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  • [04/20] Goldman earns $3.3B in 1Q as fraud case looms
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Case Summaries

Securities Law

[04/27] Merck & Co. v. Reynolds
In a 2003 securities fraud class action alleging that Merck & Co. knowingly misrepresented the heart-attack risks associated with its drug Vioxx, the Third Circuit Court of Appeals' reversal of a district court's dismissal of the complaint as untimely is affirmed where: 1) the limitations period in 28 U.S.C. section 1658(b)(1) begins to run once the plaintiff actually discovers or a reasonably diligent plaintiff would have discovered the facts constituting the violation (including scienter), whichever came first; and 2) prior to November 6, 2001, the plaintiffs did not discover, and Merck did not show that a reasonably diligent plaintiff would have discovered the facts constituting the violation.

[04/27] Pacific Inv. Mgmt. Co. v. Mayer Brown LLP
In a securities fraud action against outside counsel for a corporation that allegedly made false statements in connection with a securities offering, the dismissal of the action is affirmed where: 1) a secondary actor can be held liable for false statements in a private damages action for securities fraud only if the statements were attributed to the defendant at the time the statements were disseminated; and 2) plaintiffs' claims that defendants participated in a scheme to defraud investors were not meaningfully distinguishable from the claim at issue in Stoneridge Inv. Ptnrs., LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008).

[04/20] Greenwich Fin. Servs. Distressed Mortgage Fund 3 LLC v. Countrywide Fin. Corp.
In defendants' appeal from the district court's grant of plaintiffs' motion to remand plaintiffs' securities class action to state court, the appeal is dismissed where the fact that plaintiffs sought enforcement of a term of the pooling and servicing agreements at issue ? trust agreements similar to bond indentures in many respects ? did not affect the court's conclusion that the suit was not removable under the Class Action Fairness Act.

[04/19] Hill v. Ricoh Americas Corp.
In an action alleging that plaintiff was terminated from his position in violation of the Sarbanes-Oxley Act, and Kansas common law prohibiting retaliatory discharge, the denial of defendant's motion to compel arbitration is reversed where: 1) defendant was not required by Fed. R. Civ. P. 8(c)(1) to demand arbitration in its answer; 2) defendant did not demand arbitration until four months after answering the complaint, but that length of time in itself did not establish waiver; and 3) the parties' retention bonus agreement did not supersede the arbitration clause in the initial employment agreement.

[04/07] US v. Schiff
In a criminal prosecution of corporate executives at the pharmaceutical giant Bristol-Myers Squibb for securities fraud under 15 U.S.C. section 78j(b) and Securities and Exchange Commission Rule 10b-5, the district court's pretrial order (1) dismissing the government's theories of omission liability under Rule 10b-5 that attempted to hold defendant accountable for omissions in quarterly SEC 10-Q filings based on alleged misstatements in a company's quarterly conference calls; and 2) excluding the government's expert, following a Daubert hearing, who would have testified to the company's stock price drop as evidence of Rule 10b-5's materiality element, the order is affirmed where: 1) defendant had no duty to disclose in SEC filings deriving from a general fiduciary obligation of "high corporate executives" to the company's shareholders; 2) there were no actionable omissions in the SEC filings on which to base the government's theory; and 3) the district court's thoroughly explained ruling that allowed the government to present its fact witnesses at trial, and then petition the court for introduction of an expert's stock price drop testimony, was a pragmatic solution and not an abuse of discretion.

[04/07] Nemec v. Shrader
In an action for breach of contract and breach of fiduciary duty based on defendant corporate board's redemption of plaintiffs' stock after their post-retirement put rights expired, but before selling the company's government business division, the dismissal of the complaint is affirmed where the board exercised an express contractual right in so doing.

[04/01] Racepoint Ptnrs., LLC v. JPMorgan Chase Bank, N.A.
In an action claiming that defendant indenture trustee had actual knowledge of Enron's default on the indentures at issue, and that its failure to notify Enron and the noteholders of the default constituted a breach of the indenture agreement, the appellate division's order dismissing the complaint is affirmed where indenture agreements containing the required delivery provisions pursuant to section 314 (a) of the Trust Indenture Act referred to the Exchange Act only to identify the types of report that should be forwarded to indenture trustees, and did not create contractual duties on the part of the trustee to assure that the information contained in any report filed was true and accurate.

