Yesterday, in two decisions handed down in related cases, the Sixth Circuit addressed a series of securities issues related to oil and gas interests. In the first case, Nolfi v. Ohio Kentucky Oil Corporation, the court affirmed a $1.7 million dollar judgment. In the second case, Fencorp v. Ohio Kentucky Oil Corporation, the court reversed a $1 million judgment, directed the entry of a $800,000 judgment. Both cases demand a careful read for those who deal with securities litigation, but also shed light on basic trial practice. The court found a number of issues were not properly preserved, and the case is a cautionary tale for dealing with potentially inconsistent jury verdicts (such as the jury finding over $7 million in rescissory damages but only awarding $1.7 million).
Among the notable holdings in this pair of cases, the Sixth Circuit:
- held that Ohio’s Securities Statute of Repose is constitutional in the face of a constitutional challenge;
- upheld the imposition of discovery sanctions stemming of the failure to adequately preserve documents;
- recognized that a U.S. Supreme Court decision, Ortiz v. Jordan, reversed existing Sixth Circuit precedent on the availability to entertain appellate review of summary judgment motions following a trial;
- found that sales assignments of oil and gas leases constitute securities, consistent with the holdings of five other circuits;
- found that the plaintiffs waived their right to challenge inconsistency in the jury verdict by failing to move under Rule 49(b) in a timely manner;
- held that rescission is an appropriate measure of damages for a Section 10(b) claim post-enactment of the PSLRA, but at the same time, the court cautioned that rescission is a “fact-dependent remedy” and “is likely only appropriate in rare or unusual circumstances.”
The cases are accordingly packed with a lot of information and several new holdings on issues of first impression within the circuit. They certainly demand careful scrutiny by securities litigators.