Securities: Certiorari Petitions

Question Presented:

Section 2462 of Title 28 of the United States Code provides that “except as otherwise provided by Act of Congress” any penalty action brought by the government must be “commenced within five years from the date when the claims first accrued.” (emphasis added). This Court has explained that “[i]n common parlance a right accrues when it comes into existence.” United States v. Lindsay, 346 U.S. 568, 569 (1954).

Where Congress has not enacted a separate controlling provision, does the government's claim first accrue for purposes of applying the five-year limitations period under 28 U.S.C. § 2462 when the government can first bring an action for a penalty?

Cert petition filed 4/20/12.

Questions Presented: 

1. In a claim brought under Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder, what is the standard for creating a genuine dispute of material fact on loss causation?
2. Whether the Eleventh Circuit erred under Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), when it concluded, in conflict with the Second, Ninth, and Tenth Circuits, that loss causation may be established without requiring a plaintiff to show that the price inflation removed at the end of the class period was actually caused by the class period statements for which the plaintiff seeks to recover.
3. Whether the Eleventh Circuit erred under Basic Inc. v. Levinson, 485 U.S. 224 (1988), when it concluded that a Section 10(b) claim may exist for statements that supposedly “maintain” pre-existing price inflation where that inflation arose prior to the start of the class period and was caused by statements that have been held to be inactionable.
4. Whether the Eleventh Circuit erred in holding, in direct conflict with other Circuit Court precedent, that a plaintiff may rely on the “fraud-on-the-market” theory for “confirmatory” statements that do not interject any new information into the marketplace.

Conference 4/27/12.

Question Presented:

Whether the United States Court of Appeals for the Second Circuit's decision is in conflict with Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), because the Court of Appeals exceeded its power when it relied upon the disclaimer language in an agreement with a third party in making its finding that the Petitioner was not a customer of the Respondent Wachovia Capital Markets LLC, which affirmative defense is a procedural issue that goes to the merits of the case for the FINRA arbitrators to decide, not to the issue of arbitrability, and thus denied Petitioner's right, under the Federal Arbitration Act, to have its dispute with Respondent Wachovia Capital Markets LLC, a FINRA member, arbitrated before FINRA.

Question Presented:

The federal securities laws empower the Securities and Exchange Commission (“SEC”), in its civil law enforcement role, to seek a wide range of remedies and sanctions in federal court against securities law violators. Those remedies and sanctions include “equitable relief” for the benefit of investors. As exemplified by this case, the SEC routinely demands “disgorgement” of ill-gotten gains, and district courts routinely grant it, based on the essential premise that this monetary sanction in fact constitutes “equitable relief” rather than punitive or legal relief. But in many cases - this one being a quintessential example - the defendant does not possess or have access to the ill-gotten gains because they were long ago transferred to unrelated parties, and thus the so-called “disgorgement” order merely imposes a personal liability on the defendant to pay a sum of money approximating gains that are no longer available for the defendant to “disgorge.”

The question presented is:

Whether a district court's “disgorgement” order in an SEC law enforcement case is a permissible form of “equitable relief” when it merely imposes a personal liability on the defendant to pay a substitutionary sum of money equal to an approximation of ill-gotten gains that long ago passed on to unrelated parties and are no longer available to the defendant.

Cert petition filed 3/21/12.

Question Presented:

1. Does the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 15 U.S.C. § 78bb(f), require dismissing with prejudice a class action complaint that contains no claim for relief “alleging a misrepresentation or omission of a material fact”?

Cert petition filed 3/23/12.

Questions Presented:

1. Whether the U.S. 3'd Circuit Court of Appeals may dismiss, under F.R.C.P. 12(b)(6), this post-bankruptcy shareholder recovery action against Verizon Communications, Inc. and JP Morgan Chase Bank, as co-authors of an alleged fraudulent debt off-loading spin transaction, where a same action by creditors against Verizon Communications, Inc. was: (i) authorized by res adjudicata bankruptcy decree, and (ii) upheld (by the United States District Court, N.D. of Texas) against a same motion to dismiss. See U.S. Bank Nat'l Ass'n v. Verizon U.S. Dist, Ct., N.Dist. of Texas, [No.3:10-cv-01842, Docket 106, 9/19/11, Appx. F].
2. Whether federal district court, herein, may deny: (A) commonplace diversity jurisdiction to a multi-state plaintiffs' complaint that alleges common law deceit, and (B) federal question jurisdiction for said complaint that also alleges violation of the Federal Communications Act and the Federal Securities Exchange Act, where (i) :documentary evidence attached to the complaint, and (ii) other documentary evidence, timely filed, and (iii) the language of the Complaint itself, were contradicted or excluded from consideration.