[04/01] Kashner Davidson Sec. Corp. v. Mscisz
In plaintiffs' challenge to the district court's remand order and its electronic order denying their Rule 60(b) motion, the district court's decision to remand is affirmed but it is directed to clarify its position on whether the arbitration should proceed before the same panel of arbitrators or a newly constituted panel.

[03/30] SEC v. Vescor Capital Corp.
In an appeal from a district court's order staying all actions related to property in a receivership estate containing the proceeds of an alleged financial fraud, the order is affirmed where: 1) the district court properly focused on safeguarding the investors' assets as a whole in refusing to lift the stay; and 2) the receiver's actions to this point did not invalidate or otherwise impact any party's perfected security interest.

[03/30] Jones v. Harris Assocs. L.P.
In an action by shareholders in mutual funds managed by defendant investment adviser alleging that defendant violated section 36(b)(1) of the Investment Company Act of 1940, the Seventh Circuit's order affirming the district court on alternative grounds is vacated and remanded where, based on section 36(b)'s terms and the role that a shareholder action for breach of the investment adviser's fiduciary duty plays in the Act's overall structure, Gartenberg v. Merrill Lynch Asset Management, Inc., 694 F. 2d 923 (2d Cir. 1982), applied the correct standard to section 36(b) claims. More specifically, to be guilty of a violation of section 36(b), an adviser must charge a fee that is so disproportionately large it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining.

[03/25] SFM Holdings, Ltd. v. Banc of Am. Secs., LLC
In an action against an investment bank, claiming damages due to violations of federal and state securities laws, breach of fiduciary duty, and constructive fraud, dismissal of the complaint is affirmed where: 1) the district court properly relied on an agreement outside the pleadings because it undeniably determined the terms of the relationship between the parties; and 2) the agreement explicitly stated that defendant was not acting as an adviser or fiduciary to plaintiff.

[03/23] Fleszar v. U.S. Dep't of Labor
Petition for review a decision of the Administrative Review Board declining to investigate plaintiff's allegation that her termination from employment by the American Medical Association violated section 806 of the Sarbanes-Oxley Act (a whistleblower-protection provision), is denied as the AMA, a nonprofit membership association that does not issue stock, is not covered.

[03/16] Pendergest-Holt v. Certain Underwriters at Lloyd's
In an action by various insureds, including R. Allen Stanford, each faced with civil and criminal allegations that they engaged in a massive Ponzi scheme, seeking reimbursement of defense costs under a directors' and officers' liability policy from the policy's underwriters, an injunction prohibiting defendant-insurers from withholding defense funds is affirmed with modifications and remanded, and the underwriters are enjoined from refusing to advance defense costs as provided for in the D&O; Policy unless and until a court "determine[s] in fact" by clear and convincing evidence "that the alleged act or alleged acts [of Money Laundering] did in fact occur."

[03/10] Sec. & Exch. Comm'n v. Tambone
In SEC's action against executives of a registered broker-dealer for allegedly allowing certain preferred customers to engage in market timing, district court's dismissal of the SEC's Rule 10b-5(b) claim is affirmed as the SEC's expansive interpretation of "make" as used in Rule 10b-5(b) is inconsistent with the text of the rule and with the ordinary meanings of the phrase "to make a statement," inconsistent with the structure of the rule and relevant statutes, and in considerable tension with Supreme Court precedent. (En Banc opinion)

[03/10] Citigroup Global Markets, Inc. v. VCG Special Opportunities Master Fund Ltd.
In an appeal from a district court's order granting plaintiff's motion for a preliminary injunction and enjoining defendant from proceeding with an arbitration initiated against plaintiff before the Financial Industry Regulatory Authority, the order is affirmed where the "serious questions" standard for assessing a movant's likelihood of success on the merits remains valid in the wake of recent Supreme Court cases, and neither the district court's assessment of the facts nor its application of the law supported a finding of abuse of discretion.

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Criminal Law & Procedure

[04/27] US v. Silva-Arzeta
Defendant's drug and firearm possession convictions are affirmed where: 1) defendant could converse in English sufficiently well to consent to the search at issue; 2) the consent of a handcuffed arrestee to a search may still be voluntary; 3) the use of certified interpreters and recording devices was not required during interrogation; and 4) defendant waived his right to request discovery into alleged evidence tampering.

