the filing requirements for perfection when read in conjunction with the 2008 financing statements. View "Altair Global Credit Opportunities Fund v. Employees Retirement System" on Justia Law

Posted in: Securities Law

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The First Circuit affirmed Appellant’s convictions of securities fraud, wire fraud, and conspiracy to commit both. The convictions arose from Appellant’s writing of false opinion letters so that his two co-conspirators could sell stock to the public in a “pump and dump” scheme. On appeal, Appellant argued that the evidence was insufficient to support his convictions in light of his interpretation of section 3(a)(9) of the Securities Act and that the district court constructively amended the indictment in its instructions to the jury. The First Circuit held (1) even if Appellant’s interpretation of section 3(a)(9) was correct, the evidence was sufficient to support his convictions; and (2) Appellant’s constructive amendment claim was without merit. View "United States v. Weed" on Justia Law

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The First Circuit affirmed the district court’s finding, in this securities fraud class action against Sarepta Therapeutics, Inc. and former and current Sarepta executives, that Plaintiffs, several shareholders, failed to allege facts creating a strong inference that Defendants intentionally or recklessly deceived the investing public in the months before the Food and Drug Administration deemed premature Sarepta’s application for approval of a novel gene therapy. The price of the publicly traded securities issued by Sarepta dropped sixty-four percent after the FDA judged Sarepta’s filing premature. Plaintiffs allegedly that Defendants overstated the significance of certain data and exaggerated the likelihood that the FDA would accept a new drug application for filing, thereby deceiving the investing public and causing the purchase of Sarepta securities at inflated prices. The First Circuit affirmed the district court’s dismissal of this action, holding that Plaintiffs failed to satisfy the requisite pleadings standards. View "Corban v. Sarepta Therapeutics, Inc." on Justia Law

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The First Circuit affirmed the district court’s dismissal of this putative class action alleging violations under sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The district court concluded that the initial amended complaint failed to meet the heightened pleading requirements of the Private Securities Litigation Reform Act (PSLRA). Thereafter, the court denied Plaintiffs’ subsequent motion to vacate the judgment and for leave to file a second amended complaint to include purportedly new evidence. The First Circuit held, on de novo review, that (1) the initial amended complaint failed to plead particularized facts giving rise to a strong inference of scienter, as required by the PSLRA; and (2) the district court did not abuse its discretion in denying the motion to vacate the judgment and for leave to file a second amended complaint. View "In re Biogen Inc. Securities Litigation" on Justia Law

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Zafgen Inc.’s investors (Investors) brought a securities fraud class action suit against Zafgen and its Chief Executive Officer (collectively, Defendants) following a significant drop in the share price of the company. Specifically, Investors alleged that the Defendants made several misleading statements regarding Zafgen’s anti-obesity drug Beloranib. The district court granted Defendants’ motion to dismiss, concluding that the complaint did not contain facts giving rise to a “cogent and compelling” inference of scienter as required under the Private Securities Litigation Reform Act. The First Circuit affirmed, holding that the district court properly dismissed Investors’ claims because the complaint, considered as a whole, did not present allegations giving rise to a cogent and compelling inference of scienter. View "Brennan v. Zafgen, Inc." on Justia Law

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Appellants sought arbitration with BBVA Securities of Puerto Rico, Inc. and one of its securities brokers, asserting several claims under both federal and Puerto Rico law. An arbitration panel issued an award denying Appellants’ claims. Appellants then filed a complaint in the Puerto Rico Court of First Instance requesting that the court vacate or modify the arbitration award, seeking relief under the Puerto Rico Arbitration Act. Defendants removed the case to the U.S. District Court of the District of Puerto Rico, arguing that the district court had federal question jurisdiction and also had supplemental jurisdiction over the state law claims. Appellants moved to remand the case to Puerto Rico state court for lack of jurisdiction. The district court denied the motion after applying the look-through approach and determining that the underlying statement of claim alleged federal claims. The district court subsequently confirmed the award. The First Circuit affirmed, holding (1) the look-through approach was the correct test in this case; (2) federal jurisdiction existed; and (3) the district court did not err in refusing to vacate the award and in confirming it. View "Ortiz-Espinosa v. BBVA Securities of Puerto Rico, Inc." on Justia Law

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After the share price of a corporation’s common stock dropped, investors filed suit against the corporation and its former CEO, alleging securities fraud. The lead plaintiff, on behalf of himself and a putative class of shareholders, alleged that Defendants inflated the value of the corporation’s common stock by issuing false or materially misleading press releases concerning the approval of human clinical trials for a new medical device the company was developing. The district court granted Defendants’ motion to dismiss the complaint. The First Circuit affirmed, holding that Plaintiff failed to allege false or misleading statements sufficient to state a claim and that Plaintiff’s control person claim against the CEO was also properly dismissed. View "Ganem v. InVivo Therapeutics Holdings Corp." on Justia Law

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Following a drop in the share price of ARIAD Pharmaceuticals, Inc., investors filed suit against the corporation and four corporate officers (collectively, ARIAD). Plaintiffs alleged securities fraud in violation of the Securities Exchange Act and raised claims under sections 11 and 15 of the Securities Act against ARIAD, its directors, and various underwriters involved in the corporation's January 2013 common stock offering. On Defendants’ motion, the district court dismissed the complaint in its entirety. The First Circuit (1) affirmed the district court’s dismissal of the securities fraud counts except with respect to one particular material misstatement for which the Court found the allegations set forth in the complaint sufficient to state a claim; and (2) affirmed the disposition of Plaintiffs’ claims under Sections 11 and 15. Remanded. View "Bradley v. ARIAD Pharmaceuticals, Inc." on Justia Law

Posted in: Securities Law