U.S. Court of Appeals for the Ninth Circuit, Weston Family Partnership LLP v. Twitter, Inc., Docket No. 20-17465

SEC

 

Disclosure (Scope of)

 

Duty to Disclose

 

Misleading Statements

Exchange Act’s Safe Harbor Provision for Forward-Looking Statements

Securities Law

 

Securities Fraud Lawsuit

 

Twitter

 

 

 

The panel affirmed the district court’s dismissal of a securities fraud lawsuit under §§ 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5, alleging that Twitter, Inc., misled investors by hiding the scope of software bugs customization. Twitter shares users’ cell phone location data with companies that pay more for ads tailored to certain users, but it permits users to opt out of such data-sharing. In May 2019, Twitter announced that it had discovered software bugs that caused sharing of cell phone location data of its users, but it told its users that it had fixed the problems. In August 2019, Twitter announced that it had again accidentally shared user data with advertisers, even for those who had opted out, but it had “fixed these issues.” Twitter had not resolved the software bugs, but instead had stopped sharing user data altogether for its Mobile App Promotion advertising program, resulting in a drop in revenue. In October 2019, Twitter disclosed the software bugs and reported a revenue shortfall, and its share price dropped.

 

The panel held that plaintiffs’ complaint failed to state a claim under § 10(b) because Twitter’s statements were not false or materially misleading. The panel held that the securities laws do not require real-time business updates or complete disclosure of all material information whenever a company speaks on a particular topic. To the contrary, a company can speak selectively about its business so long as its statements do not paint a misleading picture. The panel held that Twitter’s statements about its advertising program were not false or misleading because they were qualified and factually true, and the company had no duty to disclose more than it did under federal securities law. Specifically, securities laws did not require Twitter to provide real-time updates about the progress of its Mobile App Promotion program. Further, plaintiffs did not plausibly or with particularity allege that the software bugs disclosed in August had materialized and affected revenue in July. In addition, Twitter’s July 2019 statements fell within the Exchange Act’s safe harbor provision for forward-looking statements.

 

When Twitter said that it had “fixed these issues,” it did not mean resolving the software bugs, which proved to be difficult. Rather, Twitter had stopped sharing user data for its MAP advertising program altogether. This meant no data- sharing for all users and thus also less revenue from MAP. Twitter did not disclose these facts at that time.

 

(…) Finally, about 11 weeks later on October 24, Twitter in its quarterly earnings report disclosed the software bugs hampering MAP and reported a $25 million revenue shortfall. In response to this news, some analysts downgraded the stock and the share price dropped over 20%.

 

Plaintiffs allege that these statements were false or materially misleading:

(1) Twitter’s July 26, 2019 shareholder letter and July 31, 2019 Form 10-Q stated the company is “continuing its work to increase the stability, performance, and flexibility of its ads platform and MAP,” but that it is “not there yet” and that this work will “take place over multiple quarters, with a gradual impact on revenue.” Segal added that the company is “still in the middle of that work” relating to MAP improvements, and that it is “still at the state where he believes that you would see its impact be gradual in nature.” Plaintiffs allege that these statements are false because the defendants did not disclose the software bugs allegedly plaguing MAP then and suggested that MAP was on track.

 

(2) The Form 10-Q also contained warnings that the company’s products and services “may contain undetected software errors, which could harm its business and operating results.” Plaintiffs claim that this statement is misleading because Twitter supposedly knew by this time that “software errors” would—not just “may”—harm the bottom line.

(3) Because of the allegedly false or misleading statements in the 10-Q filing, Twitter’s Sarbanes- Oxley (SOX) certifications signed by Dorsey and Segal were also false or misleading.

(4) On August 6, 2019, the company issued a tweet that stated: “We recently discovered and fixed issues related to your settings choices for the way we deliver personalized ads, and when we share certain data with trusted management and advertising partners,” and Twitter’s Help Center claimed that it “fixed these issues on August 5, 2019.” Plaintiffs assert that this statement misleadingly suggested Twitter had solved the software bugs, not just the privacy leak.

(5) On September 4, 2019 at an investor conference, Segal stated that the company’s “MAP work is ongoing” and that Twitter “continued to sell the existing MAP product.” Plaintiffs again claim that Twitter failed to disclose the scope of the software bugs hindering MAP.

