The Second Circuit Court of Appeals recently issued a decision that may prevent the expansion of scheme liability under the federal securities laws. The SEC brought scheme liability allegations against Rio Tinto, its CEO, and its CFO, based on their alleged failure to correct prior materially misleading statements that had
Joe Hartunian is an associate in the Litigation Department.
Joe earned his J.D. from the University of Michigan Law School, where he was an executive editor of the Michigan Journal of Law Reform. Joe previously served as a law clerk to the Honorable Peter W. Hall of the United States Court of Appeals for the Second Circuit.
Prior to law school, Joe served as a legislative aide for Senator Charles E. Schumer on the Senate Judiciary Committee, focusing on issues related to opioid abuse, telecommunications and gun safety. Upon graduation, he returned to the committee as an advisor to Senator Amy Klobuchar on the nomination of now-Justice Brett Kavanaugh to the Supreme Court.
Earlier this spring, yet another lawsuit alleging a company failed to adequately promote diversity was dismissed for a failure to properly allege demand futility.
In City of Pontiac Police & Fire Ret. Sys. v. Jamison, the plaintiff, a shareholder of Tractor Supply Company, had alleged that the company and members of its Board falsely stated in securities filings that they were committed to promoting diversity. The plaintiff alleged that diversity maximizes shareholder wealth and that the lack of racial diversity at Tractor Supply contributed to economic disparities at the company. Because, according to the plaintiff, the defendants had failed to sufficiently promote diversity within the company while, at the same time, made statements in Tractor Supply’s 2020 proxy statement that the Board was “committed to the principles of diversity and inclusion,” they had violated Section 14(a) of the Exchange Act.
Another shareholder derivative suit claiming diversity shortcomings within the company was dismissed last week: A judge in the Northern District of California dismissed allegations that Cisco Systems Inc. falsely and improperly represented itself as an industry leader in diversity.
Another diversity-based derivative suit was dismissed this week by a federal district court, joining a list of decisions that have rejected similar shareholder allegations.
This most recent decision, from the District of Delaware, dismissed claims alleging Qualcomm Inc. had allowed unlawful and discriminatory practices to exist within its executive ranks. Though the complaint was initially filed in the Southern District of California, Qualcomm’s Bylaws contain a forum-selection provision designating Delaware as the exclusive forum for derivative litigation, and thus the case was transferred to Delaware in March 2021.
Last week, yet another federal court dismissed a shareholder derivative suit that claimed a company had failed to diversify its corporate leadership team. Shareholders had alleged that Opko Health Inc., a Miami-based medical company, failed to nominate or appoint minorities to the board and executive management team despite public statements celebrating the company’s diverse staff.
After much debate, the SEC on Friday approved a Nasdaq proposal that will require listed companies to adopt several diversity-related measures. Nasdaq first made this proposal, which requires listed companies to publicly disclose diversity information about their board members and either hire “diverse” members to their boards or explain why they do not in writing, last December. Under SEC regulations, self-regulatory organizations such as Nasdaq must formally submit proposed rule changes to the Commission. Nasdaq made some minor revisions to the proposed rule in February that granted smaller boards and newly listed companies some compliance leeway, but the proposal has otherwise survived scrutiny from conservatives, corporate interests, and popular newspaper editorial boards.