United States Supreme Court Holds that the "Maker" of a Statement for Rule 10b-5 Purposes is the Person or Entity with Ultimate Authority Over the Statement
In Janus Capital Group, Inc. v. First Derivative Traders, No. 09-525, 2011 WL 2297762 (U.S. Jun. 13, 2011) (Thomas, J.), the United States Supreme Court held that purposes of a securities fraud claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 , 17 C.F.R. § 240.10b-5, promulgated thereunder, the “maker” of an allegedly false or misleading statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it. In so holding, the Supreme Court further narrowed the scope of potential securities fraud liability and aligned with its prior decision which held that a private right of action under Rule 10b-5 does not include suits against aiders and abettors who merely contribute “substantial assistance” to the making of a statement but do not actually make it. Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 180 (1994).
Delaware Chancery Court Considers Scope of Section 220 Books and Records Demand Made Where Sole Purpose Is to Investigate a Potential Derivative Suit
In Graulich v. Dell, Inc., 2011 WL 1843813 (Del. Ch. May 16, 2011), the Delaware Court of Chancery rejected a stockholder’s demand under Section 220 of the Delaware General Corporation Law (“Section 220”). Section 220 provides that a stockholder in a Delaware corporation may, under certain conditions, request that that corporation make available certain books and records, provided that the request is made for a “proper purpose.” In Graulich, the Court held that the plaintiff stockholder, who sought books and records for the purpose of investigating and possibly filing a derivative lawsuit against the company’s officers and directors, nonetheless lacked a “proper purpose” because the stockholder did not have legal standing to bring the derivative suit and the potential claims the stockholder wished to pursue were time-barred and barred by claim preclusion.
United States Supreme Court Holds that Securities Fraud Plaintiffs Need Not Establish Loss Causation to Certify a Class
In Erica P. John Fund, Inc. v. Halliburton Co.,No. 09-1403, 2011 WL 2175208 (U.S. June 8, 2011), the United States Supreme Court held that securities fraud plaintiffs need not prove loss causation in order to invoke the presumption of investor reliance at the class certification stage. The Court’s unanimous ruling, which reversed the United States Court of Appeals for the Fifth Circuit, focused narrowly on the need to prove loss causation at the class certification stage and expressly declined to address other issues regarding class certification in securities fraud class actions.