Cert petition filed 2/28/12. Waiver by respondent JP Morgan Chase Bank 3/12/12, waiver filed by respondent Verizon Communications, Inc. 3/26/12, conference 4/27/12.

Questions Presented:

1. Whether charging a variable annuity contract owner redemption fees is a breach of contract when the contract provides that the owner has the right to “transfer variable assets among the various funds without a charge”?
2. Whether limiting the number of telephone exchanges to twenty per year is a breach of contract when the variable annuity contract provides that the owner has the right to “make telephone exchanges where permitted by state law”?

Cert petition filed 2/29/12. Waiver filed by respondent Nationwide Life Insurance Co. 3/14/12, conference 4/13/12, cert denied 4/16/12.

WilmerHale represents respondent Nationwide Life Insurance Co.

Questions Presented:

1. Whether, in a misrepresentation case under SEC Rule 10b-5, the district court must require proof of materiality before certifying a plaintiff class based on the fraud-on-the-market theory.
2. Whether, in such a case, the district court must allow the defendant to present evidence rebutting the applicability of the fraud-on-the-market theory before certifying a plaintiff class based on that theory.

Cert petition filed 3/1/12.

Questions Presented:

1. Whether the Sixth Circuit condoned improper procedures followed by the district court relating to the proof and rebuttal for alleged complex securities fraud losses at trial, and calculating and applying them for purposes of sentencing—which prevented the Defendant from fully developing his defense, and resulted in an illegal 30-year sentence.
2. Whether the Sixth Circuit erred by ignoring the substantially unfair prejudice arising from the district court’s failure to exclude irrelevant and unfairly prejudicial facts from a separate criminal prosecution.
3. Whether the Sixth Circuit deprived Petitioner of due process by affirming his money laundering conviction, and depriving him of a resentencing that had been properly given to his alleged co-conspirators.

Cert petition filed 2/14/12. Waiver filed 2/24/12, conference 3/16/12. Petition denied.

Question Presented:

1. Did the Court of Appeals for the Second Circuit err when it ruled that the definition of “net equity” in the Securities Investor Protection Act (“SIPA”), which determines the calculation of a customer’s priority claim in a stockbroker liquidation, may be interpreted differently in different cases, depending upon the circumstances of the broker’s failure and without reference to customer ownership rights, under uniform state law, to securities reflected on brokerage statements, thereby creating uncertainty as to the scope of the protection provided by SIPA in a stockbroker liquidation?

Cert petition filed 2/3/12. Waiver filed by respondent SEC 2/24/12, response requested 3/29/12.

Question Presented:

1. Did the Court of Appeals for the Second Circuit err in holding that a trustee, appointed under the Securities Investor Protection Act (“SIPA”) for the liquidation of a broker, has unlimited discretion to deny SIPC insurance to securities customers by defining “net equity” (i.e., a customer's claim) in different ways, depending upon the particular circumstances of the case, despite

(a) SIPA's clear and unambiguous definition of “net equity;”

(b) SIPA's prohibition of the Securities Investor Protection Corporation (“SIPC”) changing the definition of “net equity;” and

(c) the absence in SIPA, of any delegation of discretion to a SIPA trustee to change the definition of “net equity.”

Cert petition filed 2/3/12. Waiver filed by respondent SEC 2/24/12, response requested 3/29/12.

Questions Presented:

