Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Participants in an employer-sponsored 401(k) plan brought suit under the Employment Retirement Income Security Act of 1974, 29 U.S.C. 1001, and the Investment Company Act of 1940, 15 U.S.C. 80a-1, claiming excessive fees on annuity insurance contracts offered to plan participants. The district court dismissed the ICA claims because only those maintaining an ownership interest in the funds could sue under the derivative suit provision and the participants are no longer investors in the funds in question. As to the ERISA claims, the court dismissed because participants failed to make a pre-suit demand upon the plan trustees to take appropriate action and failed to join the trustees as parties. The Third Circuit affirmed with regards to the ICA claims, but vacated on the ERISA counts, holding that the statute does not require pre-suit demand or joinder of trustees. View "Santomenno v. John Hancock Life Ins. Co." on Justia Law

Defendant, a licensed financial adviser, pled guilty to 34 counts of mail fraud (18 U.S.C. 1341), wire fraud (18 U.S.C. 1343), and bank fraud (18 U.S.C. 1344) based on his solicitation of bank clients to invest in speculative real estate transactions that he controlled, unrelated to bank products, an illegal practice in the securities industry known as "selling away." The Government accused him of collecting $1.55 million between October 2002 and January 2006. The district court denied his motion to withdraw the plea when he claimed that his prior attorney, unprepared to go to trial, had browbeaten him. The court imposed a sentence of 180 months and $1.3 million in restitution. The Third Circuit affirmed. With no evidence of actual innocence and the death of some of the government's elderly witnesses, there was no "fair and just" reason to allow withdrawal of the plea. Because defendant was an investment advisor when he initiated the fraud, the court properly applied a four-level enhancement at section 2B1.1(b)(16)(A); an obstruction of justice enhancement was justified by defendant's lies concerning his guilty plea and his contact with witnesses. View "United States v. Siddon" on Justia Law

Following disclosure of misrepresentations and omissions concerning collateral, the company, which provides loans for purchase of medical equipment, sought bankruptcy protection. The district court certified a class of investors for litigation under the Securities Exchange Act, 15 U.S.C. 78j with respect to all but one defendant. The Third Circuit affirmed. Class certification requires that issues common to the class predominate over other issues; defendants argued that some "in-and-out" traders did not rely on the disclosures and did not have losses caused by the alleged omissions. The district court correctly examined the relationship between disclosures and security prices and applied a presumption of reliance so that plaintiffs were not required to prove causation at the certification stage. Denial of class certification with respect to a law firm defendant was proper because the presumption of reliance and causation does not apply; the allegedly deceptive conduct was not publicly attributable to the firm, which did not file the deceptive documents.