Emulex Corp. v. Varjabedian
Issues
Can an individual sue for inaccurate or missing disclosure statements in a firm’s tender offer under Section 14(e) of the Securities Exchange Act of 1934; and, is an alleged violation of Section 14(e) subject to a negligence or scienter standard of proof?
This case asks the Supreme Court to define the private right of action under Section 14(e) of the Securities Exchange Act of 1934. Gary Varjabedian and other Emulex Corporation shareholders contend that they have a right to file a private action against Emulex under Section 14(e). Emulex Corporation and Avago Technologies Wireless Manufacturing, Inc. counter that Section 14(e) does not allow a private cause of action based on negligence, and that a higher scienter standard should apply instead. The Supreme Court’s ruling will have significant implications for shareholders’ interests in the event of a merger.
Questions as Framed for the Court by the Parties
Whether the U.S. Court of Appeals for the Ninth Circuit correctly held, in express disagreement with five other courts of appeals, that Section 14(e) of the Securities Exchange Act of 1934 supports an inferred private right of action based on the negligent misstatement or omission made in connection with a tender offer.
In February 2015, the technology companies Emulex Corporation (“Emulex”) and Avago Technologies Wireless Manufacturing, Inc. (“Avago”) announced that they would be merging. Varjabedian v.
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Additional Resources
- Joseph M. McLaughlin and Shannon K. McGovern, ‘Varjabedian v. Emulex’: Supreme Court Set to Decide Whether §14(e) of the Exchange Act Requires Scienter, New York Law Journal (Feb. 13, 2019).
- Brian Croce, Supreme Court Will Hear Case to Determine M&A Negligence Standard, Pensions and Investments (Jan. 7, 2019).
- Judy Greenwald, High Court Set to Rule in Case That Could Weaken D&O Defenses, Business Insurance (Jan. 15, 2019).