1. Is it a violation of separation of powers, and does it constitute judicial legislation, for a Court of Appeals, when determining which of two statutory provisions will control and in order to reach a result which the Court considers more fair, to fail to consider, and to ignore, the purpose of Congress repeatedly stated by (leading) members of the House and Senate on the floors of those bodies?
2. When a statute is enacted to provide customers with protection against losses arising from misconduct by securities dealers, specifically defines how the customers' “net equity” with a securities dealer is to be determined, and says the definition may not be changed by the Securities Investor Protection Corporation (“SIPC”), is it a violation of Article I of the Constitution giving the legislative power to Congress, is it a violation of separation of powers, and is it judicial legislation for SIPC to change the definition of net equity and for the Court of Appeals to rule that, instead of the single unchangeable definition given by Congress, net equity can be defined however SIPC and a SIPC trustee wish to define it in any particular case - and for SIPC and the Court, in the bargain, to thereby eliminate the assurance of protection on which Congress intended customers to be able to rely?
3. In accordance with the positions of SIPC and the Bankruptcy Trustee in proceedings involving the all-important question of “net equity,” the Bankruptcy Court refused to grant victims of the Madoff fraud any discovery into what happened or why SIPC and the Trustee acted as they did (a matter which is widely questioned). Then the Bankruptcy Court, on a de facto summary judgment on the all-important question of net equity, accepted all the facts put forth by SIPC and the Trustee (some of which are already known to be wrong even without discovery), and ruled for SIPC and the Trustee and against the Madoff victims. The refusal of discovery into the facts of what happened and why, and the wholesale acceptance of the facts put forth by SIPC and the Trustee on a de facto motion for summary judgment, was a subject of appeal to the Second Circuit, but the Circuit did not mention this question and correspondingly did not rule on it or reverse on it. In these circumstances, the question is: Is it permissible for the federal courts to grant summary judgment to one side on a crucial issue while giving the losing side no opportunity to obtain discovery of the facts, and for the courts to, instead, merely accept the version of the facts put forth by the winning side?

Cert petition filed 2/6/12. Waiver filed by respondent SEC 2/24/12, conference 4/13/12, response requested 3/29/12.

Question Presented:

1. This federal criminal prosecution for alleged securities fraud turned on the omission from corporate financial statements of hypothetical, non-cash compensation “expenses” that a since-discarded accounting standard once required companies to report with respect to certain employee stock options. The question presented is:
   
2. Whether the court of appeals erred in holding that the prosecution could bear its burden of proving that the omitted information was “material”—i.e., that it “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available”—based solely on evidence that it significantly affected the company’s “earnings” as reported under Generally Accepted Accounting Principles (GAAP), without (i) acknowledging or addressing critical differences between GAAP income and actual cash or business-related earnings or (ii) requiring evidence explaining why, in light of those differences and the other information made available, rational investors would have viewed the omitted information as significantly altering the “total mix.”

WilmerHale represents petitioner Gregory Reyes.

Cert petition filed 2/10/12. Waiver filed 2/17/12, conference 3/16/12. Petition denied.

Questions Presented:

1. Whether petitioner's convictions must be reversed because “reckless” conduct does not meet the mens rea requirement under the federal criminal securities laws. 15 U.S.C. §§ 77x, 78ff. 
2. Alternatively, whether petitioner was entitled to an instruction defining “recklessness” to mean at least what it means in civil securities fraud cases - i.e., “an intentional and extreme departure from standards of ordinary care that presents a danger of misleading buyers and sellers that is either known to the defendant or so obvious that he must have been aware of it.”

Cert petition filed 1/18/12, response requested 2/14/12.

Question Presented:

Whether the Second Circuit's deference to the Securities and Exchange Commission’s expansive interpretation of the ambit of liability under Rule 10b-5 violates the rules set down by this Court in Janus Capital Group. Inc. v. First Derivative Traders,___ U.S.___ 131 S. Ct. 2296; 180 Lawyers Ed. 2d 166; 2011 U.S. LEXIS 4380 (2011) and Stoneridge Investing Partners LLC v. Scientific-Atlanta. Inc., 552 U.S. 148 (2008).

Cert petition filed 12/23/11, waiver filed 1/20/12, conference 2/17/12. Petition denied.

Questions Presented: 

1. Can the Congress of the United States grant absolute immunity to the Security and Exchange Commission (SEC) and all entities connected to it, which deprives a citizen their rights of Due Process of law as granted by the Constitution to protect his property?
2. Did Congress also grant absolute immunity to all self-regulatory organizations (SRO) under the supervisory of the SEC, regardless of the action taken by them or just certain items?
3. Does the immunity granted by Congress to the SEC and SROs also extend beyond the stock exchanges, to its employees or contractures and to the Brokers, (Market Makers) who sell the stocks and sets the price of the stock and therefore are they extended the same immunity?
4. If Brokers manipulates the sale of stocks on exchanges would that be fraud and if it was fraud, would absolute immunity still apply?
5. Is it possible that Congress has written a perfect law and there are no cheaters involved in selling or reporting the sale of stocks?

Cert petition filed 11/14/11, waiver filed 11/28/11, conference 1/20/12. Petition denied.

Question Presented:

Are Self Regulatory Organizations entitled to absolute immunity for unlawful conduct that is "incident to" their regulatory powers but does not involve performance of any regulatory duty on behalf of the government?

Cert. petition filed 9/22/2011, conference 1/13/12. Petition denied.