(6) At the same conference, Segal stated that “Asia . . . has tended to be more MAP-focused historically.” This statement, according to Plaintiffs, glossed over MAP’s software bugs.

 

II. The Complaint Fails to State a Claim Under Section 10(b) Because Twitter’s Statements Are Not False or Materially Misleading.

Section 10(b) of the Exchange Act makes it unlawful:

To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange . . . any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the SEC may prescribe as necessary or appropriate in the public interest or for the protection of investors. 15 U.S.C. § 78j(b). The SEC, in turn, issued Rule 10b-5, which declares it unlawful:

(a) To employ any device, scheme, or artifice to defraud,

(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5.

To state a claim under Section 10(b) of the Exchange Act and Rule 10b-5, the complaint must plausibly allege: “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation. Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 267 (2014) (citations omitted).

For a statement to be false or misleading, it must “directly contradict what the defendant knew at that time” or “omit material information.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 1008–09 (9th Cir. 2018); see also 15 U.S.C. § 78u-4(b)(1)(A)–(B).

Plaintiffs must also overcome several hurdles to successfully plead a claim under Section 10(b). First, under the PSLRA’s particularity requirements and Federal Rule of Civil Procedure 9(b), allegations of “fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (cleaned up); see also 15 U.S.C. § 78u-4(b)(1). Second, an allegedly misleading statement must be “capable of objective verification.” Or. Pub. Emps. Ret. Fund v. Apollo Grp. Inc., 774 F.3d 598, 606 (9th Cir. 2014). For example, “puffing”—expressing an opinion rather than a knowingly false statement of fact—is not misleading. Id.; see also Lloyd v. CVB Fin. Corp., 811 F.3d 1200, 1206–07 (9th Cir. 2016). Third, a statement is not actionable just because it is incomplete. In re Vantive Corp. Sec. Litig., 283 F.3d 1079, 1085 (9th Cir. 2002). Section 10(b) and Rule 10b-5(b) “do not create an affirmative duty to disclose any and all material information. Disclosure is required . . . only when necessary ‘to make . . . statements made, in the light of the circumstances under which they were made, not misleading.’” Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011) (quoting 17 C.F.R. § 240.10b-5(b)). 

Finally, even if a statement is objectively false or misleading, the PSLRA provides a “safe harbor” for forward-looking statements if such statements are either identified as forward-looking and accompanied by a meaningful cautionary statement, or if the plaintiff fails to show that the statement was made with actual knowledge that it was false or misleading. See 15 U.S.C. § 78u-5(c)(1); see also In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010).

 

A. Securities laws do not require Twitter to provide real-time updates about the progress of its MAP program.

Plaintiffs suggest that Twitter—when faced with a setback in dealing with software bugs plaguing its MAP program—had a legal duty to disclose it to the investing public. Not so. While society may have become accustomed to being instantly in the loop about the latest news (thanks in part to Twitter), our securities laws do not impose a similar requirement. Section 10(b) and Rule 10b-5 “do not create an affirmative duty to disclose any and all material information.” Matrixx, 563 U.S. at 44.

Put another way, companies do not have an obligation to offer an instantaneous update of every internal development, especially when it involves the oft-tortuous path of product development. See Vantive, 283 F.3d at 1085 (“If the challenged statement is not false or misleading, it does not become actionable merely because it is incomplete.”). Indeed, to do so would inject instability into the securities market, as stocks may wildly gyrate based on even fleeting developments. A company must disclose a negative internal development only if its omission would make other statements materially misleading. Matrixx, 563 U.S. at 45 (“Even with respect to information that a reasonable investor might consider material, companies can control what they have to disclose under these provisions by controlling what they say to the market.”).

Plaintiffs argue that Twitter’s failure to disclose the software bugs’ impact on MAP in July 2019 was materially misleading because its prior statements had allegedly left a “misimpression” that the work to improve MAP was “on track.” But a closer examination of the statements reveals a much more qualified and less definitive characterization of the MAP program. For example, the July 2019 shareholder letter and 10-Q stated that Twitter is “continuing its work to increase the stability, performance, and flexibility of its ads platform and MAP. . . but we’re not there yet.” Similarly, the CFO explained that the company is “still in the middle of that work” relating to MAP. And later in September of that same year, the CFO again reiterated that the “MAP work is ongoing.”

