29 Analyses of this case by attorneys

  1. Imposing Section 10(b) Liability Against Defrauded Corporation Reads Scienter Element out of Statute—An Analysis of In re ChinaCast Education Corp. Securities Litigation, 809 F.3d 471 (9th Cir. 2015)

    Lane Powell PCDouglas GreeneAugust 25, 2016

    This principle is especially relevant in the context of corporate scienter. Under Section 10(b), liability is foreclosed absent scienter, e.g.,Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193 (1976), and of course, scienter is required as to each defendant, including the company. In contrast to Section 10(b), Congress has explicitly lowered the burden for plaintiffs in other provisions of the securities laws.

  2. Capital Markets & Public Companies Quarterly: Expanding Relief under Smaller Reporting Company, Reg A+ and Rule 701, SEC Enforcement of Cybersecurity Disclosures and Other News

    McDermott Will & EmeryThomas ConaghanJuly 11, 2018

    In overturning the district court, the 9th Circuit noted the similarities and differences between the various anti-fraud provisions provided in the federal securities laws. Citing the US Supreme Court’s decision in Ernst & Ernst v. Hochfelder, 425 US 185, 193 (1976), the 9th Circuit acknowledged that the language of Section 10(b) of the Exchange Act, which allows the SEC to regulate only “manipulative or deceptive device[s]” imposed a requirement that claims brought under Rule 10b-5 demonstrate that violations are committed with scienter. The 9th Circuit contrasted this with the holding in Aaron v. SEC, 446 US 680 (1980), in which the US Supreme Court held that actions brought under Section 17(a)(2) of the Securities Act for offers and sales utilizing “any untrue statement of a material fact or any omission to state a material fact” did not require a showing of scienter.

  3. This Week In Securities Litigation

    Dorsey & Whitney LLPThomas GormanMay 11, 2018

    Careful consideration of the Supreme Court’s decisions parsing the language of Section 10(b) of the Exchange Act demonstrates that there are important distinctions between that provision and section 14(e). When the Supreme Court began its examination of rule 10b-5’s language in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) it initially focused on the phrase stating that “It shall be unlawful . . . [t]o make any untrue statement of a material fact or omit to state any material fact . . .” That passage, the Court allowed, could be read as proscribing any type of material misstatement, regardless of intention. In Hochfelder the Court held, however, that section 10(b) and the rule require proof of scienter.

  4. This Week In Securities Litigation (Week ending May 11, 2018)

    Dorsey & Whitney LLPThomas O. GormanMay 10, 2018

    Careful consideration of the Supreme Court’s decisions parsing the language of Section 10(b) of the Exchange Act demonstrates that there are important distinctions between that provision and section 14(e). When the Supreme Court began its examination of rule 10b-5’s language in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976) it initially focused on the phrase stating that “It shall be unlawful . . . [t]o make any untrue statement of a material fact or omit to state any material fact . . .” That passage, the Court allowed, could be read as proscribing any type of material misstatement, regardless of intention. In Hochfelder the Court held, however, that section 10(b) and the rule require proof of scienter.

  5. Ninth Circuit: Section 14(e) Does Not Require Scienter

    Dorsey & Whitney LLPThomas GormanMay 9, 2018

    Scienter has been a critical element of a claim based on Exchange Act Section 10(b) in an SEC enforcement action since the Supreme Court’s decision in Aaron v. SEC, 446 U.S. 680 (1980). It has also been a key element in private damage actions based on the cause of action implied under Section 10(b) and Rule 10b-5 since Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976). Both decisions are based largely on the text and language of Section 10(b).

  6. Ninth Circuit Splits from Five Other Circuits; Requires Only a Showing of Negligence for Claims Under Section 14(e) of the Exchange Act

    Ropes & Gray LLPJane GoldsteinMay 8, 2018

    In this regard, we note that while a premiums paid analysis is included in many financial advisor presentations providing an analysis of the merger consideration, a premiums paid analysis is generally not considered by financial advisors to be a fundamental valuation analysis for purposes of a fairness opinion. In addition, the Ninth Circuit’s comment regarding materiality underscores that defendants will continue to have additional, potential dismissal arguments in Section 14(e) disclosure actions.1Varjabedian v. Emulex Corp., No. 16-55088, 2018 WL 1882905 (9th Cir. Apr. 20, 2018).2Varjabedian v. Emulex Corp., 152 F. Supp. 3d 1226 (C.D. Cal. 2016).3Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976).4Aaron v. SEC, 446 U.S. 680 (1980).

