WC Capital Management, LLC v. UBS Securities, LLC
711 F.3d 322
2d Cir.2013Background
- Willow Creek sues UBS for alleged Rule 10b-16 violations related to margin disclosures and margin-call practices.
- UBS acted as Willow Creek’s prime broker providing margin loans and custody of collateral.
- Willow Creek received an Initial Disclosure Statement describing general margin policies and right to request more specific information.
- UBS later issued Margin Levels I with detailed, internal margin formulas not previously disclosed.
- A February 2009 Margin Levels II document increased collateral requirements; Willow Creek faced significant margin calls and losses.
- District Court granted judgment on the pleadings for UBS; appeals followed with SEC as amicus urging a narrow reading of Rule 10b-16.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Rule 10b-16(a) require disclosure of detailed internal margin formulas? | Willow Creek argues general disclosures are insufficient. | UBS contends general terms suffice and no need for detailed formulas. | No; disclosures adequate under 10b-16(a). |
| Does Rule 10b-16(b) require 30-day advance notice before margin-rule changes? | Willow Creek asserts a right to notice before changes. | UBS argues margin changes are not credit charges needing notice. | No; 10b-16(b) does not apply to margin-rule changes. |
| Does Willow Creek have standing to pursue 10b-16(a) claim? | Willow Creek suffered injury from non-disclosure impacting decisions. | UBS challenges Article III standing. | Willow Creek has standing to pursue 10b-16(a) claim. |
Key Cases Cited
- Chiarella v. United States, 445 U.S. 222 (U.S. 1980) (anti-fraud focus of Rule 10b-16; deception required for 10b claims)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (standing needs injury in fact, traceability, causation)
- Liang v. Dean Witter & Co., 540 F.2d 1107 (D.C. Cir. 1976) (disclosure of general policy vs. actual policy under 10b-16(a))
- In re Refco Capital Mkts., Ltd. Brokerage Customer Sec. Litig., 586 F. Supp. 2d 172 (S.D.N.Y. 2008) (disclosure requirements and deception under 10b-16)