None of these statements suggests that Twitter’s MAP program was “on track.” Rather, they suggest a vaguely optimistic assessment that MAP, like almost all product developments, has had its ups and downs, even as the company continues to make progress. Perhaps if Twitter had set a specific deadline or revenue impact for MAP, its somewhat optimistic statements could seem like an implied affirmation of that target. But Twitter never made such specific or unqualified guidance. And with no such guidance, Twitter’s statements are so imprecise and noncommittal that they are incapable of objective verification. See Apollo, 774 F.3d at 606 (distinguishing non-actionable vague puffery from statements capable of objective verification); In re Cutera Sec. Litig., 610 F.3d at 1111 (“Mildly optimistic, subjective assessment hardly amounts to a securities violation.”). Nor can it be said that the company “touted positive information to the market” such that it “became bound to do so in a manner that wouldn’t mislead investors, including disclosing adverse information that cuts against the positive information.” Khoja, 899 F.3d at 1009.

In short, Twitter had no legal duty to disclose immediately the software bugs in its MAP program, especially given that its earlier statements about MAP’s progress were qualified and vague.

(…) Even then, an express statement of the company being “on track” to meet a target would likely be protected as a forward-looking statement under the safe harbor provision of the PSLRA. Wochos v. Tesla, Inc., 985 F.3d 1180, 1192 (9th Cir. 2021). (Fn. 4).

(…) But Twitter’s August 6 Help Center blog post said no such thing. The context makes clear that Twitter had “fixed” the inadvertent data-sharing; there is no mention of software bugs, let alone ridding of them. See Retail Wholesale & Dep’t Store Union Local 338 Ret. Fund v. Hewlett-Packard Co., 845 F.3d 1268, 1278 (9th Cir. 2017) (“A duty to provide information exists only where statements were made which were misleading in light of the context surrounding the statements.” (emphasis added)). The blog post starts off by noting that Twitter wants “to give you control over your data” but that it had “recently found issues” of inadvertent data-sharing. The post then states: “We fixed these issues on August 5, 2019. We know you will want to know if you were personally affected . . . . What is there to do? Aside from checking your settings, we don’t believe there is anything for you to do.” These statements address Twitter users’ concerns about their privacy, and thus the “fix” related to privacy leaks, not software bugs that are not even mentioned in the blog post. In short, an ordinary investor would not read Twitter’s Help Center blog post as saying that Twitter had remediated the software issues.

 

C. Twitter’s July 2019 statements fall within the safe harbor provision.

Plaintiffs’ challenge of Twitter’s July 2019 statements in its shareholder letter and 10-Q fails for another reason: They were identified as forward-looking statements and fall within the safe harbor of the Exchange Act. 15 U.S.C. § 78u- 5(c)(1); see also Police Ret. Sys. of St. Louis v. Intuitive Surgical, Inc., 759 F.3d 1051, 1058 (9th Cir. 2014) (“Classic growth and revenue projections... are forward-looking on their face.”). These forward-looking statements in the shareholder letter and 10-Q were accompanied by very detailed meaningful cautionary language that “identified important factors that could cause actual results to differ materially from those in the forward- looking statements.” 15 U.S.C. § 78u-5(c)(1)(A)(i).

 

III. The District Court Properly Dismissed the Section 20(a) Claims.

Under Section 20(a) of the Exchange Act, “certain ‘controlling’ individuals are also liable for violations of section 10(b) and its underlying regulations.” Zucco Partners, 552 F.3d at 990 (citing 15 U.S.C. §78t(a)). Because a Section 20(a) claim is derivative, “a defendant employee of a corporation who has violated the securities laws will be jointly and severally liable to the plaintiff, as long as the plaintiff demonstrates ‘a primary violation of federal securities law’ and that ‘the defendant exercised actual power or control over the primary violator.’” Id. (citation omitted). But, as shown above, Plaintiffs did not adequately plead a primary violation of Section 10(b) or Rule 10b-5 by any defendant. Thus, control person liability under Section 20(a) cannot survive.

