A California federal court held that a California statute requiring California-based corporations to have a minimum number of directors from designated under-represented groups violates the federal Constitution’s Equal Protection Clause. The decision in Alliance for Fair Board Recruitment v. Weber (E.D. Cal. May 16, 2023) is one of the latest skirmishes in the culture wars raging around diversity and other ESG-related matters. The ruling addresses the same law that a California state court previously invalidated in a decision that is currently on appeal.
Fifth Circuit Court of Appeals
Fourth Circuit Reverses Mid-Trial Grant of Judgment Against SEC in Insider-Trading Case
By Jonathan Richman on
On February 23, the U.S. Court of Appeals for the Fourth Circuit reversed a mid-trial grant of judgment as a matter of law against the Securities and Exchange Commission in a jury trial for insider trading. The decision in SEC v. Clark is a reminder that the SEC can meet its burden of proof by presenting merely circumstantial, rather than direct, evidence of insider trading and that a trial court must not weigh evidence, determine witnesses’ credibility, or substitute its judgment for the jury’s in deciding whether to grant a motion for judgment as a matter of law.
Fifth Circuit Revives Securities Class Action Against Six Flags
By Julia Alonzo on
Last week, the Fifth Circuit reversed a decision from the United States District Court for the Northern District of Texas that had dismissed a class action against Six Flags Entertainment Corporation. The complaint in Oklahoma Firefighters Pension and Retirement System v. Six Flags Entertainment Corp., et al., alleged Six Flags and its former CEO and CFO violated federal securities laws in connection with statements regarding the construction of new theme parks in China. In overturning the lower court’s decision, the Fifth Circuit provided important guidance regarding the weight of confidential witness allegations in securities class actions, as well as evaluating legal doctrines on forward-looking statements, puffery, and scienter.
Fifth Circuit Holds SEC’s In-House Courts and Judges Unconstitutional
By Joshua M. Newville & Julia Alonzo on
In Jarkesy v. Securities and Exchange Commission, the Court of Appeals for the Fifth Circuit issued a remarkable opinion holding numerous aspects of the SEC’s administrative enforcement regime are unconstitutional. The May 18, 2022 ruling stands to eliminate the SEC’s ability to adjudicate enforcement actions seeking penalties using ALJs, rather than bringing suit in federal district court. It also could tee up further argument at the Supreme Court to resolve the scope of the SEC’s – and, perhaps, other administrative bodies’ – adjudicatory powers.
Disgorgement Continues at the SEC
By Joseph Hartunian on
On October 12, 2021, the Fifth Circuit Court of Appeals upheld a disgorgement order issued by the SEC, in—according to the opinion— the first appellate ruling on the topic since the Supreme Court’s 2020 decision in Liu v. SEC.