Category Archives: Appellate Monitor

The U.S. Court of Appeals for the Fourth Circuit has upheld the dismissal of a securities class action against Duratek, Inc., a Columbia, Md.-based company that disposes of radioactive waste materials for nuclear facililties. The opinion can be found here.

Any securities litigation opinion from the Fourth Circuit has the potential to be big news, because the court has never decided whether recklessness suffices to meet the scienter requirement for 10b-5 actions and, correspondingly, what a plaintiff must plead to satisfy the PSLRA’s heightened pleading standards for scienter. But no luck today. Duratek is a per curiam opinion and simply holds that “even under the lenient Second Circuit standard” the complaint failed to adequately plead scienter.

In Cantrell v. Cal-Micro, Inc. (9th Cir. May 28, 2003), the Ninth Circuit addressed whether a corporate officer who is personally liable for corporate fraud can discharge such a debt in bankruptcy. The panel held that the directors or officers of a California corporation are not fiduciaries within the meaning of the federal bankruptcy code. As a result, the judgment against Cantrell, for breach of his fiduciary duties, was dischargeable in bankruptcy. The Recorder has an article on the opinion and its potential impact on collecting judgments.
Note, however, that the Ninth Circuit�s ruling should not affect the ability of plaintiffs to collect judgments based on securities fraud claims. Section 803 of the Sarbanes-Oxley Act has amended the federal bankruptcy code to make judgments and settlements that result from a violation of federal and state securities laws (or common law securities fraud) non-dischargeable.