 

CONCLUSION

The district court’s order granting the defendants’ motion to dismiss is AFFIRMED.

 

(Because we hold that the complaint did not adequately allege falsity, we need not address scienter or loss causation.) (Fn. 7).

 

 

(U.S. Court of Appeals for the Ninth Circuit, March 23, 2022, Weston Family Partnership LLP v. Twitter, Inc., Docket No. 20-17465, for Publication)

Court of Chancery of the State of Delaware, Tetragon Financial Group Limited v. Ripple Labs Inc., Docket C.A. No. 2021-0007-MTZ

 

 

Blockchain Company

 

Cryptocurrency

-       Officially Determined to Constitute a Security?

-       In the Affirmative: Redemption Right is Triggered in Favor of Series C Preferred Stock’s Holder, According to Stockholders’ Agreement

 

Wells Notice and the SEC’s Filing of an Enforcement Action

 

Contract Drafting

 

Meaning of the Term “Determination”

 

Delaware Law

 

 

 

In this expedited contractual dispute, defendant Ripple Labs, Inc. (“Ripple”) has moved for summary judgment (the “Motion”). Granted.

 

Ripple is an enterprise blockchain company. It uses a cryptocurrency called XRP in its payment network, and hosts a platform, RippleNet, to  facilitate transactions. Plaintiff Tetragon Financial Group Limited is an   investment company. Plaintiff, through its affiliates (collectively,  “Tetragon”), holds a majority of Ripple’s Series C preferred stock. Ripple  and Tetragon executed a stockholders’ agreement dated December 20, 2019 (the “Stockholders’ Agreement”) memorializing Tetragon’s investment and status as « Lead Purchaser. » Pursuant to that agreement, Tetragon has a redemption right that is triggered upon a “Securities Default” as defined in Section 5.4: A “Securities Default” means if XRP is determined on an official basis (including without limitation by settlement) by the U.S. Securities and Exchange Commission (or (1) another governmental authority or (2) a governmental  agency  of  similar  stature  and  standing)  to  constitute a security  on  a  current  and  going  forward  basis  (and  not,  for  the avoidance  of  doubt,  a  determination  that  XRP  was  a  security  in  the past). If a Securities Default occurs, Tetragon may demand redemption of its shares via a « Redemption Request. » Following receipt of a valid Redemption Request, the Stockholders’ Agreement requires Ripple to redeem Tetragon’s shares within sixty days and apply all of its legally available cash and other assets to the redemption. At issue in this case is whether certain actions by the Securities and Exchange Commission (the “SEC” or the “Commission”)—in particular, a “Wells Notice” and the filing of an enforcement action—constitute a “Securities Default” under Section 5.4.  Some brief background on these processes provides helpful context.

 

Wells Notices And Enforcement Actions Generally

SEC investigations are usually initiated when a potential violation of securities law is identified. If the matter escalates, the SEC will issue a Formal Order of Investigation, which identifies the nature of the investigation, grants power to the SEC’s staff (the “Staff”) to investigate, and allows the SEC and its officers to issue subpoenas and compel sworn witness testimony. If the Staff finds that further action is warranted, the Staff may recommend that the SEC file an enforcement action or institute other enforcement proceedings.

 

Prior to doing so, the Staff may send potential defendants a Wells Notice, which allows potential defendants the chance “to provide a written submission” in defense of their actions. At this stage, the Staff must obtain an Associate or Regional Director’s approval. Once a potential defendant submits a written response to a Wells Notice, that submission must be sent to the Commission with a staff memorandum.

 

Based on the Action Memorandum and the potential defendant’s written submissions, the Commission votes to approve or reject the recommendation.

 

An enforcement action begins when the SEC files suit in federal court. After the Commissioners vote to bring an enforcement action, they are minimally involved in the litigation. Once the SEC decides to file in federal court, the SEC’s role pivots to that of advocate for its position; barring settlement, the Court—not the Commission—decides whether the instrument in question is ultimately a security.

 

(…) In line with “Delaware’s well-understood principles of contract interpretation,” I find that the Stockholders’ Agreement’s plain language is susceptible to only one meaning: a determination “on an official basis” that XRP “constitutes a security on a current and going forward basis” answers the question of whether XRP is a security in the affirmative and with finality. Applying that meaning to the undisputed facts, I conclude that a Securities Default has not occurred.

