On February 2, 2017, the New York Appellate Division, First Department, issued a decision in Gordon v. Verizon Communications, Inc., No. 653084/13, 2017 WL 442871 (1st Dep’t 2017), approving the settlement of litigation over an acquisition by Verizon Communications (“Verizon”) and articulating a new test to evaluate the fairness of such settlements. The Gordon decision signals that New York will remain a friendly venue to disclosure-based M&A settlements and may see increased shareholder M&A lawsuits as a result
As we have repeatedly written about (here, here and here), Delaware Chancery Courts have spent the past year attempting to curtail, or eliminate altogether, M&A litigation settlements where the sole remedy is enhanced proxy disclosures. Chancellor Bouchard’s landmark decision in In re Trulia Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016), rejected these “disclosure-only” settlements, finding that the “enhanced” disclosures produced by such settlements were not “material or even helpful” to stockholders. The Chancery Court bemoaned the proliferation of disclosure-only settlements in Delaware, and indicated that these types of settlements would be met by “continued disfavor” unless the supplemental disclosures are “plainly material,” i.e., they must “significantly alter the ‘total mix’ of information made available.”
In Trulia’s wake, the number of M&A suits filed in Delaware plummeted—declining by almost 75% in the first half of 2016—as plaintiffs’ counsel opted to file in federal court or states other than Delaware in the hope of finding more hospitable fora for “disclosure-only” resolutions. READ MORE
On May 16, 2016, the United States Supreme Court handed down two decisions that may, in practice, limit the ability to access federal district courts. In Spokeo, Inc. v. Robins, No. 13-1339, 578 U.S. ___ (2016), the Supreme Court rejected the Ninth Circuit’s conclusion that statutory violations are per se sufficient to confer Article III standing, and, in Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, No. 14-1132, 578 U.S. ___ (2016), the Court concluded that jurisdiction under Section 27 of the Securities and Exchange Act (Exchange Act) is limited to suits brought under the Exchange Act and state law claims that turn on the plaintiff’s ability to prove the violation of a federal duty.
On March 28, 2016, the Supreme Court denied a petition for certiorari review brought by Laurie Bebo, the former CEO of Assisted Living Concepts Inc., who challenged the constitutionality of proceedings conducted in an SEC administrative tribunal. Although the Court denied review, there are many more cases like it winding their way through the federal system, and in the likely event a split develops among the circuits, the Supreme Court may be inclined to address the issue, especially given the amount of attention the issue has received. Indeed, Bebo’s petition itself attracted the notice of celebrity entrepreneur Mark Cuban, who filed an amicus brief in her case arguing that the SEC’s administrative tribunal is a “farce” and unconstitutional.
On March 22, 2016, the Supreme Court issued a decision permitting class plaintiffs to rely on “representative” or “sample” evidence to satisfy the prerequisites to class certification and certain elements of their claims. See Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, 2016 WL 1092414 (Mar. 22, 2016). This is one of the relatively few recent class action decisions by the Court that could be construed as something other than a victory for class defendants. As Justice Thomas stated in dissent, the decision arguably is inconsistent with the Court’s pro-defendant decisions in Wal-Mart and Comcast. We have previously discussed the Supreme Court’s recent class action jurisprudence, including the Wal-Mart and Comcast decisions.
Today, the Solicitor General filed a petition for a writ of certiorari in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), asking the United States Supreme Court to address the standard for insider trading in a tipper-tippee scenario. Specifically, the Solicitor General argues that the Second Circuit’s Newman decision is in conflict with the Supreme Court’s 1983 decision in Dirks v. SEC, 463 U.S. 646 (1983), and the Ninth Circuit’s recent decision in United States v. Salman, No. 14-10204 (9th Cir. July 6, 2015). Because the Supreme Court grants certiorari in nearly three out of four cases filed by the Solicitor General, the likelihood of a cert grant in Newman is particularly high.
On March 24, 2015, the Supreme Court issued its much anticipated decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, No. 13-435, 2015 WL 1291916 (Mar. 24, 2015). With some significant caveats (discussed below), the decision is largely protective of issuers: it enshrines the distinction between “opinions” and “facts,” and generally makes it difficult to hold issuers liable for securities fraud based on statements of opinion.
In brief, the Court held that issuers that include opinions in a registration statement may be liable under Section 11 of the Securities Act of 1933 (the “Securities Act”) for making an untrue statement of fact only when the issuer does not subjectively believe the stated opinion. In so holding, the Court rejected the Sixth Circuit’s view that an honestly-held opinion that was at the time or later proved to be untrue could subject the issuer to liability. As the Court put it, Section 11 “is not, as the Court of Appeals and the [plaintiffs] would have it, an invitation to Monday morning quarterback an issuer’s opinions.”
Echoing a famous epistemological observation from The Big Lebowski, the Supreme Court today rejected the argument, for the most part, that a statement of opinion stands on the same footing as a statement of fact. READ MORE