Overstock.com, Inc. v. Goldman Sachs

I. INTRODUCTION

Often, it is the federal courts, applying federal law, that wrestle with claims of cross-state securities fraud involving a nationally-listed stock. Here, plaintiffs of various states allege defendants, securities firms headquartered on the East Coast, violated California and New Jersey law through their involvement in massive naked short selling of Overstock shares. The trial court sustained demurrers to plaintiffs’ New Jersey Racketeer Influence and Corrupt Organizations (RICO) claim without leave to amend and subsequently granted summary judgment on plaintiffs’ California market manipulation claims. We affirm the dismissal of the belatedly raised New Jersey RICO claim. We also affirm the summary judgment as to three of the four defendants, but reverse as to Merrill Lynch Professional Clearing Corporation. The evidence, although slight, raises a triable issue this firm effected a series of transactions in California and did so for the purpose of

* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of part III(A), III(B)(4)(d)(ii)–(iv) and III(B)(4)(e). 1 inducing others to trade in the…