On April 23, 2019, the Supreme Court dismissed the writ of certiorari as “improvidently granted” in a closely-watched appeal raising the question whether an assertion of mere negligence is sufficient to plead and prove a claim under Section 14(e) of the Securities Exchange Act of 1934 and—perhaps—whether a private right of action exists under Section 14(e) at all. Emulex Corporation, et al. v. Varjabedian, —U.S.—, slip op. (Apr. 23, 2019). As discussed in our prior post, most of the oral argument concerned whether a private right of action under Section 14(e) exists, but some justices expressed concern over whether the Court should weigh in on that question because it was not presented below. The dismissal raises the possibility that a majority of the Court may have been inclined to find no private right of action, but felt that the question was not properly before the Court, and did not want to address the required state of mind for a cause of action whose very existence the Court questioned. The result from this unusual step is that, although the Court took the appeal to resolve a Circuit split regarding the required mental state under Section 14(e), the split still remains. However, given the Court’s apparent interest in considering the existence of a private right of action under Section 14(e) (and, perhaps, revisiting the question with respect to Section 14(a)), it seems the Court may be inclined to take up the issue in a case properly preserving and presenting the question. A number of Circuits—including the First, Fourth, Eighth, and DC Circuits—have not yet addressed whether Section 14(e) has an implied right of action. Accordingly, it is possible that a case brought in one of these Circuits could eventually lead to the Supreme Court’s consideration of the issue.
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