Justices’ Securities Docket Could Reflect Class Action Focus

Bloomberg BNA Securities Law Daily
July 19, 2017

Serena P. Hallowell and Jordan A. Thomas remark on upcoming cases on SCOTUS docket

In a recent Bloomberg BNA article discussing cases on the U.S. Supreme Court’s upcoming docket, Firm partners Serena P. Hallowell and Jordan A. Thomas offered their perspectives on how the cases might proceed.

Looking at the decision in CALPERS v. ANZ and the upcoming Cyan Inc. v. Beaver City Employee Retirement Fund, Serena P. Hallowell noted that the ANZ opinion is focused on textual analysis over policy and practical considerations, which will likely have consequences in terms of the number of opt-out suits that courts see early on after a class action is filed. If nothing else, the decision will require investors to consider their options early on to avoid risk of later relinquishment of certain claims. But ANZ's “plain language” textual mode of analysis can cut both ways, she told Bloomberg BNA, and just because the Securities Litigation Uniform Standards Act (SLUSA) provided for state law claims to be precluded in federal court, it doesn't mean lawmakers intended that Securities Act claims receive the same treatment. “If anything, an analysis of Congress’ silence says the opposite,” Hallowell, who brings securities fraud cases on behalf of institutional investors, said.
 
Chair of the Firm’s Whistleblower Representation Practice, Jordan A. Thomas, remarked on Digital Realty Trust, Inc. v. Somers, a decision requiring reporting to the Securities and Exchange Commission (SEC) that could “hurt all key stakeholders—whistleblowers, companies, and the SEC.” The U.S. Courts of Appeal for the Ninth and Second Circuits have said so-called reporting out isn't required, but the Fifth Circuit has held otherwise.
 
First, he said, “[i]t would force sophisticated whistleblowers to report to the SEC first and bypass internal reporting. This hurts responsible organizations because they'll be deprived of the ability to address problems internally”; second, it would leave the commission “between a rock and a hard place,” because historically, the first line of defense has been robust compliance programs; and third, the SEC Whistleblower Program was designed to encourage internal reporting and provides an incentive to do so, Thomas said. “If there's no remedy for retaliation, it will send whistleblowers into harm's way."