Posts in Case Summaries
Akorn, Inc. v. Fresenius Kabi AG: Suit for Specific Performance of Merger Agreement

In Akorn, Inc. v. Fresenius Kabi AG (Del. Ch. 2018 WL 4719347), the plaintiff pharmaceutical company (“Akorn”) brought suit against Fresenius seeking specific performance of its signed merger agreement. Fresenius argued it was permitted to terminate the merger agreement because Akorn’s actions, performance, and misrepresentations following execution of the agreement constituted a materially adverse effect (“MAE”) under the terms of the merger agreement and thus excused Fresenius’s obligation to perform. The court held that Fresenius legally terminated its merger agreement with Akorn because: (1) Akorn made material misrepresentations with regard to its business operations and the status of its regulatory compliance before the closing date, (2) Akorn did not materially comply with or perform its obligations under the merger agreement prior to the effective closing date, and (3) Akorn suffered a general MAE that allowed Fresenius to terminate the agreement.

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SEC v. Catlin Cade, IV

In SEC v. Cade, No. 2:18-cv-01323-JEO (N.D. Ala. Aug. 17, 2018), the SEC filed an initial complaint against Catlin Cade (“defendant”) alleging a violation of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and SEC Rule 10b-5 by trading shares of Golden Enterprises, Inc. (“Golden”) on the basis of material nonpublic information.

According to the allegations, a director of Golden learned of nonpublic information pertaining to a contemplated merger between Golden and a second company. The director separately owned and controlled a different privately held company (“Director’s Company”)

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SEC Investigation of Elon Musk

On August 7, Elon Musk made an abrupt announcement regarding his plan to take Tesla private. Mr. Musk claimed that this Twitter announcement came after he had “secured” funding from the Saudi Arabian sovereign wealth fund. (Ben Bain and Matt Robinson, Bloomberg). After the announcement, Tesla’s shares rose in value to over $381 per share, from $342 (the closing price on August 6). (Mark Matousek, Business Insider). Nevertheless, the share price dropped dramatically over the next few weeks to as low as $263 on September 7.

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SEC v. Chang - Complaint

On September 20, 2017, the Securities and Exchange Commission (“SEC”) filed a complaint (“Complaint”) against Peter C. Chang (“Chang”), alleging Chang violated Sections 10(b), 14(e), and 16(a) of the Exchange Act and Rules 10b-5, 14e-3, and 16a-3 thereunder. The SEC asserted Chang knowingly engaged in an insider-trading scheme and failed to disclose his ownership of securities in accordance with federal securities laws.

According to the Complaint, Chang served as the Chief Executive Officer, Chairman of the Board, and President of Alliance Fiber Optic Products, Inc. (“AFOP”) from its formation in 1995 until its acquisition by Corning, Inc. (“Corning”) in 2016.

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SEC v. Sayid: District Court Denied Securities Lawyer's Motion to Dismiss SEC Fraud Allegations

In SEC v. Sayid, No. 17 Civ. 2630 (JFK), 2018 BL 9039 (S.D.N.Y. Jan. 10, 2018), the United States District Court for the Southern District of New York denied securities lawyer Norman T. Reynolds’ (“Reynolds”) motion to dismiss a Securities and Exchange Commission (“SEC”) complaint for failure to state a claim. The SEC alleged Reynolds wrote misleading opinion letters for Mustafa David Sayid (“Sayid”), the legal counsel for Nouveau Holdings Ltd. and Striper Energy, Inc. (collectively, the “Shells”), which opinion letters Sayid used to engage in market manipulation. The court found that the SEC adequately alleged facts that constitute strong circumstantial evidence of Reynolds’ conscious misbehavior.

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SEC v. Mapp: SEC's Motion for Summary Judgment Granted in Part and Denied in Part

In SEC v. Mapp, No. 4:16-CV-00246, 2017 BL 401498 (E.D. Tex. Nov. 8, 2017), the United States District Court for the Eastern District of Texas granted in part and denied in part the Securities and Exchange Commission’s (“SEC”) motion for summary judgment and denied William E. Mapp’s (“Defendant”) partial motion for summary judgment.

According to the allegations, Defendant raised approximately $26 million in private securities offerings as CEO for Servergy, Inc., (“Servergy”) from November 2009 to September 2013. Defendant received over $1.4 million in investments from Caleb White (“White”) through Dominion Joint Venture Group No. 1, 2, and 3 (collectively “Dominion JVs”). Servergy also secured $19.4 million from broker dealer WFG Investments, Inc. (“WFG”). Severgy did not file a registration statement for any of its securities offerings.

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