Corporate Defense and Disputes

Important developments in U.S. securities law, white collar criminal defense, regulatory enforcement and other emerging issues impacting financial services institutions, publicly traded companies and private investment funds

New York Court Upholds Insider-Trading Verdict

U.S. District Judge Jed Rakoff denied motions for judgment as a matter of law or for a new trial after a jury found the defendants civilly liable for insider trading. The decision in SEC v. Payton (S.D.N.Y. Nov. 29, 2016) held that the jury had sufficient evidence to conclude that the initial tipper of inside information had misappropriated it and passed it on in breach of a duty of confidence and in exchange for a personal benefit – and that the defendant remote tippees had consciously avoided learning of the tipper’s breach of duty.

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SEC and DOJ Charge Board Member with Trading on Inside Information . . . During a Board Meeting

On Friday, the SEC filed a complaint against James C. Cope, a former member of the Executive Committee of Pinnacle Financial Partners’ (“PFP”) board of directors, alleging that he engaged in insider trading.  The same day, Cope pleaded guilty to related insider trading charges brought by the U.S. Attorney’s office for the Middle District of Tennessee.  The government alleges that Cope personally traded on information about a pending acquisition that he learned during board meetings, in breach of his duties to the company.

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Dutch Collective Actions vs. Collective Settlements

As U.S. law has become less willing to entertain certain types of lawsuits on behalf of worldwide classes of plaintiffs, litigants have looked for other forums that might allow the prosecution – or at least the resolution – of claims on a global, classwide basis, ideally through opt-out classes. The Netherlands has emerged as an option in recent years because the Dutch Act on Collective Settlement of Mass Claims (the “WCAM”) authorizes the settlement, but not the prosecution, of classwide claims on an opt-out basis.

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Supreme Court Hears Argument on Meaning of “Personal Benefit” in Insider Trading

All eyes were on the U.S. Supreme Court yesterday as it heard arguments in Salman v. United States (No. 15-628) concerning the “personal benefit” required to establish a claim for insider trading. After an hour punctuated by the Justices’ constant questioning of attorneys for both the defendant and the government, it appears unlikely that the Supreme Court will radically depart from its 1983 decision in Dirks v. SEC, which held that insider trading violates the federal securities laws if an insider makes a gift of nonpublic information to a trading relative or friend. Continue Reading

Proskauer Attorneys Pen Cover Article for New York Law Journal’s White-Collar Crime Special Report

Proskauer partner Joshua M. Newville and associate Lindsey A. Olson recently wrote the lead article for New York Law Journal’s White-Collar Crime special report. In the article, they discuss how proposed amendments to the Electronic Communications Privacy Act of 1986 could affect financial fraud investigations by the SEC and DOJ.  For more information, please read the article entitled How Proposed Changes to the ECPA Affect Privacy Interests in Investigations.

Second Circuit Affirms Exclusion of Certain Foreign Purchasers and Purchases from Securities Class Action

The U.S. Court of Appeals for the Second Circuit issued a lengthy opinion today in the long-running In re Vivendi, S.A. Securities Litigation, affirming the jury’s verdict on liability and addressing issues about loss causation and expert-witness testimony.  But the tail on the proverbial dog also dealt with another set of issues that this blog has frequently discussed:  the extent to which the U.S. securities laws apply to foreign purchasers and foreign purchases.

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International Comity and Deference: A Foreign Government with Final Say When Interpreting its Own Laws

On Tuesday, the Second Circuit in In Re Vitamin C Antitrust Litigation vacated a $147 million award against two Chinese companies for engaging in anti-competitive behavior.  At issue was how a federal court should respond when a foreign government’s regulatory scheme conflicts with U.S. laws.  Because the Chinese companies could not simultaneously comply with Chinese law and U.S. antitrust laws, the principles of international comity required the district court to abstain from exercising jurisdiction in the case.  As a result, the Second Circuit reversed the district court’s denial of the Chinese companies’ motion to dismiss and remanded the case with instructions to dismiss the complaint with prejudice. In re Vitamin C Antitrust Litig., No. 13-4791 (2d Cir. Sept. 20, 2016). Continue Reading

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