First Republic Bank Investors Invoke Justices’ Jarkesy on Appeal

First Republic Bank shareholders’ lawsuit against the collapsed financial institution’s former executives and auditor hinged on independent wrongdoing and shouldn’t have been tossed, the suing investors told a federal appeals court.

The dismissal order “effectively immunizes bank executives, auditors, and other third parties from securities fraud liability for their own misconduct,” contrary to the meaning of the federal act that the lower court cited, the investors said in their brief filed Oct. 3 in the US Court of Appeals for the Ninth Circuit.

The US District Court for the Northern District of California’s ruling also violates Article III of the ...