Summary
The Ninth Circuit held that the allegations were prima facie sufficient to establish subject matter jurisdiction under the Securities Acts over an allegedly fraudulent transaction involving securities of an American corporation registered and listed on the American Stock Exchange. The court reversed the district court's summary judgment for lack of subject matter jurisdiction and remanded, while emphasizing that jurisdiction remained provisional and could be revisited if the factual basis was not established.
Topics
Practice areas
Questions Presented
- Whether the district court had subject-matter jurisdiction under 15 U.S.C. §§ 77v and 78aa over an allegedly fraudulent foreign transaction involving securities of an American corporation registered and listed on a national securities exchange.
- Whether the pleadings and record made a prima facie showing that the foreign transaction adversely affected the domestic market in the particular securities.
Holdings
- The Securities Acts' jurisdictional provisions extend to some substantially foreign transactions when the transaction involves securities registered and listed on a national securities exchange and adversely affects the domestic market in those securities.
- The allegations of the complaint and the record were prima facie sufficient to vest the district court with subject-matter jurisdiction under the Securities Acts.
Key quotations
“We thus conclude that the allegations of the complaint are prima facie sufficient to vest the district court with subject matter jurisdiction over the action under the jurisdictional statutes of the Securities Acts.” (¶ 11)
“We emphasize that our conclusion that subject matter jurisdiction exists in this case is provisional and is based on the record now before us.” (¶ 12)
Factual background
Goldfield Corporation, an American corporation whose stock was registered and listed on the American Stock Exchange, agreed to acquire the assets and stock of Canadian Plywood Corporation Ltd. for $3 million payable in Goldfield stock. The transaction was structured through a Canadian holding company, which would exchange Goldfield shares for shares held by Plywood's former shareholders. Plaintiffs alleged that the transaction violated substantive provisions of the Securities Acts, caused the collapse of the American market in Goldfield shares, and financially injured shareholders.
Procedural history
Plaintiffs brought an action seeking equitable relief and damages based on an allegedly fraudulent transaction involving the acquisition of a Canadian corporation with stock of an American corporation listed on the American Stock Exchange. The district court granted defendants summary judgment for lack of subject-matter jurisdiction. The Ninth Circuit reversed and remanded, holding that the pleadings and record made a prima facie showing of jurisdiction.
Remand instructions
The district court was to proceed with the action, but should dismiss it if, in further proceedings, appellants failed to establish the factual basis for subject-matter jurisdiction.