[04/27] Hodge v. US
In a drug and firearm possession prosecution, a denial of defendant's motion to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. section 2255 is affirmed where Gall v. United States, 552 U.S. 38 (2007), did not apply retroactively to cases that became final prior to its filing.

[04/27] US v. Millard-Grasshorn
In defendant's appeal from the district court's order finding defendant mentally incompetent and committing him to the custody of the Attorney General under 18 U.S.C. section 4241(d) for a determination of whether his competency can be restored, the order is affirmed where the magistrate judge did not initially commit defendant under section 4241(d), and therefore the court's later order was the first judicial determination of incompetency, and commitment under section 4241(d) was accordingly required by the statute.

[04/27] US v. Linzy
Conviction of defendant for conspiracy to distribute, possession with intent to distribute various controlled substances and sentence to a term of life imprisonment, ten years' supervised release, and a $200 special assessment are affirmed where the district court did not abuse its discretion in limiting cross-examination of a witness (co-defendant) concerning the nature of his arrest warrant, as the jury had abundant evidence to appraise the witness's motivation for testifying.

[04/27] Hooks v. Sheets
In habeas proceedings, imposition of the same sentence upon a defendant following a remand for re-sentencing in light of State v. Foster, 845 N.E.2d 470 (Ohio 2006), is affirmed as, since defendant was always subject to consecutive rather than concurrent sentences in the discretion of the trial court, his re-sentencing under Foster did not raise ex post facto or due process concerns.

[04/27] US v. Woods
District court's imposition of a sentence of 108 months' imprisonment for a conviction on one count of manufacturing methamphetamine is vacated and remanded as, although the district court correctly applied an enhancement under the sentencing guidelines for reckless endangerment during flight, its finding that the possession of a firearm by a co-conspirator was reasonably foreseeable, by relying on an inference that if a drug conspiracy involves a "substantial" amount of drugs, a defendant should foresee that a co-conspirator is likely to possess firearms, is without evidentiary support and therefore clearly erroneous.

[04/27] US v. Bethea
District court's imposition of an enhanced 180-month sentence upon a defendant after determining that he had three prior ACCA-predicate convictions is vacated and remanded where: 1) a conviction under South Carolina's escape statute does not inherently constitute a violent felony; and 2) it cannot be determined whether the defendant's conduct here necessarily violated the statute in a way that would bring him under the ACCA's ambit.

[04/27] US v. Hernandez
District court's imposition of a 262 months' imprisonment, at the low end of the advisory guidelines range and requested for by the defendant, upon his conviction for conspiracy to possess illegal drugs with the intent to distribute is affirmed as the sentenced imposed was not procedurally unreasonable as the explanation given in the context of this case is adequate.

[04/27] US v. Cerna
Defendant's conviction for illegal reentry into the U.S. is vacated where: 1) the district court's factual finding that defendant knowingly and intelligently waived his right to appeal his deportation order and so failed to exhaust his administrative remedies as required by 8 U.S.C. section 1326(d)(1) was clearly erroneous; and 2) ineffective assistance of counsel may be grounds to excuse the requirement of 8 U.S.C. section 1326(d)(1) that a defendant charged with illegal reentry who brings a collateral challenge to the prior deportation order must have exhausted administrative remedies in the immigration proceeding.

[04/27] US v. Paige
Defendant's conviction for permitting his minor child to engage in sexually explicit conduct for the purpose of producing child pornography is affirmed where: 1) there was nothing irrational about Congress's conclusion that failure to regulate the intrastate production of child pornography, by punishing parents who permitted their minor children to participate in the production of child pornography, would undermine its regulation of the interstate child pornography market; 2) the cameras used to produce, and the memory card used to store, the images of child pornography had traveled in interstate commerce; and 3) defendant's separation of powers argument was foreclosed by binding precedent.

[04/26] US v. Steele
In defendant's appeal from his 18-month sentence of imprisonment imposed for his second violation of the terms of his supervised release, the sentence is affirmed where: 1) a remand was not necessary because the record on appeal was sufficient to enable adequate review; 2) the district judge clearly articulated his (self evident) reasons for imposing a sentence outside the recommended range; and 3) under the guidelines, recidivism was generally a reason for increased sentencing severity.

