- Court: U.S. Supreme Court Certiorari Granted
- Area(s) of Law: Civil Procedure
- Date Filed: March 3, 2014
- Case #: 13-435
- Judge(s)/Court Below: Court Below: 719 F.3d 498 (6th Cir. 2013)
- Full Text Opinion
Respondent alleges that Petitioner issued securities which contained untrue or misleading statements in their registration statement filed with the Securities and Exchange Commission (SEC).
Respondent filed suit in district court seeking relief under §11 of the Securities Act of 1933, 15 U.S.C. §77k (§11), and alleges failure to comply with Generally Accepted Accounting Principles (GAAP). The district court held that the Respondent did not state a claim upon which relief can be granted because Respondent did not adequately plead Petitioner's knowledge of wrongdoing, or loss causation as required for §11 claims, and that Respondent’s GAAP allegations were based on “soft information." Respondent appealed to the Sixth Circuit Court of Appeals, which reversed, remanded and held that loss causation is an affirmative defense rather than a requirement of a §11 claim, and that the GAAP allegations were based on information sufficient under a “subjective disbelief” standard to state a claim upon which relief can be granted.
Petitioners filed for certiorari to address a circuit split. The Supreme Court granted certiorari to decide whether a §11 claim must allege that a statement was subjectively false - that the speaker had an opinion different than stated - as the Second, Third, and Ninth Circuits have held, or whether a statement’s objective falsity is sufficient, as the Sixth Circuit held.