 

(…) Neither party here meaningfully contends that the definition of Securities Default is ambiguous, so I do not reach the parties’ arguments about their negotiation history or other extrinsic evidence of their intent.

 

Instead, I turn directly to the language in question, and apply it to the Wells Notice and the SEC’s filing of the Enforcement Action.

 

“Under well-settled case law, Delaware courts look to dictionaries for assistance in determining the plain meaning of terms which are not defined in a contract,” as “dictionaries are the customary reference source that a reasonable person in the position of a party to a contract would use to ascertain the ordinary meaning of words not defined in the contract.” And so, I look to contemporary dictionaries to help understand Section 5.4’s undefined terms.

 

By its plain meaning, a “determination” has finality. According to Merriam- Webster’s Dictionary, to “determine” something means “to fix conclusively or authoritatively,” as in to “determine national policy,” or “to settle or decide by choice of alternatives or possibilities,” as in to “determine the best time to go.” The Oxford Learner’s Dictionary similarly states that a “determination” is “the process of deciding something officially.” The “official” nature of a determination is echoed in definitions in the legal arena. In those definitions, a determination comes from an authoritative source, such as a court. Black’s Law Dictionary tells us that a “determination” is “the act of deciding something officially; especially, a final decision by a court or administrative agency.” Merriam-Webster’s definition suggests that a legal determination has finality, « a judicial decision settling and ending a controversy ».

 

(…) Applying this plain meaning to the SEC’s decision to file the Enforcement Action and issue a Wells Notice, it is clear that neither constitutes a Securities Default.

 

(…) Tetragon’s arguments regarding the Wells Notice present an even weaker case for a Securities Default. A Wells Notice precedes an enforcement action, giving potential defendants notice of the SEC investigation and providing them the opportunity to explain to the SEC why an enforcement action is unnecessary. As the parties’ experts explained, a Wells Notice indicates that the Staff might recommend an enforcement action to the SEC Commissioners, but the Commission itself is free to reject this recommendation. SEC Commissioners, who lead the SEC, are simply not involved in the Wells process. Further, a Wells Notice invites the potential defendant to convince the Staff that such a recommendation would be improper. Wells Notice from Staff is a far cry from the type of official, final decision contemplated by Section 5.4.

 

My conclusion that the SEC actions at issue fall short of “determinations” does not gut Section 5.4 of its meaning. It is undisputed that the SEC can make “determinations on an official basis” in three other ways: (1) an administrative proceeding, (2) a report pursuant to the Securities Exchange Act of 1934 (the “’34 Act”), and (3) rulemaking.

 

 

(Court of Chancery of the State of Delaware, March 19, 2021, Tetragon Financial Group Limited v. Ripple Labs Inc., Docket C.A. No. 2021-0007-MTZ)

 

Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., Docket No. 17-1229

License Agreement

Supply and Purchase Agreement

Form 8–K Filing with the Securities and Exchange Com­mission

Patent

Prior Art

AIA bars a person from receiving a patent on an invention that was in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.

The sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention “on sale” within the meaning of §102(a).

We granted certiorari to determine whether, under the AIA, an inventor’s sale of an invention to a third party who is obligated to keep the invention confidential quali­fies as prior art for purposes of determining the patentability of the invention. 585 U. S. ___ (2018). We conclude that such a sale can qualify as prior art.

The Leahy-Smith America Invents Act (AIA) bars a person from receiving a patent on an invention that was “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” 35 U. S. C. §102(a)(1). This case requires us to decide whether the sale of an invention to a third party who is contractually obligated to keep the invention confidential places the invention “on sale” within the meaning of §102(a).

(…) Accordingly, a commercial sale to a third party who is required to keep the invention confidential may place the invention “on sale” under the AIA.

Petitioner Helsinn Healthcare S. A. (Helsinn) is a Swiss pharmaceutical company that makes Aloxi, a drug that treats chemotherapy-induced nausea and vomiting. Hel­sinn acquired the right to develop palonosetron, the active ingredient in Aloxi, in 1998 (…)

In September 2000, Helsinn announced that it was beginning Phase III clinical trials and was seeking marketing partners for its palonosetron product.

