The Supreme Court Raises Questions About Private Rights of Action to Challenge Tender Offers Under Exchange Act § 14(e)
On April 23, 2019, the Supreme Court of the United States dismissed as improvidently granted its earlier grant of certiorari in Emulex Corp. v. Varjabedian, No. 18-459. The Justices had been poised to resolve a circuit split about whether plaintiffs must plead scienter to state a claim arising from tender-offer disclosures under Securities Exchange Act § 14(e) (15 U.S.C. § 77n(e)). Although the Court’s one-sentence Order did not explain why the case had been dismissed, the Justices’ questions at oral argument suggest they viewed the case as a flawed vehicle because it did not present the more basic question of whether there even is a private right of action under 14(e).
The Supreme Court’s Order has at least two practical implications. First, plaintiffs seeking to litigate § 14(e) claims are likely to flock to the Ninth Circuit to avoid having to plead scienter. Second, defendants would be wise to argue both that plaintiffs do not have a private right of action under § 14(e), and that plaintiffs must plead scienter if they can bring a claim at all.