WILMINGTON, Del. — A Delaware Chancery Court vice chancellor erred in dismissing a breach of fiduciary duty claim against the former CEO of a professional services firm after he failed to disclose to his company’s board of directors that he had been offered a lucrative compensation package in exchange for obtaining shareholder approval of a proposed merger deal because the trial court ignored certain shareholder disclosure cases in deciding whether the CEO’s alleged omissions were material to the board, a divided Delaware Supreme Court ruled June 30 (City of Fort Myers General Employees’ Pension Fund, et al. v. John J. Haley, et al., No. 368, 2019, Del. Sup., 2020 Del. LEXIS 225).
NEW YORK — A divided Second Circuit U.S. Court of Appeals panel on June 26 ruled that although a member of an investment-adviser group has Article III standing to challenge the Securities and Exchange Commission’s adoption of a regulation of certain obligations for broker-dealers, the case is not the same for a group of states and the District of Columbia because their assertions that the regulation will cause a decline in state tax revenues in “entirely speculative” (XY Planning Network LLC, et al. v. United States Securities and Exchange Commission, et al., Nos. 19-2886 and 19-2893. 2nd Cir., 2020 U.S. App. LEXIS 20078).
NEW YORK — A federal judge in New York on June 26 issued a final judgement ordering two offshore entities to return over $1.2 billion in investments to investors in digital tokens and pay an $18.5 million civil penalty to settle claims that the defendants violated federal securities laws by engaging in an offering of the digital-asset tokens in violation of the registration provisions of the securities laws (Securities and Exchange Commission v. Telegram Group Inc., et al., No. 19-9439, S.D. N.Y.).
Novartis AG and a former subsidiary on June 25 agreed to pay $345 million in criminal penalties and disgorgement to resolve criminal and administrative charges that they violated the Foreign Corrupt Practices Act (FCPA) and the Securities and Exchange Act of 1934, 15 U.S. Code § 78m, by paying bribes to health care employees in Greece and Vietnam to buy the companies’ drugs and failing to report those transactions (United States v. Novartis Hellas S.A.C.I., No. 20-538, United States v. Alcon Pte. Ltd., No. 20-539, D. N.J., In the Matter of Novartis AG, Admin. Proc. 3-29835, SEC).
NEW YORK — A point-of-care diagnostics company and two of its senior executives misrepresented the accuracy of its antibody test used to determine current or past exposure to COVID-19 in violation of federal securities laws, causing the company’s stock to trade at an artificially high rated until the alleged fraud was disclosed, an investor argues in a June 18 complaint filed in New York federal court (Sergey Chernysh v. Chembio Diagnostics Inc., et al., No. 20-2706, E.D. N.Y.).
NEW YORK — A federal judge in New York on June 24 ruled that the lead plaintiff in a securities class action against an information and analytics company and two of its executive officers failed to plead any actionable misstatements or omissions or scienter in alleging that the defendants failed to disclose internal disagreements between senior executives and directors over the growth and long-term strategy of the company in violation of federal securities laws (Sergii Bratusov v. Comscore Inc., et al., No. 19-3210, S.D. N.Y., 2020 U.S. Dist. LEXIS 110695).
NEW YORK — Addressing six motions to dismiss, a New York federal judge granted and denied in part the motions on June 22 in an insurer’s suit alleging that defendants “engaged in a complex and massive fraud against it, resulting in losses exceeding $135 million” (Great Western Insurance Co. v. Mark Graham, et al., No. 18-6249, S.D. N.Y., 2020 U.S. Dist. LEXIS 109330).
NEW YORK — A federal judge in New York on June 23 ruled that lead plaintiffs in a securities class action lawsuit stemming from alleged misrepresentations made in the proxy materials for a merger deal between two biopharmaceutical companies that develop cancer treatment drugs have failed to plead any material misrepresentations or omissions or loss causation in making their federal securities law claims (In re GTx Shareholders Litigation, No. 19-3239, S.D. N.Y., 2020 U.S. Dist. LEXIS 109680).
CHICAGO — An investor may not sue a company under Section 14(e) of the Securities Exchange Act of 1934, challenging statements it made after a tender offer for the repurchase of its stock has been made, because the statute does not give a private right of action to collect damages in that instance, a Seven Circuit U.S. Court of Appeals panel ruled June 22 (Walleye Trading LLC v. AbbVie Inc., et al., No. 19-3063, 7th Cir., 2020 U.S. App. LEXIS 19361).
