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Following oral arguments that focused on a different issue, the U.S. Supreme Court on Tuesday withdrew its consideration of a case on the issue of whether shareholders need only claim defendants had acted negligently, rather than with an intent to defraud, in tender offer cases.
In a one-sentence order in Emulex Corp. et al. v. Gary Varjabedian, et al., the court said, "The writ of certiorari is dismissed as improvidently granted.”
The Supreme Court had agreed to consider the 9th U.S. Circuit Court of Appeals in San Francisco’s ruling in the case, in which it was the only federal appeals court to rule that in filing litigation over tender offers, plaintiffs need only claim defendants had acted negligently.
At least five other circuits have disagreed, holding plaintiffs must establish that defendants had acted with an intent to defraud.
A tender offer is a conditional offer to buy a large number of shares for a price typically higher than the stock’s current price. Experts say they account for a relatively small percentage of deals when compared with mergers where the companies’ boards of directors reach an agreement.
Oral arguments at the Supreme Court hearing focused on the basic issue of whether shareholders had a private right to action to sue in these cases.
Daniel L. Geyser, of Dallas-based Geyser P.C., said in a statement that an action such as the Supreme Court’s “is never really a grand slam, but this a pretty solid ground-rule double. We argued three times (in our brief in opposition, in our merits brief and at last week’s argument) that this case was the wrong vehicle for deciding these issues. As usual, all the Justices were deeply engaged, and we’re thrilled the Court ultimately saw it our way.
“Today’s decision leaves in place the same private right that has existed now for half a century. While I’m sure future litigants will lodge the same challenge, I think they’ll find this is the exceptionally rare statute that satisfies the Court’s demanding standard for recognizing implied rights of action.”
An Emulex attorney could not immediately be reached for comment.
Kevin LaCroix, executive vice president of RT ProExec, a division of R-T Specialty LLC, in Beachwood, Ohio, who is not involved in the case, said during oral argument several justices, particularly Justices Elena Kagan and Sonia Sotomayor, seemed concerned that the question of a private right of action “had not been fully considered by the courts below.”
He said as matters stand now the Supreme Court’s action could lead to forum shopping by plaintiff attorneys who will file these cases where possible in California.
(Reuters) — Bank of America Corp. has sued bond insurer MBIA Inc. in a New York state court for allegedly interfering with a tender offer to buy MBIA's bonds.