26 Apr
2015

Judge Scheindlin Allows Class Action Over Barclays “Dark Pool” to Proceed

In an opinion Friday, Judge Scheindlin largely denied Barclays’ motion to dismiss a securities fraud class action alleging that Barclays misled investors about its anonymous trading platform, or “dark pool,” referred to as “LX.” 

At the outset, Judge Scheindlin found it appropriate for the plaintiffs to have borrowed substantially from the New York Attorney General’s complaint against Barclays in a similar state court case because the “facts are derived from a credible complaint based on facts obtained after an investigation.” (By way of contrast, we covered a case in 2013 in which Judge Cote took issue with borrowing from another private complaint that was based on confidential sources.)

On the sufficiency of the allegations, Judge Scheindlin dismissed claims arising from various public statements about the company’s overall business practices and risk controls that she concluded were “not only generic, but are for the most part aspirational.”  But she allowed claims to go forward that were specific to LX.  According to the plaintiffs, Barclays boasted about LX being a platform free from “predatory” traders while secretly encouraging predators.  And she found those statements to be material, notwithstanding that LX represented a small portion of Barclays’ revenue, because she concluded “the specific misstatements about LX — which include touting its safety while secretly encouraging predatory behavior — call into question the integrity of the company as a whole”

21 Apr
2015

Judge Furman Dismisses Gender Discrimination Suit by Male Student Suspended from Columbia for Sexual Assault

In an opinion today, Judge Furman ruled that a male student, who was suspended from Columbia University for sexual assault, did not allege facts sufficient to go forward with his gender discrimination suit against the school.  The plaintiff alleged that the school’s disciplinary process was unfair and came to the wrong conclusion, but Judge Furman found that he failed “to establish gender as a plausible motivating factor behind the investigation and ultimate punishment”:

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15 Apr
2015

Judge Berman Refuses to Block SEC ALJ Proceeding; Finds ALJ Tenure Protections Likely Constitutional

In an opinion today, Judge Berman denied a motion to enjoin an SEC administrative enforcement proceeding.  The proceeding was challenged on the ground that SEC administrative law judges are too insulated from executive oversight for purposes Article II of the Constitution, as interpreted by the Supreme Court in Free Enterprise Fund v. Pub. Co. Accounting Oversight Ed., 561 U.S. 477 (2010).

Judge Berman agreed with the plaintiff on a threshold procedural point:  he ruled that the issues could be raised in district court, as opposed to raising them exclusively in the administrative proceeding itself (or on direct appeal to the Court of Appeals), because, absent a collateral challenge, the plaintiff would endure the very proceeding she was trying to block.  As Judge Berman observed: “The American Heritage New Dictionary of Cultural Literacy, 3d. Ed. (2005), defines the colloquial expression ‘you can’t unscramble an egg’ to mean ‘some processes are irreversible.’”

But Judge Berman found the plaintiff was unlikely to succeed on the merits because he found that SEC ALJs’ insulation from removal was appropriate, given their adjudicatory (rather than policymaking) functions:

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07 Apr
2015

Judge Rakoff, Acknowledging “Difficulties” In Defining Insider Trading, Upholds SEC Complaint Notwithstanding Newman Decision

In an opinion yesterday, Judge Rakoff denied a motion to dismiss an SEC complaint against two individuals who traded stocks after learning about an impending acquisition from a co-worker, Thomas Conradt, who, in turn, learned the information from his roommate Trent Martin.  The opinion begins by acknowledging the “difficulties” with having insider trading defined by case law instead of by statute:

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27 Mar
2015

Judge Forrest Allows Aluminum Warehouse Antitrust Case (As Amended) to Proceed

In an opinion yesterday, Judge Forrest denied (for the most part) various motions to dismiss the collection of cases alleging an antitrust conspiracy among commodity trading firms and their affiliated warehouse operators relating to the price of aluminum.  She had dismissed an earlier version of the case because it alleged only parallel (not conspiratorial) conduct (see here), but the updated pleadings, she ruled, are now sufficient:

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25 Mar
2015

Judge Pauley Bemoans Needlessly Long and Complicated Pleadings

In an opinion issued today, Judge Pauley lamented the “troubling trend toward prolixity in pleading [that] is infecting court dockets in this district and elsewhere.”  Pointing to the 175-paragraph complaint, “larded with more than 1,400 pages of exhibits” and the 303-page, 1,263-paragraph counterclaim in a “relatively straightforward” case, Judge Pauley admonished both sides for their failure to adhere to Rule 8′s exhortation that a pleading contain a “short and plain statement of the claim.”

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24 Mar
2015

Judge Swain, Based on “Implicit” Overruling of Second Circuit, Rules 3-Year Limit to Sue Over False Securities Offerings Is Not Subject to “Extender” Law

In an opinion today, Judge Swain ruled Section 13 of the Securities Act, which states that no action may be brought “more than three years after the security was bona fide offered to the public” was not extended by the so-called “FDIC Extender Provision” of the Financial Institutions Reform, Recovery, and Enforcement Act (or “FIRREA”) because, she concluded, the FDIC Extender Provision applied only to statutes of limitations, which are generally triggered from the time a claim accrues (or can be brought), as opposed to statutes of repose, which set forth an absolute end date for suit, regardless of equitable considerations and regardless of whether the harm necessary to sue even arisen.

Judge Swain’s ruling was based on the Supreme Court’s decision CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014), which rejected the application of a similar extender law in the context of federal environmental law.  She went further and found that Waldburger “implicitly” overruled parts of a Second Circuit ruling in one of the FHFA cases, FHFA v. UBS, which, based on an extender law, found the claims at issue to be timely: “The analytical framework set out by the Supreme Court in Waldburger calls into question the Second Circuit’s analysis of the extender provision . . .  in its UBS decision, implicitly overruling material aspects of the UBS decision’s rationale.”

Judge Swain also disagreed with the Tenth Circuit, which, after having been instructed to reconsider a ruling based on Waldburger, maintained its original conclusion that the extender law would apply.

If Judge Swain’s ruling carries the day with the Second Circuit, it would be welcome news to Nomura and RBS, which are in the midst of a trial against the FHFA involving a substantially identical issue.

Alison Frankel has been covering these issues in depth, see here, here and here.