Justia Business Law Opinion Summaries

In the case involving Sorrento Therapeutics, Inc., its CEO, and its Vice President, the United States Court of Appeals for the Ninth Circuit affirmed the dismissal of a securities fraud class-action case brought by lead plaintiff Andrew R. Zenoff. The plaintiff alleged that the defendants violated the Securities Exchange Act and the SEC's Rule 10b-5 by falsely claiming to have discovered a "cure" for COVID-19, resulting in a temporary surge in Sorrento's stock prices.The court held that the defendants' representations about the potential COVID-19 cure, when read in context, were not materially false or misleading. The court also found that the plaintiff failed to support the requisite strong inference of scienter, or intent to deceive, manipulate, or defraud. The court noted that Sorrento's financial difficulties and the need to raise capital did not provide a strong inference of scienter. Furthermore, the plaintiff did not provide evidence of specific stock sales or purchases that would indicate an intent to manipulate stock prices.The court found that the plaintiff's allegations did not meet the specific requirements for claims of securities fraud under the Private Securities Litigation Reform Act of 1995, which include demonstrating a material misrepresentation or omission, scienter, a connection between the misrepresentation or omission and the purchase or sale of a security, reliance upon the misrepresentation or omission, economic loss, and loss causation. The court concluded that the defendants' initial enthusiasm about the potential cure was not inherently false or misleading at the time, and the plaintiff failed to establish a strong inference of scienter. As a result, the court affirmed the lower court's dismissal of the case. View "ZENOFF V. SORRENTO THERAPEUTICS, INC., ET AL" on Justia Law

The case involved a lawsuit against Meta Platforms, Inc. (formerly known as Facebook) by a class of advertisers who claimed that Meta misrepresented the "Potential Reach" of advertisements on its platforms. The plaintiffs alleged that Meta falsely claimed that Potential Reach was an estimate of people, when in fact, it was an estimate of accounts.The United States Court of Appeals for the Ninth Circuit affirmed the district court's order certifying one class of advertisers (the damages class) who sought compensation for fraudulent misrepresentation and concealment. The court stated that the misrepresentation was a common issue for the class and that the district court properly determined that the element of justifiable reliance was capable of classwide resolution.However, the court vacated the district court's order certifying another class of advertisers (the injunction class) who sought injunctive relief. The court asked the lower court to reconsider whether the named plaintiff, Cain Maxwell, had Article III standing to seek an injunction. The case was remanded for further proceedings. View "DZ Reserve v. Meta Platforms, Inc." on Justia Law

The United States Court of Appeals for the Ninth Circuit heard an appeal by Cathay Pacific Airways Limited, from a district court's decision denying its motion to compel arbitration in a class action lawsuit. The plaintiffs, Winifredo and Macaria Herrera, alleged that Cathay Pacific breached their contract by failing to issue a refund following flight cancellations for tickets they purchased through a third-party booking website, ASAP Tickets.The court ruled that when a non-signatory, in this case Cathay Pacific, seeks to enforce an arbitration provision, an order denying a motion to compel arbitration based on the doctrine of equitable estoppel is reviewed de novo. Applying California contract law, the court held that the plaintiffs' allegations that Cathay Pacific breached its General Conditions of Carriage were intimately intertwined with ASAP’s alleged conduct under its Terms and Conditions. Thus, it was appropriate to enforce the arbitration clause contained in ASAP’s Terms and Conditions.Accordingly, the court reversed the district court’s denial of Cathay Pacific’s motion to compel arbitration and remanded with instructions to either dismiss or stay the action pending arbitration of the plaintiffs’ breach-of-contract claim. View "HERRERA V. CATHAY PACIFIC AIRWAYS LIMITED" on Justia Law

