Supreme Court of Delaware Agrees with Pro-Investor Arguments Submitted by Peiffer Wolf Carr & Kane Attorneys in Amicus Brief
On May 24, 2016, the Supreme Court of Delaware released an opinion in an important case having to do with the ability of investors in public corporations to seek redress for their losses without additional roadblocks when such investors continue to hold stock in the corporation in reliance upon misrepresentations or omissions by the corporation.
The Court considered the legal question of whether certain types of fraud cases brought by shareholders should be considered “direct” claims brought by investors, or should instead be considered “derivative” claims that belong to the corporation. If the claims are derivative, the investors would face additional legal roadblocks that could make it more difficult for them to seek compensation for their losses.
The case was brought by an investor in Citigroup, who argued that Citigroup made misstatements that induced him to hold, rather than sell, stock in Citigroup during the financial crisis of 2008.
Peiffer Wolf Carr & Kane attorneys Jason Kane and Colin Ray filed a friend of the court brief on behalf of the Public Investors Arbitration Bar Association (“PIABA”), arguing that claims like the investor’s are direct and belong to investors. Citigroup and the Securities Industry and Financial Markets Association (“SIFMA”) argued that the cases are derivative and belong to the corporation – which in effect would make it more difficult for investors to seek redress for their losses.
The Court agreed with the pro-investor position advocated by the Peiffer Wolf Carr & Kane lawyers and held that the claims are direct, rather than derivative. The case could have a significant impact on investors who decide to sell securities, but change their minds in light of misrepresentations made by the company and suffer losses as a result once accurate information reaches the markets.
“We are pleased with the Court’s decision,” said Jason Kane, a partner at Peiffer Wolf Carr & Kane who often represents investors who are victims of investment-related fraud or misconduct. “This case will benefit investors who have been lied to by corporations and will allow them to pursue their claims more easily.”
The Delaware Court’s full opinion is located on its website at http://www.courts.delaware.gov/supreme. The case number is 641, 2015, and the Second Circuit case numbers are 13-448-cv(L) and 13-4504-cv(XAP). The opinion can be accessed directly at http://courts.delaware.gov/Opinions/Download.aspx?id=241290.