United States Court of Appeals, District of Columbia Circuit
D. J. WU, ET AL., APPELLANTS
JOHN CRUMPTON STOMBER, ET AL., APPELLEES
Argued, February 19, 2014
Appeals from the United States District Court for the District of Columbia. (No. 1:11-cv-02287). (No. 1:11-cv-01142).
Matthew E. Miller argued the cause for appellants. With him on the briefs were Jonathan W. Cuneo and Joel Davidow.
Robert A. Van Kirk argued the cause for appellees. With him on the brief were Sarah F. Teich, Brian C. Rabbitt, and Gary A. Orseck.
Before: HENDERSON and KAVANAUGH, Circuit Judges, and RANDOLPH, Senior Circuit Judge. Opinion for the Court filed by Circuit Judge KAVANAUGH.
Kavanaugh, Circuit Judge
Carlyle Capital Corporation invested in residential
mortgage-backed securities. In June 2007, in order to raise capital, Carlyle
Capital sold shares in the company to private investors. During the real estate
and financial crisis of 2008, Carlyle Capital's investments lost their value,
and the company went out of business. In this suit, former Carlyle Capital
investors alleged that Carlyle Capital made material misstatements and omissions
in its June 2007 sale of securities and thereby violated the federal securities
laws. Plaintiffs also alleged violations of Dutch law. In thorough opinions, the
District Court dismissed the claims. We affirm.
Carlyle Capital was an investment fund. Between 2006 and 2008, it invested the majority of its capital in AAA-rated, Fannie Mae-guaranteed and Freddie Mac-guaranteed residential mortgage-backed securities. In June 2007, Carlyle Capital conducted a private offering of its shares to accredited investors. Such accredited investors must meet certain high personal wealth requirements at the time they purchase securities. See 17 C.F.R. § 230.501(a). The basic idea of Carlyle Capital's offering was to raise more capital so that it could purchase even more residential mortgage-backed securities.
In the spring of 2008, amidst the ongoing real estate meltdown, Carlyle Capital collapsed. Three years later, two sets of investors brought class action suits in federal district court in Washington, D.C. The two cases were later consolidated. Plaintiffs alleged, as relevant here, that Carlyle Capital made certain misstatements and omissions during the June 2007 Offering, in violation of Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.
See 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. They also eventually alleged common-law fraud and misrepresentation claims. In the midst of the D.C. litigation, these same plaintiffs, joined later by some other new plaintiffs, brought a separate suit in New York state court based on the same nucleus of facts and raising the same basic claims. The New York action was removed to New York federal district court and ...