The case involves a whistleblower-retaliation action brought by Tayo Daramola, a Canadian citizen, under the Sarbanes-Oxley and Dodd-Frank Acts. Daramola was employed by Oracle Canada, a subsidiary of Oracle America, and worked remotely from Canada. He alleged that Oracle America and its employees retaliated against him for reporting suspected fraud related to one of Oracle's software products.The United States Court of Appeals for the Ninth Circuit affirmed the district court's dismissal of Daramola's action. The court held that the whistleblower anti-retaliation provisions in the Sarbanes-Oxley and Dodd-Frank Acts do not apply outside the United States. The court applied a presumption against extraterritoriality and concluded that the presumption was not overcome because Congress did not affirmatively and unmistakably instruct that the provisions should apply to foreign conduct.The court further held that this case did not involve a permissible domestic application of the statutes, given that Daramaola was a Canadian working out of Canada for a Canadian subsidiary of a U.S. parent company. The court agreed with other circuits that the focus of the Sarbanes-Oxley anti-retaliation provision is on protecting employees from employment-related retaliation, and the locus of Daramola's employment relationship was in Canada. The court also concluded that Daramola did not allege sufficient domestic conduct in the United States in connection with his Dodd-Frank claim. The same reasoning disposed of Daramola’s California state law claims. View "DARAMOLA V. ORACLE AMERICA, INC." on Justia Law

In this case, Robert Sproat was convicted on ten counts of securities fraud. On appeal, Sproat argued that the district court improperly coerced the jurors into reaching a unanimous guilty verdict by instructing them to return the next day after they had reported an impasse in their deliberations.The United States Court of Appeals for the Ninth Circuit affirmed the conviction, rejecting Sproat's argument. The court held that merely instructing a jury that reported an impasse to return the next day is not unconstitutionally coercive. The court found that the district court's instruction to return did not amount to an Allen charge, an instruction encouraging jurors to reach a unanimous verdict. The court explained that no such encouragement was explicit or implicit in the district court's instruction.The court also observed that the district court had not asked the jury to identify the nature of its impasse or the vote count before excusing them for the evening, and that any theoretical risk of coercion was cured by the partial Allen instruction the district court gave the following day, emphasizing the jurors' freedom to maintain their honest beliefs and their ability to be excused if they could not overcome their impasse. The court concluded that the district court's instruction to return the next day and the partial Allen instruction the following day did not coerce the jurors into reaching a unanimous guilty verdict. View "USA V. SPROAT" on Justia Law

In this case, a group of California wholesale businesses, the plaintiffs, brought a lawsuit against Innovation Ventures, LLC, and Living Essentials, LLC, the defendants, under the Robinson-Patman Price Discrimination Act. The plaintiffs accused the defendants of offering less favorable pricing, discounts, and reimbursements to them than to the Costco Wholesale Corporation for the sale of 5-hour Energy drink. The United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the district court’s judgment.The court held that the district court did not abuse its discretion in instructing the jury that the plaintiffs needed to show that Living Essentials made “reasonably contemporaneous” sales to them and to Costco at different prices and that the price discrimination was not justified by functional discounts compensating Costco for marketing or promotional functions. The court concluded that the functional discount doctrine was available to the defendants, regardless of whether the plaintiffs and Living Essentials were on the same level in the distribution chain.However, the court vacated the district court's ruling on the plaintiffs' claim for injunctive relief under section 2(d) of the Robinson-Patman Act. This section prohibits a seller from providing anything of value to one customer unless it is available on proportionally equal terms to all other competing customers. The court found that the district court committed legal and factual errors in determining that Costco and the plaintiffs operated at different functional levels and therefore competed for different customers of 5-hour Energy. The case was remanded for the district court to reconsider whether Costco and the plaintiffs purchased 5-hour Energy from Living Essentials within approximately the same period of time, or if the plaintiffs were otherwise able to prove competition. View "U.S. WHOLESALE OUTLET & DISTR. V. INNOVATION VENTURES, LLC" on Justia Law

In this case, the plaintiff, Lorenzo Dominguez, who was a former employee of Better Mortgage Corporation, alleged that the company violated federal and state wage-and-hour laws, primarily by failing to pay overtime to him and other mortgage underwriters. Upon being sued, Better Mortgage attempted to reduce the size of the potential class and collective action by persuading employees to agree not to join any collective or class action and to settle their claims individually. The district court found that Better Mortgage's communications were misleading and coercive. As such, the court nullified the new employment agreements, release agreements, and ordered the company to communicate with current and former employees about wage-and-hour issues only in writing and with prior approval.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s order imposing a communication restriction on Better Mortgage, considering the company's appeal timely due to a motion to reconsider the restriction, thus tolling the time to file the notice of appeal. The appellate court held that it had jurisdiction to review the communication restriction and found it both justified and tailored to the situation created by the employer’s misleading and coercive communications. However, the appellate court dismissed for lack of jurisdiction the employer’s appeal from the district court’s order nullifying agreements between the employer and current and former employees. The appellate court found that it lacked jurisdiction to consider the merits of the nullification order because the issue was raised in an interlocutory appeal and did not fit any exception that would allow for review. View "DOMINGUEZ V. BETTER MORTGAGE CORPORATION" on Justia Law

