The past decade has seen a surge in the number of cases brought against financial institutions and other major corporations under the Anti-Terrorism Act, 18 U.S.C. § 2331 et seq. (“ATA”). Plaintiffs alleging injuries by acts of international terrorism have sought to recover treble damages for their injuries from financial institutions on the theory that the financial institutions supplied, directly or indirectly, financial services to the terrorist groups. The frequency with which such suits are filed is unlikely to diminish, particularly because Congress recently extended the statute of limitations for ATA claims from four to ten years, and in some circumstances even longer. On February 14, 2013, the United States Court of Appeals for the Second Circuit issued a significant opinion with respect to the ATA’s causation requirements. In Rothstein v. UBS AG, the Court held that the plaintiffs had failed adequately to allege that UBS’s transfers of funds for the government of Iran were the proximate cause of the plaintiffs’ injuries suffered in terrorist attacks by Hamas and Hizbollah in Israel. Rothstein will be an important precedent for financial institutions and other companies in defending themselves against ATA lawsuits.

…continue reading: Anti-Terrorism Act Liability for Financial Institutions

In the recent decision Gatz Properties LLC v. Auriga Capital Corporation, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s January 2012 decision in Auriga Capital Corporation v. Gatz Properties. In January of this year, the Court of Chancery held that a controlling member and manager of a limited liability company breached his fiduciary duties to the company’s minority members because the process by which he purchased the limited liability company from the minority members did not result in the payment of a fair price under the entire fairness standard of review. In affirming the decision, the Supreme Court stated that the question of whether the default standard under the Delaware Limited Liability Company Act is that a manager owes fiduciary duties to the members of a limited liability company remains unanswered and should not have been addressed by the lower court. Until this question is answered definitively, members of limited liability companies should clearly state in the limited liability company agreement whether and to what extent the company’s managers or controlling persons should have any fiduciary duties to the members.

…continue reading: Fiduciary Duties as Default Standard Under Limited Liability Company Act

On August 8, 2012, the Second Circuit issued an important decision in Securities and Exchange Commission v. Apuzzo, 2012 WL 3194303, clarifying the test the SEC must meet to establish aiding and abetting liability for a securities law violation. There previously had been uncertainty in the Second Circuit whether the SEC must prove that the aider and abettor proximately caused the harm on which the primary violation was based. In Apuzzo, the Second Circuit made clear that “proximate cause” was not an element of the aiding and abetting violation and that, to charge someone with aiding and abetting, the SEC need allege and prove only that the aider and abettor associated himself with the venture in some way, participated in the venture as in something he wished to bring about, and sought by his action to make the venture succeed. The Court of Appeals also stated that proof of a high degree of knowledge of a primary violation may lessen the SEC’s burden in proving substantial assistance.

…continue reading: Aider and Abettor Liability Standards in SEC Civil Enforcement Actions