Following the stock market crash in 1929, Congress enacted the Securities Act of 1933 (the “1933 Act”) and the Securities and Exchange Act of 1934 (the “1934 Act”). Cyan, Inc. v. Beaver Cty. Emps. Ret. Fund , 138 S. Ct. 1061, 1066 (2018). The 1933 Act has two primary objectives: (1) to provide transparency in financial statements so investors can make informed decisions about securities being offered for public sale; and (2) to address misstatements and omissions in the secur

Derivative actions are brought by current shareholders of a company to redress the harm (monetary or equitable) incurred by the company as the result of officer/director self-dealing, breaches of fiduciary duty, and/or other wrongdoing; to restore shareholder value caused by mismanagement and the waste of corporate assets; and to enhance and strengthen internal controls and the company’s governance policies and procedures. Very often, shareholder derivative actions are filed

McGuckin v. Privilege Underwriters Reciprocal Exch. was decided by the Appellate Division, Second Department, on July 17, 2019. The facts of McGuckin , at least from the Second Department’s decision, seem rather straight forward. The plaintiff, who was a passenger in a vehicle owned by Carol Giambrone and driven by Douglas Giambrone, was injured when the vehicle was in an accident. The vehicle was insured by defendant Privilege under a policy that provided at the time of

Readers of this Blog know that, as a general matter, New York courts will not permit a fraudulent inducement claim to survive a motion to dismiss when the claim arises from a breach of contract. Indeed, courts routinely dismiss a fraudulent inducement claim where “ he existence of a valid and enforceable written contract govern a particular subject matter” and the recovery sought arises out of the same facts and circumstances. Clark-Fitzpatrick v. Long Is. , 70 N.Y.2d 382 (1

The disclosure of material information is the foundation of the Securities and Exchange Commission’s (“SEC”) mission. For this reason, the SEC considers itself to be “a disclosure agency.” See “The Importance of the SEC Disclosure Regime” by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission (July 16, 2013) (here). One need only look at the SEC’s website to confirm this point: “he laws and rules that govern the securities industry in the United States

Working with friends can be both rewarding and challenging. The comfort that brings friends together often is replaced by the stress and rigors of running a business. Because friends have a history together, professional disagreements often become heated, especially when there are pent up issues or grudges that one holds about the other. Similarly, the character traits that created the friendship are often replaced by a professional (and, some would say, ugly) demeanor that w

Frequently, important terms of a contract are intended to be incorporated by reference into other documents. Litigation frequently arises when one party disputes whether the terms of extrinsic documents were indeed made part of the executed agreement. The parties in Movado Group, Inc. v. Mozaffarian , 92 A.D.3d 431 (1 st Dep’t 2012), entered into a credit agreement in which defendants “expressly acknowledged receipt of, and agreed to be bound by, terms and conditions conta

On July 9, 2019, the Appellate Division, First Department, issued three decisions involving claims of fraud and/or fraudulent inducement that piqued this Blog’s interest. One case involved whether a fraudulent inducement claim duplicated a contract claim ( Man Advisors, Inc. v. Selkoe , 2019 N.Y. Slip Op. 05483 (1st Dept. July 9, 2019) ( here ), while the other two involved the justifiable reliance element of a fraud cause of action ( Mann v. Thomas-Senior , 2019 N.Y. Slip O

Sometimes state appellate courts affirm or modify lower court decisions without providing much in the way of analysis. With overburdened dockets and substantially similar issues being decided, it is no surprise these courts issue short decisions that have more value to the parties than to the bar. Such is the case in BML Properties Ltd. v. China Construction America Inc. , 2019 N.Y. Slip Op. 05339 (1st Dept. July 2, 2019) ( here ). Overview and the First Department’s Decisi

On July 1, 2019, this Blog wrote about Hoffman v. AT&T Inc. , 2019 N.Y. Slip Op. 31811(U) (Sup. Ct. N.Y. County, June 21, 2019) ( here ). Hoffman involved a motion, under CPLR § 2201, to stay an action filed in state court, alleging claims under the Securities Act of 1933 (the “1933 Act”), in favor of a parallel action filed in federal court, alleging claims under the 1933 Act and the Securities Exchange Act of 1934 (the “Exchange Act”). As discussed in the article, the Hoff

In mortgage foreclosure actions, and other actions in which a party is suing on a promissory note (or other negotiable instruments) ( a “Note”), a plaintiff must allege that it is in possession of the underlying Note in order to establish that it has standing to prosecute the action. As this Blog has previously noted in the Blog < The=">The" Second="Second" Department="Department" Denies="Denies" Summary="Summary" Judgment="Judgment" to="to" Another="Another" Foreclosing="Fo

On March 20, 2018, the United States Supreme Court decided Cyan, Inc. v. Beaver County Employees Retirement Fund , 138 S. Ct. 1061, 1069 (2018), in which it unanimously held that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) does not strip state courts of subject-matter jurisdiction over class actions involving claims exclusively brought under the Securities Act of 1933 (the “1933 Act”), and does not allow for the removal of those cases to federal court.

Since the early 20th century, a plaintiff alleging fraud in New York can recover only the actual pecuniary loss sustained as a result of the misrepresentation or omission, i.e. , the plaintiff’s out-of-pocket damages. Reno v. Bull , 226 N.Y. 546 (1919); see also Continental Cas. Co. v. PricewaterhouseCoopers, LLP , 15 N.Y.3d 264 (2010). The damages recoverable under the out-of-pocket rule are intended to compensate plaintiffs for what they lost because of the fraud, not for w

Arbitration is an alternative form of dispute resolution where the parties voluntarily agree that a neutral, private person will resolve any legal disputes between them, instead of a judge or jury in a court of law. Rent-A-Ctr., W, Inc. v. Jackson , 561 U.S. 63, 67 (2010) (noting that “arbitration is a matter of contract”). In business and commercial transactions, arbitration is the preferred means of resolving disputes. It is encouraged and recognized as the public policy of

On June 17, 2019, the Securities and Exchange Commission (“SEC” or the “Commission”) announced (here) that KPMG LLP (“KPMG”) agreed to settle charges that it altered prior audit work after receiving information about inspections of the firm by the Public Company Accounting Oversight Board (“PCAOB”). In connection with the settlement, KPMG agreed to pay a $50 million penalty and comply with a set of remedial measures to prevent the conduct at issue, including retaining an ind

Rule 3213 of the CPLR – which permits a litigant to move for summary judgment in lieu of filing a complaint to streamline litigation in situations where the statute is applicable – provides: When an action is based upon an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons a notice of motion for summary judgment and the supporting papers in lieu of a complaint. The summons served with such motion papers shall require the d

Lawyers should be mindful that the signed writing aspect of CPLR 2104 can be satisfied by e-mails exchanged between counsel. CPLR 2104 provides, in relevant part that: An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered. One of the first cases in New York to t

On November 18, 2018, this Blog wrote about Brown v. Cerebus Capital Management, LP , 2018 N.Y. Slip Op. 32782 (Sup. Ct., N.Y. County Oct. 30, 2018) ( here ). Brown involved the grant of employment compensation that plaintiffs claimed, among other things, was part of a fraudulent scheme to deprive them of their benefits. The gravamen of the article pertained to the difference between the standards for pleading fraud with particularity under the Civil Practice Law and Rules (