Tag Archives: Judge Sullivan

24 Apr
2013

Judge Crotty Refuses to Reconsider or Certify Question Splitting Southern District Judges on Interpretation of Securities Antifraud Statute

by Charles Michael Link to post

In a letter endorsement Monday, Judge Crotty refused a request to reconsider or certify for appeal a question that has resulted in divided views within the Southern District:  whether the SEC must plead and prove that a defendant personally gained from an alleged fraud, for purposes of claims under Section 17(a)(2) of the Securities Act, which prohibits, in certain securities transactions, “obtain[ing] money or property by means of any untrue  statement of a material fact or any omission to state a material  fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.”

Last August, Judge Crotty, citing a a prior ruling from Judge Rakoff (the subject of this post), ruled that it would be sufficient to plead and prove that the defendant obtained money for his employer, while acting as the employer’s agent (see our prior blog post).  In an opinion in March, Judge Sullivan expressly disagreed with Judges Rakoff and Crotty on the question, and dismissed Section 17(a)(2) claims arising from a stock offering from which the defendants did not themselves personally gain.  The remaining claims survived, however (see our prior blog post).

The legal issue is significant because the SEC does need not prove an intent to defraud for purposes of Section 17(a)(2) claims, unlike claims under other antifraud statutes or rules.

Judge Crotty’s endorsement said that the ruling from Judge Sullivan “is not an intervening change in controlling law” and that interlocutory appeal would be inappropriate because the issue would not dispose of the entire case.

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01 Apr
2013

Judge Sullivan Dismisses Shareholder Class Action Against RIM Because Allegations Amounted to “Mismanagement Not Malfeasance”

by Charles Michael Link to post

Judge Sullivan on Friday dismissed a shareholder class action against RIM, maker of the Blackberry smartphone, because the allegations amounted to mere “mismanagement”:

It is plain from the CAC as well as RIM’s financial trajectory over the past two years that Defendants have failed to keep pace with their rivals in the highly competitive market for smartphones and information technology. As a consequence, Defendants have paid a price for their mistakes by way of demotions, terminations, and sizable financial setbacks. Nevertheless, corporate failings alone do not give rise to a securities fraud claim. Here, the facts alleged by Plaintiff support a finding of corporate mismanagement, not misfeasance.

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29 Mar
2013

Judge Sullivan Denies Motion to Dismiss SEC Case Against Freddie Mac Executives

by Charles Michael Link to post

In a decision today, Judge Sullivan denied a motion from Freddie Mac executives to dismiss the SEC’s claims that they deliberately understated Freddie Mac’s exposure to subprime mortgages.  Judge Sullivan wrote, “At its core, this case turns on a single question: when Freddie Mac and its executives used the term ‘subprime,’ what did reasonable investors understand them to mean by it?” The defendants’ motion (discussed in this prior post) had argued that the statements at issue were consistent with the particular, narrow definition of “subprime” intended at the time.  Judge Sullivan determined that a broader understanding of “subprime” was plausible in context, and could have misled investors.

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13 Feb
2013

UPDATE: Apple Opposes Greenlight PI Motion

by Jessica Holloway Link to post

Today, Apple responded to Greenlight Capital’s motion for preliminary injunction blocking a shareholder vote on a plan which Greenlight claimed would eliminate Apple’s ability to issue preferred stock.   Greenlight had argued that the plan was “bundled” with other proposed amendments to Apple’s articles of incorporation (as “Proposal No. 2″)  for a single up or down vote, and that “bundling” violates SEC “unbundling” rules. (For the details of Greenlight’s motion, see our previous post.)

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08 Feb
2013

Einhorn Seeks to Block Vote on Apple’s Plan to Eliminate Preferred Stock

by Jessica Holloway Link to post

Hedge Fund Greenlight Capital – owner of at least 1.3 million shares of Apple common stock – has sued Apple to block a plan to eliminate Apple’s ability to issue preferred shares. In their complaint and motion for preliminary injunction – both filed yesterday –  the Greenlight entities claim that Apple has “bundled” the vote on that plan with two other unrelated proposed modifications of Apple’s articles of incorporation in violation of SEC “unbundling” rules. The bundle – “Proposal No. 2” – is set for shareholder vote at Apple’s annual shareholder meeting on February 27.

As David Einhorn – co-founder of Greenlight – explained in his declaration in support of Greenlight’s motion for preliminary injunction:

5.     Proposal No.2 in the definitive proxy bundles together three separate, discrete amendments for a single up or down vote. First, the proposal would modify the articles of incorporation to facilitate “majority voting” for directors under California law. Second, the proposal would establish a par value for Apple’s common stock. And third, the proposal would eliminate Apple’s power to issue preferred stock.

6.     The proxy requires shareholders to vote either “yes” or “no” to these proposed amendments as a group.

7.     The Greenlight Entities support the first two proposed changes to Apple’s articles of incorporation.

8.     The Greenlight Entities oppose, however, the proposed elimination of Apple’s power to issue preferred shares, and believe that the proposed change is not in the best interests of Apple’s shareholders. The power to issue preferred stock gives the board important flexibility in managing Apple’s capital, and the Greenlight Entities believe this flexibility can be used to enhance shareholder value.

9.     Because the three proposed modifications to the Articles are bundled together, the Greenlight Entities, like other shareholders who support some but not all of the  modifications, will be forced to either vote in favor of one or more modifications they oppose, or to vote against one or more modifications they support.

Judge Sullivan’s expedited briefing schedule for the PI requires Apple to respond by February 15, with replies due February 18 and oral argument on February 22.

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04 Feb
2013

Four Judges Relocated to 40 Centre Street; 17 More Moves Planned

by Charles Michael Link to post

After a six-year renovation, the 40 Centre Street courthouse is open again for district court proceedings.  Judges Abrams, Engelmayer, Gardephe, and Nathan have already moved to 40 Centre Street. They will be joined by Judges Furman, Sullivan, Oetken, Carter, and Schofield, and Magistrate Judges Fox and Netburn, in the next two months. The plan is for 21 Southern District judges to be relocated to 40 Centre Street.

The Court’s press release is here.

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03 Oct
2012

Judge Sullivan: Some Arrests at 2004 RNC Lacked Probable Cause

by Jessica Holloway Link to post

In a decision filed on Sunday, Judge Sullivan granted in part and denied in part the parties’ cross-motions for summary judgment in Dinler et al. v. City of New York – the consolidated actions brought by protesters arrested during the 2004 Republican National Convention in New York City. The parties’ fifty motions addressed four issues:

(1) whether the police had probable cause to arrest protesters and bystanders at a demonstration on Fulton Street on August 31, 2004; (2) whether the police had probable cause to arrest protesters and bystanders at a demonstration on East 16th Street on August 31, 2004; (3) whether the City’s suspension of its summons policy for minor offenses, when those offenses related to the RNC, was constitutionally permissible; and (4) whether the City’s blanket fingerprinting policy with respect to RNC-related arrests was lawful and constitutionally permissible.

Judge Sullivan dismissed plaintiffs’ claims challenging the constitutionality of the No-Summons and Fingerprinting policies, but granted in part plaintiffs’ motions for summary judgment, finding that probable cause did not exist to justify the Fulton Street arrests. He also found that questions of fact existed with respect to the East 16th Street arrests that require trial.

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