SALT LAKE CITY — An investor sued a COVID-19 test kit maker and several of its executive officers and directors in Utah federal court on June 15, alleging that the defendants issued a series of misrepresentations regarding the accuracy of the company’s test kits in violation of federal securities laws (Gelt Trading Ltd. v. Co-Diagnostics Inc., et al., No. 20-368, D. Utah).
PHILADELPHIA — A Third Circuit U.S. Court of Appeals panel on June 18 ruled that a federal district court partially erred in determining that shareholders in a securities class action stemming from a merger deal between two banks failed to plead any actionable misstatements or omissions in making their federal securities law claims (David Jaroslawicz v. M&T Bank Corp., et al., No. 17-3695, 3rd Cir.).
WASHINGTON, D.C. — The Securities and Exchange Commission may seek disgorgement as an equitable form of relief under federal statute in situations where seeking such an award will not exceed the net profits obtained by a wrongdoer and is awarded for victims, the U.S. Supreme Court ruled June 22 in an 8-1 decision (Charles C. Liu, et al. v. Securities and Exchange Commission, No. 18-1501, U.S. Sup., 2020 U.S. LEXIS 3374).
NEW YORK — The U.S. government in a June 16 reply brief asks the Second Circuit U.S. Court of Appeals to reinstate jury verdicts against two former hedge executives and to proceed to sentencing over allegations of securities fraud in a scheme to transfer the hedge fund’s assets to a reinsurance company and related entities to defraud bondholders in an oil and gas company (United States v. Uri Landesman, et al., No. 19-3207 c/w 19-3209, 2nd Cir.).
NEW YORK — Without providing further detail, the Second Circuit U.S. Court of Appeals on June 15 declined a request by Goldman Sachs Group Inc. and certain of its senior executives for en banc review of a split panel decision upholding a federal district court’s application of the inflation-maintenance theory for demonstrating price impact in granting class certification in a securities class action lawsuit (Arkansas Teacher Retirement System, et al. v. Goldman Sachs Group Inc., et al., No. 18-3667, 2nd Cir.).
WASHINGTON, D.C. — The Securities and Exchange Commission issued an order on June 16 agreeing to accept an offer to settle claims in a long-running enforcement action brought against former investment adviser Raymond J. Lucia and his brokerage firm that had reached all the way to the U.S. Supreme Court (In the Matter of Raymond J. Lucia Companies Inc., et al., No. 3-15006, SEC).
PHILADELPHIA — Two biopharmaceutical company investors filed a shareholder derivative lawsuit against the company’s board of directors on June 15 in Pennsylvania federal court, alleging that the defendants breached their fiduciary duty and violated provisions of federal securities law by misrepresenting that the company had developed a vaccine for the novel coronavirus (Krishna Kishor Devarakonda, et al. v. J. Joseph Kim, et al., No. 20-2829, E.D. Pa.).
BOSTON — The First Circuit U.S. Court of Appeals on March 20 affirmed a lower federal court’s dismissal of a trustee for a bankrupt investment advisory company’s complaint seeking excess insurance coverage for $7.7 million in attorney fees arising from a formal order of investigation brought by the Securities and Exchange Commission (Craig R. Jalbert v. Zurich Services Corporation, et al, No. 18-2244, 1st Cir., 2020 U.S. App. LEXIS 8850).
NEW YORK — A microcap company misrepresented to investors that it had shifted its business from production of cannabinoid-based products to products used to battle the novel coronavirus, including a home test kit, and that it had “begun shipping” its line of home test kits to consumers in violation of federal securities law, the Securities and Exchange Commission argues in a May 14 complaint filed in New York federal court (Securities and Exchange Commission v. Applied Biosciences Corp., No. 20-3729, S.D. N.Y.).
WASHINGTON, D.C. — Vacating a Securities and Exchange Commission’s ruling that fees charged by two securities exchanges are not justified, a District of Columbia Circuit U.S. Court of Appeals panel on June 5 ruled that Section 19(d) of the Securities Exchange Act of 1934 “is not available as a means to challenge generally-applicable fee rules,” sending an action brought by two securities industry groups back to the SEC for further review (The Nasdaq Stock Market LLC v. Securities and Exchange Commission, et al., Nos. 18-1292 and 18-1293, D.C. Cir., 2020 U.S. App. LEXIS 17707).
MIAMI — A Carnival Corp. investor sued the cruise line operator and three of its executive officers in Florida federal court on June 3, alleging that the defendants misled investors about the company’s health and safety standards in their handling of the outbreak of the novel coronavirus on several of Carnival’s cruise ships in violation of federal securities laws (John P. Elmensdorp v. Carnival Corp., et al., No. 20-22319, S.D. Fla.).