Justia U.S. 11th Circuit Court of Appeals Opinion SummariesArticles Posted in Securities Law
Rensel v. Centra Tech, Inc.
The Eleventh Circuit vacated the district court's order denying plaintiffs' motion for class certification and remanded for further proceedings. Plaintiffs' action alleged that Centra Tech and some of its principals violated the Securities Act of 1933 in their efforts related to the initial coin offering of Centra Tokens.The court concluded that, under the circumstances of this case, including the near omnipresence of an automatic discovery stay imposed by the Private Securities Litigation Reform Act (PSLRA) whenever a motion to dismiss is pending -- in effect for just under fifteen of the eighteen months between the initial complaint and plaintiffs' certification motion -- the district court's timeliness holding was an abuse of discretion. The court also concluded that the district court erred when it denied certification on the alternative ground that plaintiffs had not established an administratively feasible method for identifying class members. The court explained that Federal Rule of Civil Procedure 23 implicitly requires that a proposed class be ascertainable. However, the court's recent decision in Cherry v. Dometic Corp., 986 F.3d 1296, 1304 (11th Cir. 2021), clarified that to meet this ascertainability requirement, the party seeking certification need not establish its ability to identify class members in a convenient or administratively feasible manner. The court noted that considerations of administrative feasibility may still be relevant to Rule 23(b)(3)(D) manageability analysis. View "Rensel v. Centra Tech, Inc." on Justia Law
Fedance v. Harris
In mid-2017, Felton created an “offshore entity,” FLiK, for “developing [an] online viewing platform that [would] allow creatives to sell/rent their projects.” To raise funds, FLiK created cryptographic “FLiK Tokens” and represented that investors could redeem the tokens on its platform after it launched. FLiK never registered FLiK Tokens with the SEC but promoted FLik on social media and published a whitepaper with details about the company. FLiK announced that “T.I.,” an Atlanta-based rapper and actor (Harris), had joined Felton. The actor Kevin Hart tweeted a photograph of himself with Harris and wrote, “I’m Super Excited for [T.I.] and his new venture with @TheFlikIO! FLiK sold the tokens for about six cents each. The value of FLiK tokens soared and then crashed down. Felton largely ignored messages from token purchasers. None of FLiK’s services or projects came to fruition.Fedance, who had purchased $3,000 worth of FLiK Tokens, brought a putative class action under the Securities Act of 1933, 15 U.S.C. 77l(a)(1), 77o(a), alleging that Felton and Harris sold unregistered securities, that Harris acted as a “statutory seller” of unregistered securities, and that Felton and Harris were liable as controlling persons of an entity, The district court dismissed the complaint as untimely under a one-year statute of limitations. The Eleventh Circuit affirmed. The complaint does not plausibly allege that Felton or Harris fraudulently concealed the facts necessary to assert claims under sections 12(a)(1) or 15(a) against them. View "Fedance v. Harris" on Justia Law
SuVicMon Development, Inc. v. Morrison
Plaintiffs sued Morrison in Alabama state court in 2006, alleging common-law fraud and Alabama Securities Act violations, later adding claims under the Alabama Uniform Fraudulent Transfer Act, alleging that Morrison had given property to his sons to defraud his creditors. Morrison filed for Chapter 7 bankruptcy. The bankruptcy court allowed the Alabama case to proceed but stayed the execution of any judgment. Plaintiffs initiated a bankruptcy court adversary proceeding, seeking a ruling that their state-court claims were not dischargeable. The bankruptcy court entered Morrison’s discharge order with the adversary proceeding still pending. In 2019, the Alabama trial court entered judgment ($1,185,176) against Morrison on the common-law fraud and Securities Act claims but rejected the fraudulent transfer claims.In the adversary proceeding, the bankruptcy court held that the state-court judgment was excepted from discharge, 11 U.S.C. 523(a)(19), as a debt for the violation of state securities laws, and later ruled that the discharge injunction barred appeals against Morrison on the fraudulent transfer claims. The court found the "Jet Florida" doctrine inapplicable because Morrison would be burdened with the expense of defending the state-court suit. The district court and Eleventh Circuit affirmed, rejecting arguments that the fraudulent transfer suit is an action to collect a non-dischargeable debt (securities-fraud judgment) or that Plaintiffs should be allowed to proceed against Morrison as a nominal defendant, to seek recovery from the fraudulent transferees. The bankruptcy court has discretion in deciding whether to allow a suit against a discharged debtor under Jet Florida. View "SuVicMon Development, Inc. v. Morrison" on Justia Law
Securities and Exchange Commission v. Marin
The Eleventh Circuit affirmed separate district court orders directing defendant and MinTrade to comply with SEC subpoenas for the production of documentary evidence and testimony. The court held that the district court properly exercised personal jurisdiction over defendant in the Southern District of Florida. As to MinTrade, the court held that the district court did not abuse its discretion in not holding an evidentiary hearing. On the merits, the court held that neither district court abused its considerable discretion in concluding that the subpoenas were relevant to a legitimate investigation into possible violations of the Securities Exchange Act of 1934. View "Securities and Exchange Commission v. Marin" on Justia Law
Whitehead v. BBVA Compass Bank
The Eleventh Circuit affirmed the district court's grant of summary judgment for appellees in an action brought by appellant, alleging claims for securities fraud and state common law claims of negligence, breach of fiduciary duty, suppression and fraud. Appellant alleged that appellees wrongfully failed to inform appellant of the risks involved in making a certain investment. The court found that the alleged wrongful conduct of appellees did not cause the economic loss for which appellant sues. In this case, there is no viable claim against appellees; no act or omission asserted against them was the cause of the loss suffered by appellant; and thus the district court properly granted summary judgment in their favor. View "Whitehead v. BBVA Compass Bank" on Justia Law
University of Puerto Rico Retirement System v. Ocwen Financial Corp.