  7. Alert: Ninth Circuit Rules Tender Offer Disclosure Challenges Do Not Require Proof of Intent to Deceive

    Cooley LLPKoji FukumuraMay 3, 2018

    Although other courts have relied on the similarity of the language of Section 14(e) to that of Rule 10b-5 (promulgated under Section 10(b) of the Securities Exchange Act) to find that Section 14(e) claims likewise require scienter, the Ninth Circuit found this logic to be undercut by two United States Supreme Court opinions. First, the Ninth Circuit observed that the rationale for a Rule 10b-5 scienter requirement set out in Ernst & Ernst v. Hochfelder, 425 US 185, 193 (1976) – that the rule's authorizing statute, Section 10(b), pertains only to manipulative or deceptive devices – does not apply to Section 14(e). Second, the Ninth Circuit observed that, in Aaron v. SEC, 446 US 680 (1980), the Supreme Court found that Section 17(a)(2) of the Securities Act of 1933 – which is worded similarly to the first clause of Section 14(e) – does not require a showing of scienter.

  8. Ninth Circuit Rules Tender Offer Disclosure Challenges Do Not Require Proof of Intent to Deceive

    Cooley LLPBarbara BordenMay 2, 2018

    Given the disjunctive "or," the Ninth Circuit concluded that Congress intended to prohibit two different offenses in Section 14(e), only the second of which entails actual fraud or deception.Although other courts have relied on the similarity of the language of Section 14(e) to that of Rule 10b-5 (promulgated under Section 10(b) of the Securities Exchange Act) to find that Section 14(e) claims likewise require scienter, the Ninth Circuit found this logic to be undercut by two United States Supreme Court opinions. First, the Ninth Circuit observed that the rationale for a Rule 10b-5 scienter requirement set out in Ernst & Ernst v. Hochfelder, 425 US 185, 193 (1976) – that the rule's authorizing statute, Section 10(b), pertains only to manipulative or deceptive devices – does not apply to Section 14(e). Second, the Ninth Circuit observed that, in Aaron v. SEC, 446 US 680 (1980), the Supreme Court found that Section 17(a)(2) of the Securities Act of 1933 – which is worded similarly to the first clause of Section 14(e) – does not require a showing of scienter.The last few years have seen a dramatic increase in federal court suits by investors challenging the adequacy of merger-related disclosures under the federal securities laws.

  9. Lowering the Bar on Tender Offer Claims: The Ninth Circuit Adopts a Negligence Pleading Standard

    Paul Hastings LLPWilliam F. SullivanMay 1, 2018

    [6]Adams v. Standard Knitting Mills, Inc., 623 F.2d 422, 431 (6th Cir. 1980).[7] 425 U.S. 185, 193 (1976).[8]Id.

  10. Ninth Circuit Establishes Negligence Standard for Section 14(e) Claims in Circuit-Splitting Decision

    Perkins CoieJoseph BringmanMay 1, 2018

    At the heart of the Ninth Circuit’s rejection of Chris-Craft and every other circuit court decision that has considered the issue is an assertion that all those other courts were mistaken in assuming that principles developed in Rule 10b-5 cases applied equally to Section14(e) cases. In support of its position, the Ninth Circuit relied on two U.S. Supreme Court decisions that were issued after Chris-Craft was decided—Ernst& Ernst v. Hochfelder, 425 U.S. 185 (1976), and Aaron v. SEC, 446 U.S. 680 (1980)—and contended that all the courts that have considered the matter since these Supreme Court decisions have failed to take these decisions into account. As the Ninth Circuit explained, Ernst& Ernst acknowledged that the language of Rule10b-5 that makes it unlawful “[t]o make any untrue statement of material fact or omit to state any material fact” can be viewed, in isolation, as proscribing both intentional and unintentional conduct.