The SDNY Blog is relaunching as a publication of Steptoe & Johnson LLP.  We expect to post several times a week on decisions and other developments in the Southern District of New York.  You can find us right here at www.sdnyblog.com, or follow us on Twitter or Facebook.

Here’s a quick summary of what’s been happening in the Southern District while we were away:

  • Judge Berman vacated the NFL’s four-game suspension of New England Patriots quarterback Tom Brady for his alleged role in deflating footballs used during the 2015 AFC Championship Game.  Judge Berman concluded that “Brady had no notice that he could receive a four-game suspension for general awareness of ball deflation by others or participation in any scheme to deflate footballs, and non-cooperation with the ensuing Investigation.”

Continue Reading SDNY Blog Returns as Steptoe Blog

In an opinion today allowing a securities class action to be dismissed without prejudice, Judge Engelmayer expressed concern about the lawyers using confidential witnesses in complaint without confirming the accuracy of the statements attributed to them or warning the witnesses that their identity might have to be revealed. On the first point, the complaint’s 11 confidential witnesses were not given the chance to confirm the statements attributed to them and at least four believed they were misquoted or misleadingly quoted.  This risk of error, Judge Engelmayer concluded, counsels in favor of better diligence before filing a complaint. On the second point, Judge Engelmayer concluded that it was a matter of “decency” to alert confidential witnesses that their identities might eventually be revealed:
Continue Reading Judge Engelmayer: Lawyers Using Confidential Witnesses in Complaints Should Confirm Their Testimony and Warn of Risks of Being Outed

In an opinion Tuesday, Judge Forrest dismissed various class action suits accusing stock exchanges of improperly allowing high-frequency traders to pay to obtain and trade on market data faster than other investors.  The plaintiffs subscribed to market data via subscriber contracts that, in turn, incorporated the terms of standardized market data dissemination “plans.”  Those plans, which the SEC approved, stated the data would be provided on “fair and reasonable terms” that are “not discriminatory” (or used similar language). Judge Forrest ruled that the claims were preempted by the detailed federal statutory and regulatory regime governing stock exchanges:
Continue Reading Judge Forrest: “Flash Boys” Suit Against Exchanges is Preempted by Federal Law

In an opinion Friday, Judge Scheindlin largely denied Barclays’ motion to dismiss a securities fraud class action alleging that Barclays misled investors about its anonymous trading platform, or “dark pool,” referred to as “LX.”  At the outset, Judge Scheindlin found it appropriate for the plaintiffs to have borrowed substantially from the New York Attorney General’s

In an opinion today, Judge Swain ruled Section 13 of the Securities Act, which states that no action may be brought “more than three years after the security was bona fide offered to the public” was not extended by the so-called “FDIC Extender Provision” of the Financial Institutions Reform, Recovery, and Enforcement Act (or

In an opinion today in a securities fraud case, Judge Engelmayer denied a class certification motion that was based on a somewhat novel theory:  the plaintiffs allege that insiders of a company called SmartHeat publicly touted a “lockup” restricting their ability to sell shares, but then secretly “unlocked” those shares, thereby causing extra shares to flood the market and depress prices. He ruled that there was insufficient evidence of the plaintiffs’ theorized cause and effect:
Continue Reading Judge Engelmayer Rejects Class Certification Premised on Extra Shares Being “Secretly” Available and Depressing Price

In an opinion last week, Judge Scheindlin denied the plaintiffs in a securities class action leave to amend their complaint to assert securities fraud claims against the company’s auditors, PriceWaterhouseCoopers and Ernst & Young. The proposed amendment would have alleged that PwC and E&Y took at face value the erroneous opinion of a third party tax preparer (referred to as “Frankel”), which the plaintiffs argued is as reckless and fraudulent as simply taking management representations as true:
Continue Reading Judge Scheindlin: Auditors’ Failure to Investigate Tax Preparer’s Opinions is Not Fraud

In an opinion today, Judge Gardephe dismissed a securities class action accusing Avon of defrauding its investors about its compliance with the FCPA.  Avon’s management received a whistleblower letter about bribes to Chinese officials, and Judge Gardephe found that it was not fraudulent for Avon to investigate the allegations before disclosing them:
Continue Reading Judge Gardephe Dismisses Class Action Accusing Avon of Hiding FCPA Exposure

In an opinion dated yesterday, Judge Castel dismissed a suit challenging the proposed merger between a Chilean bank (Itau) and a Brazlian bank (CorpBanca) because the plaintiff, Cartica, was not a “purchaser” or “seller” in relation to the alleged fraud.  It was merely a stockholder. In doing so, he took one side of an issue that has divided the lower courts:
Continue Reading Judge Castel Rules 10(b) Claims Are Limited to Buyers and Sellers, Even in Injunction Cases

In an opinion yesterday, Judge Swain dismissed a securities class action accusing GM of “channel stuffing” — forcing excess inventory onto dealers to create the appearance of improving revenue — because the inventory at dealerships was fully disclosed:

The fundamental flaw of Lead Plaintiff’s thesis is that is own Amended Complaint reflects public knowledge of