securities

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In 2004, biotechnology company Amgen Inc. was selling securities of two drugs that stimulate the production of red blood cells. After the Food and Drug Administration held an advisory committee meeting in May 2004 about the safety of those drugs, the market prices of their corresponding securities dropped. On behalf of the shareowners who suffered, Connecticut Retirement Plans and Trust Funds sought to certify the class of investors who held stock in Amgen at that time to sue Amgen for fraud regarding any misrepresentations of the drugs. Amgen argues that this kind of class action requires a plaintiff to show material reliance of the class of investors as part of the question as to whether a class exists. In contrast, Connecticut Retirement argues that during this class certification stage a plaintiff need not go beyond demonstrating that investors share a common question of reliance as a class rather than as individuals. If Amgen wins, then plaintiffs of securities fraud may face an unwieldy burden of proof at an early stage in litigation. If Connecticut Retirement wins, then defendants of securities fraud may face unfair pressures to settle cases.

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This case presents the Supreme Court with an opportunity to clarify the applicability of the time limitations in Section 13 of the Securities Act of 1933 for individual claims brought after a class action lawsuit has been filed in the same matter. Petitioner California Public Employees' Retirement System (“CalPERS”) argues that Section 13 is a statute of limitation, which may be overridden by judge-made rule, as opposed to a statute of repose, which is not subject to judicial extension even in cases of extraordinary circumstances. Accordingly, CalPERS asserts that a prior Supreme Court decision, American Pipe, establishes that the filing of a class action tolls the statute of limitation as to all putative members of that class. Respondent ANZ Securities, however, argues that Section 13 is a statute of repose, and under the Second Circuit precedent the American Pipe tolling rule does not extend to statutes of repose. The outcome of this case could encourage litigation strategies that decrease court efficiency or, alternatively, benefit large investors at the expense of smaller ones. 

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The Supreme Court will determine whether state courts can hear claims filed solely under the Securities Act of 1933 as “covered class actions.” The case arises out of a decrease in Cyan, Inc.’s stock prices, which led investors, including the Beaver County Employees Retirement Fund, to sue as a class in state court for alleged disclosure violations. Cyan argues that California state courts could not hear this case, because the Securities Act’s legislative history and existing regulatory structure suggests that Congress intended for all class actions filed under the Securities Act to be tried in federal courts. Beaver, on the other hand, claims that Congress intended to give state and federal courts concurrent jurisdiction—i.e., both state and federal courts can hear this case. The stakes of the case are also in dispute: organizations supporting Cyan claim that a Beaver victory would promote inconsistent Securities Act decisions in federal and state courts, encourage forum shopping, and harm the capital markets. Beaver’s supporters disagree, asserting that the effects of a decision in its favor would be minimal.

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Halliburton is accused of making misstatements about its financial position regarding asbestos litigation, a merger, and  costs-overruns  on fixed price contracts. As those misstatements came to light or were corrected, Halliburton’s stock price dropped. The Erica P. John Fund asserts that these misstatements defrauded Halliburton’s investors and seeks class certification to recover investors' losses from Halliburton. The Court of Appeals for the Fifth Circuit held that in order to be certified as a class, investors must not only demonstrate elements common to the  class,  but must also prove that the fraud actually caused the drop in stock value. Halliburton asserts that this is necessary  because,  unless the fraud actually caused the loss, no presumption of reliance on the misstatement can arise, and therefore the plaintiffs have failed to make the case for certification as a class. The Erica P. John Fund argues that the Fifth Circuit’s holding contradicts the Federal Rules of Civil Procedure and Supreme Court  precedent,  and that requiring proof of loss causation undermines the values and goals of the reliance presumption. The Supreme Court’s  decision in this case  will affect the ability of investors to pursue private securities actions against companies who misstate their financial positions.