In this case, the plaintiffs, who are shareholders of Facebook, Inc., brought a securities fraud action against the company and its executives, alleging that they made materially misleading statements and omissions about the risk of improper access to Facebook users' data, Facebook's internal investigation into the actions of Cambridge Analytica, and the control Facebook users have over their data. The United States Court of Appeals for the Ninth Circuit affirmed in part and reversed in part the decision of the District Court for the Northern District of California.The Circuit Court held that the shareholders adequately pleaded falsity as to the challenged risk statements in Facebook's 2016 Form 10-K. The court held that these statements were materially misleading because Facebook knew at the time of filing that the risk of improper third-party misuse of Facebook users' data was not hypothetical, but had already occurred.As to the statements regarding Facebook's investigation into Cambridge Analytica, the court affirmed the district court's decision, holding that the shareholders failed to plead scienter, or intent to defraud.Lastly, the court held that the shareholders adequately pleaded loss causation as to the statements assuring users that they controlled their data on the platform. The court found that the shareholders had adequately pleaded that the March 2018 revelation about Cambridge Analytica and the June 2018 revelation about Facebook's whitelisting policy were the first times Facebook investors were alerted that Facebook users did not have complete control over their own data, causing significant stock price drops.The case was remanded to the district court for further proceedings. View "AMALGAMATED BANK V. FACEBOOK, INC." on Justia Law

The district court appointed a receiver to claw back profits received by investors in a Ponzi scheme that was the subject of a Securities and Exchange Commission enforcement action. The receiver filed suit against certain investors, alleging fraudulent transfers from the receivership entities to the investors. The district court concluded that the receiver was bound by arbitration agreements signed by the receivership company, which was the instrument of the Ponzi scheme. The district court relied on Kirkland v. Rune.   The Ninth Circuit reversed the district court’s order denying a motion to compel arbitration. The panel held that EPD did not control because it addressed whether a bankruptcy trustee, not a receiver, was bound by an arbitration agreement. Unlike under bankruptcy law, there was no explicit statute here establishing that the receiver was acting on behalf of the receivership entity’s creditors. The panel held that a receiver acts on behalf of the receivership entity, not defrauded creditors, and thus can be bound by an agreement signed by that entity. But here, even applying that rule, it was unclear whether the receiver was bound by the agreements at issue. The panel remanded for the district court to consider whether the defendant investors met their burden of establishing that the fraudulent transfer claims arose out of agreements with the receivership entity, whether the investors were parties to the agreements and any other remaining arbitrability issues. View "GEOFF WINKLER V. THOMAS MCCLOSKEY, JR., ET AL" on Justia Law

This appeal arises out of a commercial property insurance policy (“Policy”) that Oregon Clinic, P.C. (“Oregon Clinic”) purchased from Fireman’s Fund Insurance Company (“Fireman’s Fund”). The Policy provides Oregon Clinic, a medical provider with more than fifty locations in Oregon, with coverage for a reduction of business income only if its insured property suffers “direct physical loss or damage.” In March 2020, after the COVID-19 pandemic began, Oregon Clinic, like hundreds of other insured businesses nationwide, sought coverage under its Policy. It alleged that it suffered “direct physical loss or damage” because of the COVID-19 pandemic and related governmental orders that prevented it from fully making use of its insured property. Fireman’s Fund denied coverage. Oregon Clinic then sued Fireman’s Fund in the United States District Court for the District of Oregon. At Oregon Clinic’s request, the Ninth Circuit certified to the Oregon Supreme Court the interpretation of “direct physical loss or damage” under Oregon law and stayed proceedings. The Oregon Supreme Court declined the certification request.   The Ninth Circuit affirmed the district court’s dismissal. The panel held that the Oregon Supreme Court would interpret “direct physical loss or damage” to require physical alteration of property, consistent with the interpretation reached by most courts nationwide. Because Oregon Clinic failed to state a claim under this interpretation and because the amendment would be futile, the panel affirmed the district court’s judgment. View "THE OREGON CLINIC, PC V. FIREMAN'S FUND INS. CO." on Justia Law