Saturday, April 1, 2017
The big news in securities litigation this week is that the Supreme Court has agreed to resolve the circuit split over whether a failure to disclose required information can function as a misleading omission for purposes of Section 10(b).
I've blogged about this split before; basically, my take is that courts are wary of omissions liability not simply because they distrust securities litigation in general, but because they are concerned about further blurring the line between fraud claims and claims for mismanagement.
Which, fortuitously, happens to be the subject of my new article, forthcoming in the Fordham Law Review and just posted to SSRN. I argue that courts are using issues like puffery, loss causation/damages, and omissions liability to draw distinctions between fraud claims and mismanagement claims and - further - to sketch out a (relatively narrow) view of the proper role of shareholders within the corporate governance structure. I hastily amended the piece before posting to account for the cert grant; my quick prediction is that if the Supreme Court does permit omitted information to serve as the basis of a Section 10(b) claim, lower courts - concerned about this fraud/mismanagement line - will find themselves narrowing the scope of what counts as a required disclosure in the first place, which will then impact not only private plaintiffs, but potentially also government enforcement efforts.