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This case asks the Supreme Court to determine whether a company’s risk disclosure to investors is false or misleading when the company does not disclose a risk that has materialized in the past, even when that past event poses no risk of ongoing or future harm to the company. In this case, Facebook failed to disclose a past data breach, the Cambridge Analytica Scandal, in its 2016 10-K disclosures. Shareholders sued the company and its executives, arguing that the failure to disclose this information was false or misleading. On one hand, Facebook argues that it does not have to disclose such past events in the form at issue because risk disclosures are forward-looking and investors understand that. On the other hand, Amalgamated Bank contends that companies must disclose information about past bad events because stating a risk as a hypothetical event could mislead investors into believing there have been no past bad events. The outcome of this case will affect the requirements of risk disclosures, which could impact the quantity and quality of disclosure information, how much companies must disclose, and whether investors’ demands are met.

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This case asks the Court to determine whether Congress created an implied private right of action under the Investment Company Act (“ICA”) of 1940, by stating in Section 47(b) that a court “may not deny rescission at the instance of any party.” Petitioners argue that Congress did not intend to grant private parties the right to sue, as Congress would have explicitly stated a private right in the ICA had they intended to include one. Additionally, Petitioners argue that the words of the statute themselves do not imply a private right of action. Respondents contend that Congress’s use of “rights-creating language” in the statute demonstrated its intent to create a private right of action and assert that the plain text of the statute does in fact explicitly state this right. This case touches on important questions regarding the separation of powers between federal branches of government and the impact of ICA enforcement on the market.

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This case asks the court to determine whether investors may bring a private claim against an issuer under § 10(b) of the Securities Exchange Act of 1934 for an omission without an associated misleading statement, known as a “pure omission,” based on the disclosure requirements set by Item 303 of SEC Regulation S-K. Macquarie Infrastructure Corporation argues that investors cannot bring a private claim for a pure omission because the text and statutory context of § 10(b), Rule 10b-5, and Item 303 do not support such claims. In opposition, Moab Partners, L.P. argues that investors may bring a private claim for a pure omission because Supreme Court precedent and statutes comparable to § 10(b) indicate that investors may bring such claims. This case touches on important questions regarding disclosure requirements, issuer liability for omissions, and the suitability of enforcement of securities regulations through private lawsuits.

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The Supreme Court will decide whether transactions conducted through entities named in 11 U.S.C. § 546(e) are protected from avoidance in bankruptcy. Petitioner Merit Management Group, LP (“Merit”) claims that Respondent FTI Consulting, Inc. (“FTI”) may not avoid the transfer because the transfers to and from Citizens Bank are protected under the safe harbor provision of § 546(e), which precludes avoidance involving certain financial institutions and markets. Respondent FTI says that Merit is wrongly applying § 546(e) to the component transfers, and that the only relevant transfer is the overall transfer, which is not protected by the safe harbor provision. If the Supreme Court allows protections that would enable creditors to undo payouts, the resulting uncertainties may lead to market destabilization; conversely, the removal of such protections may enable the exploitation of intermediaries as a channel for prohibited transactions. 

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This case asks the Supreme Court to decide how plaintiffs can demonstrate intent (also called “scienter”) under the Private Securities Litigation Reform Act (“PSLRA”) for the purpose of alleging securities fraud. More specifically, this case asks the Supreme Court to decide whether plaintiffs can allege intent based on allegations about internal company documents without referring to specific content in those documents. It also asks the Supreme Court to determine if plaintiffs can satisfy the Act's falsity requirement by relying on an expert opinion in lieu of particularized allegations of fact. NVIDIA argues that Öhman’s failure to allege with particularity the contents of the internal documents to show that NVIDIA misrepresented its finances to investors does not show a strong inference of scienter that the PSLRA requires in order to reduce frivolous lawsuits, and that Öhman’s reliance on expert testimony to satisfy the PSLRA’s rigorous particularity standard would allow plaintiffs to circumvent it. Öhman counters that the PSLRA evinces a holistic approach in meeting the burden of showing a strong inference of scienter rather than requiring one specific allegation. Öhman also claims that an expert’s conclusion is an allegation of fact since the experts’ assertion is backed by embedded statements of fact to arrive at such a conclusion. The outcome of this case has strong implications for the national economy and access to justice.

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