[04/26] US v. Kanner
Defendant's drug conspiracy conviction is affirmed where: 1) the indictment charged that physicians and pharmacists contracted by defendant's company acted in a manner inconsistent with the usual course of professional practice, and the Supreme Court's decision in Gonzales v. Oregon, 546 U.S. 243 (2006), did not affect this conclusion; and 2) the Controlled Substances Act, as applied to defendant, was not unconstitutionally vague.

[04/26] US v. Birbragher
Defendant's drug conspiracy conviction and sentence are affirmed where: 1) it was well settled that 18 U.S.C. section 841 applied to defendant, as the owner and operator of a company involved in an alleged conspiracy with doctors and pharmacists to distribute controlled substances outside the scope of their professional practice; 2) the Controlled Substances Act, as it existed when defendant engaged in the conduct alleged in the indictment, was not unconstitutionally vague as applied to defendant's ownership and operation of his company; and 3) the court enforced defendant's waiver of his right to appeal and declined to address the merits of his claim.

[04/26] US v. Chapa
Defendant's appeal requesting his conviction for conspiracy to possess with the intent to distribute 1,000 or more kilograms of marijuana be vacated and the matter remanded to the district court for trial, based on a claim that his guilty plea was invalid, is dismissed as defendant waived his right to appeal his conviction.

[04/26] US v. Shaaban
Conviction of a naturalized American citizen born in Jordan, in a jury trial, of acting as an agent for Iraq and other crimes and sentence to a 160-months' imprisonment is affirmed as the district court did not abuse its discretion in denying defendant's motion for a new trial and did not err in its adverse ruling on a motion to reconsider the denial of demand for return of seized property as untimely.

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Sentencing

[04/27] Hodge v. US
In a drug and firearm possession prosecution, a denial of defendant's motion to vacate, set aside, or correct his sentence pursuant to 28 U.S.C. section 2255 is affirmed where Gall v. United States, 552 U.S. 38 (2007), did not apply retroactively to cases that became final prior to its filing.

[04/27] Hooks v. Sheets
In habeas proceedings, imposition of the same sentence upon a defendant following a remand for re-sentencing in light of State v. Foster, 845 N.E.2d 470 (Ohio 2006), is affirmed as, since defendant was always subject to consecutive rather than concurrent sentences in the discretion of the trial court, his re-sentencing under Foster did not raise ex post facto or due process concerns.

[04/27] US v. Woods
District court's imposition of a sentence of 108 months' imprisonment for a conviction on one count of manufacturing methamphetamine is vacated and remanded as, although the district court correctly applied an enhancement under the sentencing guidelines for reckless endangerment during flight, its finding that the possession of a firearm by a co-conspirator was reasonably foreseeable, by relying on an inference that if a drug conspiracy involves a "substantial" amount of drugs, a defendant should foresee that a co-conspirator is likely to possess firearms, is without evidentiary support and therefore clearly erroneous.

[04/27] US v. Bethea
District court's imposition of an enhanced 180-month sentence upon a defendant after determining that he had three prior ACCA-predicate convictions is vacated and remanded where: 1) a conviction under South Carolina's escape statute does not inherently constitute a violent felony; and 2) it cannot be determined whether the defendant's conduct here necessarily violated the statute in a way that would bring him under the ACCA's ambit.

[04/27] US v. Hernandez
District court's imposition of a 262 months' imprisonment, at the low end of the advisory guidelines range and requested for by the defendant, upon his conviction for conspiracy to possess illegal drugs with the intent to distribute is affirmed as the sentenced imposed was not procedurally unreasonable as the explanation given in the context of this case is adequate.

[04/27] US v. Paige
Defendant's conviction for permitting his minor child to engage in sexually explicit conduct for the purpose of producing child pornography is affirmed where: 1) there was nothing irrational about Congress's conclusion that failure to regulate the intrastate production of child pornography, by punishing parents who permitted their minor children to participate in the production of child pornography, would undermine its regulation of the interstate child pornography market; 2) the cameras used to produce, and the memory card used to store, the images of child pornography had traveled in interstate commerce; and 3) defendant's separation of powers argument was foreclosed by binding precedent.

