Supreme Court to Consider ERISA Statute of Limitations Issue

On October 2nd, the Supreme Court granted certiorari to consider whether a claim that 401(k) plan fiduciaries breached their duty of prudence by offering higher-cost retail-class mutual funds to plan participants, even though identical lower-cost institution-class mutual funds were available, is barred by 29 U.S.C. Section 1113(1) when fiduciaries initially chose the higher-cost mutual funds as plan investments more than six years before the claim was filed. Tibble v. Edison International, 13-550. In the decision below, the Ninth Circuit rejected a continuing violation theory holding that under the six-year statute of limitations for claims brought under the Employee Retirement Income Security Act, the district court correctly measured the timeliness of claims alleging imprudence in plan design from when the decision to include those investments in the plan was initially made.

Item 303 of Reg S-K Doesn’t Create Duty to Disclose under Rule 10b-5

On October 2nd, the Ninth Circuit affirmed the dismissal of a shareholder securities fraud lawsuit. Agreeing with the Third Circuit, the appellate court held that the district court did not err by failing to consider plaintiffs’ allegations of scienter in the context of Item 303 of Regulation S-K because Item 303’s disclosure duty is not actionable under Section 10(b) or Rule 10b-5. Item 303’s requirement to disclose known trends is much broader than that required for liability for forward looking statements under Section 10(b). In addition, none of the plaintiffs’ scienter allegations created a strong inference of scienter individually or holistically. Further, neither the corporate scienter doctrine nor the core operations doctrine supported a strong inference of scienter. In re Nvidia Corp. Securities Litigation.

Partial Disclosures Amounted to a Corrective Disclosure

On October 2nd, the Fifth Circuit reversed and remanded the dismissal of plaintiffs’ securities fraud lawsuit for failure to plead loss causation. Shareholders in Amedysis claimed the company engaged in a scheme to defraud Medicare. Plaintiffs further asserted they suffered an economic loss when the firm’s share price fell in response to a series of partial disclosures exposed the Medicare fraud. Finding that none of the disclosures individually constituted a corrective disclosure, the district court dismissed the complaint. Reversing, the Fifth Circuit held that a news article which provides expert analysis of complex economic data may constitute a corrective disclosure. When that report was taken together with other reports, executive resignations, governmental investigations, and earnings reports, the allegations collectively constituted a corrective disclosure that adequately pleaded loss causation. Public Employees’ Retirement System of Mississippi v. Amedisys, Inc.

Preliminary Injunction Properly Denied in Native American Internet Lending Suit

On October 1st, the Second Circuit affirmed the district court’s denial of a preliminary injunction. Plaintiffs, Native American tribes, tribal regulatory agencies, and companies owned by the tribes that offer high  interest, short  term loans over the internet, sought an injunction prohibiting New York State from imposing its usury laws against them. Plaintiffs claimed that the Indian Commerce Clause prohibited New York State from doing so. The Second Circuit held that the district court did not abuse its discretion in finding that plaintiffs failed to meet their burden of proving that the challenged transactions occurred within Native American soil, affirming the denial of the preliminary injunction. Otoe  Missouria Tribe of Indians v. New York State Department of Financial Services.

Dismissal of Securities Lending Fee Suit Is Affirmed

On September 30th, the Sixth Circuit affirmed the dismissal of a lawsuit for alleged violations of Sections 36(a) and 36(b) of the Investment Company Act. Plaintiffs, shareholders in exchange-traded funds (“ETFs”) issued by iShares, allege that iShares’ investment advisor and affiliates charge excessive securities lending fees. The Court held that a SEC exemptive order permits iShares to pay the securities lending fee at issue. Moreover, that fee could not be aggregated with other fees paid to the investment advisor to form a claim for excessive compensation under Section 36(b) of the Act. Because no private right of action exists for breach of fiduciary duty under Section 36(a) of the Act, plaintiffs’ derivative claim was also properly dismissed. Laborers’ Local 265 Pension Fund v. iShares Trust.

Supreme Court Won’t Hear Statute of Repose Case

On September 29th, the Supreme Court withdrew its order granting certiorari in Public Employees’ Retirement System v. Indymac MBS, Inc. Petitioners, who filed a Securities Act complaint, appealed a Second Circuit decision which held that the Securities Act’s statute of repose was not tolled for all class action members without facts demonstrating the timeliness of newly asserted claims.