One of the more intriguing rulings of this Supreme Court Term is the Court’s one-sentence order yesterday dismissing as improvidently granted the writ of certiorari issued in Emulex Corp. v. Varjabedian (No. 18-459). The Court had taken the case to review a Circuit split on the liability standard under § 14(e) of the Securities Exchange Act, which regulates tender offers. Along the way, however, the petitioner argued that a private right of action does not exist at all under § 14(e) – an issue that had not been raised in the lower courts. That issue occupied a large portion of the oral argument held on April 15, 2019, with the parties and the Justices exploring whether the Court should entertain the previously unraised issue and, if so, what the outcome should be.
U.S. Supreme Court
Supreme Court Holds that Persons Who Do Not “Make” Misstatements Can Nevertheless Be Liable for Other Securities-Fraud Violations
By Jonathan Richman on
The Supreme Court held on March 27 that persons who do not “make” material misstatements or omissions, but who disseminate them to potential investors with fraudulent intent, can be held to have violated other provisions of the securities laws that do not depend on actually “making” the misstatements or omissions. …
Supreme Court Rules That Federal Courts Are Not Bound to Give Conclusive Effect to Foreign Governments’ Statements About Their Laws
By Jonathan Richman on
The Supreme Court ruled today that, when a foreign government presents a formal submission to a federal court about the content of the government’s own laws, the court should accord “respectful consideration” to the government’s statements, but is not bound to grant them “conclusive effect.” The decision in Animal Science Products, Inc. v. Hebei Welcome Pharmaceutical Co. (No. 16-1220) resolves a Circuit split about the weight to accord a foreign government’s description of its own law and could lead to more in-depth litigation of the content and meaning of foreign law, with expert witnesses on both sides addressing the issues.
Supreme Court Prohibits Stacking of Successive Class Actions Beyond Limitations Period
By Jonathan Richman on
The Supreme Court ruled today that judicially created principles that toll statutes of limitations for class members in timely filed class actions apply only to subsequently filed individual actions, not to follow-on class actions filed outside the limitations period. The decision in China Agritech, Inc. v. Resh (No. 17-432) thus eliminates the specter of a potentially infinite series of class actions in which each class representative claims that limitations periods were tolled by the pendency of the prior class actions.
China Agritech was a securities class action under the Securities Exchange Act of 1934, which has a five-year statute of repose that sets an untollable outer limit on the filing of claims. But many other causes of action are not governed by statutes of repose. The China Agritech decision should have particular impact on those types of cases.
Supreme Court Rules that State Courts can Adjudicate Class Actions Under the Securities Act of 1933
By Jonathan Richman on
On March 20, 2018, the Supreme Court ruled that the 1998 amendments to the federal securities laws did not strip state courts of jurisdiction over class actions alleging violations of only the Securities Act of 1933. The Court further held that those amendments do not empower defendants to remove those…
Watch the Napkin: First Circuit Affirms Insider-Trading Conviction
By Jonathan Richman on
In what appears to be the first appellate decision since the Supreme Court’s December 2016 ruling in Salman v. United States, the U.S. Court of Appeals for the First Circuit affirmed an insider-trading conviction based on a tip of material, nonpublic information. The February 24, 2017 decision in United States v. Bray held that the jury had sufficient evidence to conclude that, in soliciting and receiving a trading tip surreptitiously written on a pub-room napkin, the tippee had known that the tipper had provided the information in breach of his duty of confidentiality and in expectation of a personal benefit.
However, the court also made clear that a tippee cannot be criminally convicted for insider trading if he merely “should have known” of the tipper’s breach of duty. The court further held that a “willful blindness” or “conscious avoidance” standard cannot be based on mere negligence (at least in a criminal case).
U.S. Supreme Court Rejects Indefinite Tolling of False Claims Act under Wartime Suspension of Limitations Act; Holds First-to-File Bar Only Applies to Pending Cases
By Roger Cohen & Sigal Mandelker on
Yesterday, in Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, 575 U.S. __ (2015), the Supreme Court settled two important questions under the False Claims Act (the FCA). In a unanimous decision authored by Justice Alito, the Court held: (1) the Wartime Suspension of Limitations Act (WSLA) applies only to criminal actions, and thus the statute of limitations under the FCA is not tolled under the WSLA while the United States is at war; and (2) the FCA first-to-file bar prevents the filing of an FCA action only when a related action is pending, not when a related action has been filed but dismissed.