The Retirement System filed a private securities fraud action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and the SEC's Rule 10b-5, claiming that it had detrimentally relied on Ocwen's materially misleading statements and omissions concerning the likelihood of achieving regulatory compliance. The district court dismissed the complaint for failure to identify any material misrepresentations or omissions or otherwise state a claim against Ocwen for securities fraud.The Eleventh Circuit affirmed and held that, even considering the Retirement System's allegations in the most favorable light, the complaint fell short of alleging any actionable misrepresentations or omissions under section 10(b) and Rule 10b-5, or any other cognizable securities law violation. In this case, some statements made by Ocwen were immaterial puffery, some were mere statements of opinion, some fell within the Private Securities Litigation Reform Act's safe-harbor forward-looking statements, and others were simply not alleged to be false. Furthermore, nothing that Ocwen failed to disclose rendered already-disclosed information misleading in context. View "University of Puerto Rico Retirement System v. Ocwen Financial Corp." on Justia Law
Word v. U.S. Commodity Futures Trading Commission
Petitioner sought review of a 2016 order entered by the Commission denying his motion to set aside a 1992 default judgment order requiring him to pay reparations plus interest to June and Louie Stidham for violations of the Commodity Exchange Act. The Eleventh Circuit granted respondents' motion to dismiss the petition for lack of jurisdiction and dismissed the petition for want of jurisdiction.The court held that, taken together, the statutory text, context, and legislative history are a "clear statement" of congressional intent that the bond requirement in 7 U.S.C. 18(e) is jurisdictional. Therefore, the petition for review must be dismissed because petitioner failed to post the bond. View "Word v. U.S. Commodity Futures Trading Commission" on Justia Law
SEC v. Torchia
After the SEC initiated federal proceedings against defendant, the district court appointed a receiver for one of defendant's entities. The receiver proposed a plan to collect and sell assets connected to a Ponzi scheme and distribute the proceeds.The Eleventh Circuit agreed with investors and held that the district court denied them due process by employing summary proceedings that did not allow them to present their claims and defenses or meaningfully challenge the receiver's decisions. In this case, the district court appointed the receiver, issued an injunction to freeze assets, and held status conferences regarding the receivership all within a few months. The receiver then separated investors into different categories and the district court issued an order that called for the receiver to collect and sell the receivership's insurance policies. These determinations by the receiver and the orders entered by the district court were made without giving investors sufficient notice and/or a meaningful opportunity to be heard. Accordingly, the court reversed and remanded for further proceedings. View "SEC v. Torchia" on Justia Law
Pictet Overseas Inc. v. Helvetia Trust
The Trusts initiated before FINRA an arbitration proceeding against the eight individuals who had owned Banque Pictet as partners and others, including Pictet Overseas, seeking to recover losses from custodial accounts with Banque Pictet. Pictet Overseas and the Partners then filed an action in federal district court, seeking to enjoin the arbitration, contending that, even if Rule 12200 of the FINRA Code of Arbitration Procedure for Customer Disputes required Pictet Overseas to arbitrate certain claims before FINRA, it did not require Pictet Overseas or the Partners to arbitrate the Trusts' claims.The Eleventh Circuit affirmed the district court's ruling that the Trusts' claims were non-arbitrable and held that FINRA Rule 12200 did not require arbitration. In this case, the Trusts' claims did not arise in connection with Pictet Overseas' or the Partners' business activities. Therefore, the court affirmed the district court's order permanently enjoining the Trusts from arbitrating in a FINRA forum their claims against Pictet Overseas and the Partners. View "Pictet Overseas Inc. v. Helvetia Trust" on Justia Law
U.S. Commodity Futures Trading Commission v. Southern Trust Metals, Inc.
The Eleventh Circuit vacated its original opinion in this case and issued the following opinion in its place.The CFTC begain investigating defendants in response to a customer's complaint of commodities fraud. The NFA also opened an investigation, which proceeded in tandem with the CFTC's, but ended in a settlement. The CFTC then filed suit alleging that defendants violated the Commodities Exchange Act (CEA) when they failed to register as futures commission merchants, transacted the purchase and sale of contracts for the future delivery of a commodity (futures) outside of a registered exchange, and promised to invest customers' money in precious metals (metals) but instead invested the funds in so-called "off-exchange margined metals derivatives" (metals derivatives). The court affirmed the district court's judgment except as to the restitution award for the group of investors whose losses were associated solely with the registration violations. In regard to the restitution award, the court vacated and remanded with instructions to consider other equitable remedies. View "U.S. Commodity Futures Trading Commission v. Southern Trust Metals, Inc." on Justia Law