The Delaware Court of Chancery last week dealt another blow to disclosure-only settlements of merger litigation and refused to approve a proposed class-action settlement arising from Zillow, Inc.’s acquisition of Trulia, Inc. The court’s decision held that the supplemental disclosures that formed the basis of the settlement were not “material
The Supreme Court agreed today to review the Court of Appeals for the Ninth Circuit’s decision concerning the “personal benefit” required to establish a claim for insider trading. The grant of certiorari in Salman v. United States (No. 15-628) could resolve a possible split between the Ninth Circuit and the…
The U.S. Court of Appeals for the Ninth Circuit appears to have rebuffed aspects of the Second Circuit’s recent effort to narrow liability for insider trading. The Ninth Circuit’s decision today in United States v. Salman holds that insiders can engage in insider trading if they disclose material nonpublic information with the intent to benefit a trading relative or friend, even if they do not receive a pecuniary gain or other quid pro quo type of benefit in exchange for the disclosures.
The Ninth Circuit’s opinion was written by Judge Jed Rakoff, a Senior District Judge for the Southern District of New York, who sat by designation on the Ninth Circuit panel – and whose recent opinions seem to have struggled with the Second Circuit’s decision in United States v. Newman. The Ninth Circuit’s decision might now create a circuit split – and enhance the chances that the Government will seek and perhaps obtain a writ of certiorari from the Supreme Court in Newman and/or Salman.
Originally published as a Proskauer Client Alert.
The U.S. Court of Appeals for the Third Circuit added its voice yesterday to the ongoing judicial effort to construe the U.S. Supreme Court’s 2010 decision in Morrison v. National Australia Bank, concerning the extent to which the federal securities laws apply to securities transactions involving transnational elements. The Morrison decision had held that the Securities Exchange Act’s anti-fraud provisions apply only to transactions involving the purchase or sale of (i) “a security listed on an American stock exchange” and (ii) “any other security in the United States.”
In an appellate case of first impression, the Third Circuit ruled in United States v. Georgiou that the OTC Bulletin Board (the “OTCBB”) and the Pink OTC Markets Inc. (the “Pink Sheets”) are not “American stock exchanges” under Morrison‘s first prong. The court also held that transactions in “securities issued by U.S. companies through U.S. market makers acting as intermediaries for foreign entities” satisfy Morrison‘s second prong and are subject to the federal securities laws. This ruling on Morrison‘s second prong follows decisions from the Second and Eleventh Circuits concerning the locus of transactions in securities not listed on U.S. stock exchanges.
Proskauer litigator Ralph Ferrara spoke last week on real-world crisis management – “event horizons and black holes” – at PLI’s 46th Annual Securities Regulation Institute in New York. Recently named to the inaugural class of the Securities Docket’s Enforcement Hall of Fame, Mr. Ferrara presented a complex hypothetical and…
In its landmark 2010 decision in Morrison v. National Australia Bank, the Supreme Court articulated what seemed to be a bright-line test for determining the extent to which the U.S. securities laws apply to transactions with international elements. In so doing, the Court harshly rejected the fact-intensive “conduct/effects” tests propounded several decades ago by the Second Circuit and followed by many other courts throughout the country.
Last week, the Second Circuit got its revenge. In a long-awaited decision in ParkCentral Global Hub Limited v. Porsche Automobile Holdings SE, the court declined “to proffer a test that will reliably determine when a particular invocation of [the Securities Exchange Act’s anti-fraud provision] will be deemed appropriately domestic or impermissibly extraterritorial.” Instead, the Second Circuit held that courts must carefully consider the facts and circumstances of each case to avoid the very result that the Supreme Court had hoped to prevent in Morrison: promiscuous application of the U.S. securities laws to transactions that have little, if any, relationship to the United States.
The ParkCentral decision illustrates the difficulties that the Morrison test created for determining whether U.S. law should apply to transactions involving unlisted securities and international elements. The decision reinforces the trend against extraterritorial application of U.S. law – while perhaps not closing the door to applying U.S. law where facts so warrant.
The Court of Appeals for the Second Circuit ruled today that the Dodd-Frank Act’s prohibition on retaliation against whistleblowers does not apply extraterritorially. In affirming the dismissal of the case on extraterritoriality grounds, the court declined in Liu v. Siemens AG to address another issue that has attracted attention: whether a person qualifies as a whistleblower for purposes of the antiretaliation provision if he or she has disclosed the alleged misconduct only within the corporation, rather than to the Securities and Exchange Commission.
The U.S. Supreme Court today declined to abandon the efficient-market theory, with its rebuttable presumption of reliance that enables securities class actions to proceed without proof of actual reliance on alleged misrepresentations or omissions. However, the Court’s ruling in Halliburton Co. v. Erica P. John Fund, Inc. allows defendants to try to show at the class-certification stage that the alleged misrepresentations did not in fact affect the price of the securities at issue.
The Halliburton decision is likely to increase the complexity, importance, and expense of class-certification proceedings and could influence both sides’ settlement strategies in securities class actions.