[04/26] US v. Steele
In defendant's appeal from his 18-month sentence of imprisonment imposed for his second violation of the terms of his supervised release, the sentence is affirmed where: 1) a remand was not necessary because the record on appeal was sufficient to enable adequate review; 2) the district judge clearly articulated his (self evident) reasons for imposing a sentence outside the recommended range; and 3) under the guidelines, recidivism was generally a reason for increased sentencing severity.

[04/26] US v. Birbragher
Defendant's drug conspiracy conviction and sentence are affirmed where: 1) it was well settled that 18 U.S.C. section 841 applied to defendant, as the owner and operator of a company involved in an alleged conspiracy with doctors and pharmacists to distribute controlled substances outside the scope of their professional practice; 2) the Controlled Substances Act, as it existed when defendant engaged in the conduct alleged in the indictment, was not unconstitutionally vague as applied to defendant's ownership and operation of his company; and 3) the court enforced defendant's waiver of his right to appeal and declined to address the merits of his claim.

[04/23] In re Eric S.
Juvenile court's order requiring a juvenile ward to pay direct victim restitution that included the cost of medical treatment the victim received as a member of Kaiser California North is affirmed as the reasoning in People v. Duong, which held that victim restitution ordered against adult offenders under Penal Code section 1202.4 may include amounts billed for medical services provided by a health maintenance organization (HMO) even when the victim is an HMO member not required to pay for those medical services, applies equally to direct victim restitution ordered in wardship cases under Welfare and Institutions Code section 730.6.

[04/23] US v. Gales
Defendant's sentence for distribution of cocaine base is affirmed where: 1) the district court did not clearly err in thinking it highly unlikely that defendant did not have any further information on the identity of his steady supplier, whom he claimed to have known for ten years, beyond the vague description given to the government; 2) there was no incorrect application by the district court of the burden of proof to defendant; and 3) the district court's conclusion was consistent with the underlying purposes and established criteria of the safety valve provision.

[04/22] Sanders v. State of Florida
Trial court's conclusion that defendant's third-degree felony offenses, for which he had completed his prison sentences and probation, should have been scored as additional offenses on the scoresheet used in the 2006 sentencing upon the revocation of defendant's probation is quashed and remanded as offenses over which the trial court no longer has jurisdiction cannot be scored as additional offenses during a sentencing proceeding following a violation of probation because they do not fit the definition of "additional offense" set out in section 921.0021, Florida Statutes (1999).

[04/22] US v. Robinson
District court's calculation of defendant's sentencing guideline range of 27 to 33 months imprisonment, for conspiring to steal and convert United States Treasury checks in violation of 18 U.S.C. sections 641 and 471, is affirmed where: 1) district court did not clearly err in finding by a preponderance of the evidence that defendant and the co-defendant were engaged in joint criminal activity; and 2) it cannot be concluded that defendant's sentence was unreasonable based on the mere allegation of a difference between the district court's sentencing calculations in defendant's case and his co-defendant's case.

[04/22] US v. William
Conviction of defendant for possessing marijuana and cocaine base is affirmed as, the sobriety checkpoint was lawful and defendant's argument that the checkpoint's primary purpose was something other than detecting impaired driving is rejected. However, defendant's sentence of a five-year prison term is vacated and remanded for resentencing as, the sentencing provision applied to defendant - a five-year minimum and a twenty-year maximum - required not only more than three grams of cocaine but also a prior conviction under 21 U.S.C. section 844(a), and here, defendant's prior conviction was for a state drug offense and does not meet the requirements of section 844(a) for a sentence above two years.

[04/21] US v. Crape
In defendant's appeal from the revocation of his conditional release following his writing of letters threatening to kill several teenagers, the order is reversed where requiring defendant to refrain from writing threatening letters and revoking his discharge from a psychiatric hospital for the failure to comply with that condition exceeded the district court's authority under 18 U.S.C. section 4243(g).

[04/20] US v. Merced
District court's imposition of a five-year sentence for a drug possession conviction is vacated and remanded where: 1) the district court may have sentenced defendant pursuant to a personal policy disagreement with the scope of the career offender provision of the guidelines, and if variance was granted on such grounds, the court must clearly explain whether defendant it is based on a policy disagreement with section 4B1.1 and if so, the court must justify that decision as required by precedents; and 2) district court failed to analyze a highly relevant sentencing factor, section 3553(a)(6), as the court's choice of sentence may have created a risk of unwarranted disparities between defendant and similarly situated recidivist crack cocaine dealers.

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