CALIFORNIA CLASS ACTION LAW

Category: Shareholder Actions

Ninth Circuit Holds That Incomplete Disclosures About Sales Force Performance Are Not Material Omissions

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In In re Cutera Securities Litigation, 610 F.3d 1103 (9th Cir. 2010), a fraud-on-the-market class action suit, plaintiff investors appealed the dismissal of their securities fraud class action against Cutera, Inc., its chief executive officer, Kevin Connors, and its chief financial officer, Robert J. Santilli, under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934.  The investors alleged that Cutera provided false and misleading revenue projections and failed to disclose material information about the shortcomings of Cutera’s sales staff.

Chief Judge Vaughn R. Walker of the Northern District of California dismissed without prejudice for failure to state claim. Investors appealed.

The Ninth Circuit affirmed, concluding that Cutera’s alleged incomplete disclosures about its sales force are not material omissions made in violation of the securities laws, and that Cutera’s earnings projections fall within the statutory safe harbor for forward-looking projections under the Private Securities Litigation Reform Act of 1995 (“PSLRA“), 15 U.S.C. § 78u-5. Read the rest of this entry »

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Ninth Circuit Holds That Deadline for Objection to Class Action Fee Award Must Be Set for Date After Plaintiff’s Counsel Files Fee Motion

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The Ninth Circuit Court of Appeals yesterday clarified the timing of objections to class counsel’s fee requests under Fed. R. Civ. Proc. Rule 23(h), holding that objectors must be given a deadline to object after plaintiff’s fee application is submitted.  The litigation in In re Mercury Interactive Corp. Securities Litigation, No. 08-17372, — F.3d —-, 2010 WL 3239460 (9th Cir. Aug. 18, 2010), which involved stock option backdating, settled early on, at the motion to dismiss stage.

A settlement class was certified, the settlement of $117.5 million in cash was approved, and attorneys’ fees of 25% ($29.375 million) were awarded pursuant to the settlement agreement.  No objections were made to the settlement itself, but two objections were made to the proposed attorneys’ fees.  Id. *2.  The court described lead counsel’s fee application as follows: Read the rest of this entry »

Ninth Circuit Holds That No Private Right of Action Exists to Enforce the Provisions of § 13(a) of the Investment Company Act of 1940

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In a shareholder class action, Northstar Financial Advisors, Inc. v. Schwab Investments, et al., 2010 WL 3169400 (9th Cir. Aug. 12, 2010), the Ninth Circuit Court of Appeals addressed whether there is a private cause of action to enforce the provisions of § 13(a) of the Investment Company Act of 1940 (“ICA” or “1940 Act”), 15 U.S.C. § 80a-13(a).  That section generally requires an investment company to obtain shareholder approval before deviating from the investment policies contained in the company’s registration statement filed with the Securities and Exchange Commission (“SEC”).

The Court held that “nothing in § 13(a) as originally enacted or as subsequently amended either creates a private cause of action or recognizes one exists with the clarity and specificity required under Supreme Court precedent.”

Marc J. Gross argued for plaintiff-appellee Northstar Financial Advisors, Inc.

Darryl P. Rains argued for defendants-appellants Schwab Investments, et al.

The case was argued before Circuit Judges Mary M. Schroeder N. Randy Smith and Hon. James Maxwell Moody, the Senior United States District Judge for the District of Arkansas, who was sitting by designation.  Circuit Judge Schroeder wrote the opinion of the Court.

By CHARLES H. JUNG