Varjabedian v. Emulex Corp., No. 16-55088 (9th Cir. 2018)
Annotate this CasePlaintiff, on behalf of former Emulex shareholders, appealed the district court's dismissal of his putative securities class action. The Ninth Circuit held that claims under Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. 78n(e), require a showing of negligence, not scienter. Therefore, the panel reversed the dismissal of the complaint and remanded to the district court for it to reconsider defendants' motion to dismiss under a negligence standard. Because plaintiff's Section 14(e) claim survived, his claim under Section 20(a) of the Exchange Act also remained. Furthermore, the panel affirmed the district court's conclusion that Section 14(d)(4) of the Exchange Act did not create a private right of action and dismissal of the complaint as to Emerald Merger Sub because it was not a proper defendant.
Court Description: Securities. The panel affirmed in part and reversed in part the district court’s dismissal of a putative securities class action complaint arising from a corporate merger. Reversing in part, and disagreeing with five other circuits, the panel held that intervening guidance from the Supreme Court compelled the conclusion that claims under Section 14(e) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(e), require a showing of negligence, rather than scienter. The panel affirmed the district court’s (1) conclusion that Section 14(d)(4) of the Exchange Act does not create a private right of action for shareholders confronted with a tender offer and (2) dismissal of the complaint as to one defendant because it was not a proper defendant. Because plaintiff’s Section 14(e) claim survived, his claim under Section 20(a) of the Exchange Act also remained. The panel remanded for the district court to reconsider defendants’ motion to dismiss under a negligence standard.
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