2nd Circuit: Securities Act claims to have more stringent pleading standards

The 2nd Circuit ruled Aug. 23 in Fait v. Regions Financial Corp. that statements of opinion are not actionable under strict liability provisions of securities laws unless plaintiffs allege that defendants didn’t believe the statements they made.

Bank holding company Regions Financial acquired another bank holding company in November 2006 in a deal valued at $10 billion, recording about $6.5 billion in goodwill. When Regions issued its 2008 fourth quarter financial results, it reported a write-down of $6 billion of goodwill and increased its loss reserves. The plaintiff filed claims under the Securities Act of 1933, alleging that the 2009 adjustment for trust-preferred securities was false and misleading, and that Regions overstated its goodwill and understated its loss reserves.

The 2nd Circuit affirmed the district court’s dismissal, ruling that claims generally do not require allegations that the speaker had a particular mental state with respect to a challenged statement. Additionally, the court explained that when a plaintiff asserts a claim on a disclosure about a belief or opinion, the defendant will only be liable if the belief or opinion was both objectively false and disbelieved by the defendant when it was made.

7th Circuit: Racial bias in class actions defined

A 7th Circuit decision Aug. 8 in Peña v. Kraft Foods Global Inc. found that discrimination against some employees violates federal anti-discrimination laws regardless of whether a company discriminates against others.

Jose Diaz and Ramon Peña were both former Kraft employees who lost their jobs after the company outsourced a number of positions. The pair eventually submitted applications for other positions at Kraft but were not hired, they claimed, because they were Hispanic.

The 7th Circuit decision reversed the district court’s summary judgment in favor of Kraft. The district court judge initially ruled Diaz and Peña’s evidence did not support an inference of discrimination because at least one Hispanic worker was not assigned to “disfavored tasks.” The 7th Circuit panel rejected this analysis, holding that Title VII of the Civil Rights Act of 1964 would have little force if an employer could defeat a discrimination claim by treating a single protected class member in accordance with the law. It added that “the employer cannot satisfy its burden by identifying a person within the protected class who was not similarly discriminated against.”

8th Circuit: Monopoly claims must have price-based proof

The Federal Trade Commission (FTC) suffered a setback recently thanks to an 8th Circuit ruling. On Aug. 19, the court rejected the FTC’s contention in FTC v. Lundbeck Inc. that the acquisition of two drugs used to treat similar heart conditions was anti-competitive.

The FTC and Minnesota’s attorney general filed suit against Lundbeck in 2008 after the pharmaceutical company allegedly tried to corner the market on drugs combating patent ductus arteriosus (PDA), and then drastically increased their prices. To successfully prove antitrust violations, the FTC had to show that the relevant product market consisted of Federal Drug Administration-approved drugs to treat PDA. The district court ruled the FTC failed to identify the relevant product market needed to assert such antitrust claims.

On appeal, the FTC argued for a de novo review, alleging the district court applied an incorrect legal standard in failing to review all pertinent factors. However, the 8th Circuit affirmed the lower court’s decision, noting that “functionally similar products may be in separate product markets, depending on the facts of the case.”

11th Circuit: FLSA plaintiffs may not always recover attorney fees

The 11th Circuit’s decision July 28 in Dionne v. Floormasters Enterprises Inc. may have significant impact on how attorneys represent their clients in wage and hour matters.

Perry Dionne was employed by Floormasters as a warehouse clerk until November 2007. In March 2008, he filed a complaint to recover overtime compensation, damages and attorney’s fees and costs. Floormasters tendered payment in full to Dionne, not including attorney’s fees and costs, and moved to dismiss the claim as moot, which the court granted. However, Dionne’s attorneys argued that he was still owed attorney’s fees because he was the prevailing party.

The 11th Circuit rejected the plaintiff’s argument and upheld the district court’s decision, given Floormasters tendered full payment for the plaintiff on the grounds that payment mooted the case. Because the plaintiff admitted the case was moot, he therefore had no claim for attorney’s fees. Dionne appealed the ruling, arguing that the suit served as the catalyst for the defendant’s eventual payment. The 11th Circuit disagreed, stating that unless the court issues a judgment in favor of the plaintiff, the plaintiff has not become the “prevailing party,” and was owed nothing.