Helsinn found its marketing partner in MGI Pharma, Inc. (MGI), a Minnesota pharmaceutical company that markets and distributes drugs in the United States. Helsinn and MGI entered into two agreements: a license agreement and a supply and purchase agreement. The license agreement granted MGI the right to distribute, promote, market, and sell the 0.25 mg and 0.75 mg doses of palonosetron in the United States. In return, MGI agreed to make upfront payments to Helsinn and to pay future royalties on distribution of those doses. Under the supply and purchase agreement, MGI agreed to purchase exclusively from Helsinn any palonosetron product ap­proved by the FDA. Helsinn in turn agreed to supply MGI however much of the approved doses it required. Both agreements included dosage information and required MGI to keep confidential any proprietary information received under the agreements.

Helsinn and MGI announced the agreements in a joint press release, and MGI also reported the agreements in its Form 8–K filing with the Securities and Exchange Com­mission. Although the 8–K filing included redacted copies of the agreements, neither the 8–K filing nor the press releases disclosed the specific dosage formulations covered by the agreements.

Helsinn filed its fourth patent application—the one relevant here—in May 2013, and it issued as U. S. Patent No. 8,598,219 (‘219 patent). The ’219 patent covers a fixed dose of 0.25 mg of palonosetron in a 5 ml solution. By virtue of its effective date, the ’219 patent is governed by the AIA. See §101(i).

(…) In 2011, Teva sought approval from the FDA to market a generic 0.25 mg palonosetron prod­uct. Helsinn then sued Teva for infringing its patents, including the ’219 patent. In defense, Teva asserted that the ’219 patent was invalid because the 0.25 mg dose was “on sale” more than one year before Helsinn filed the provisional patent application covering that dose in Janu­ary 2003.

(U.S. Supreme Court, Jan. 22, 2019, Helsinn Healthcare S.A. v. Teva Pharmaceuticals USA, Inc., Docket No. 17-1229, J. Thomas, unanimous)

Digital Realty Trust, Inc. v. Somers, Docket No. 16-1276, J. Ginsburg

Whistleblower: Sarbanes-Oxley: Dodd-Frank: SEC: Chevron deference: Jurisdiction:

Endeavoring to root out corporate fraud, Congress passed the Sarbanes-Oxley Act of 2002, 116 Stat. 745 (Sarbanes-Oxley), and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank). Both Acts shield whistleblowers from retaliation, but they differ in important respects. Most notably, Sarbanes-Oxley applies to all “employees” who report misconduct to the Securities and Exchange Com­mission (SEC or Commission), any other federal agency, Congress, or an internal supervisor. 18 U. S. C. §1514A(a)(1). Dodd-Frank delineates a more circum­scribed class; it defines “whistleblower” to mean a person who provides “information relating to a violation of the securities laws to the Commission.” 15 U. S. C. §78u– 6(a)(6). A whistleblower so defined is eligible for an award if original information he or she provides to the SEC leads to a successful enforcement action. §78u–6(b)–(g). And, most relevant here, a whistleblower is protected from retaliation for, inter alia, “making disclosures that are required or protected under” Sarbanes-Oxley, the Securi­ties Exchange Act of 1934, the criminal anti-retaliation proscription at 18 U. S. C. §1513(e), or any other law subject to the SEC’s jurisdiction. 15 U. S. C. §78u–6(h)(1)(A)(iii).

The question presented: Does the anti-retaliation provi­sion of Dodd-Frank extend to an individual who has not reported a violation of the securities laws to the SEC and therefore falls outside the Act’s definition of “whistleblow­er”? Pet. for Cert. (I). We answer that question “No”: To sue under Dodd-Frank’s anti-retaliation provision, a per­son must first “provide . . . information relating to a violation of the securities laws to the Commission.” §78u–6(a)(6). (…) “When a statute includes an explicit definition, we must follow that definition,” even if it varies from a term’s ordinary meaning. Burgess v. United States, 553 U. S. 124, 130 (2008). This principle resolves the question before us. Our charge in this review proceeding is to determine the meaning of “whistleblower” in §78u–6(h), Dodd-Frank’s anti-retaliation provision. The definition section of the statute supplies an unequivocal answer: A “whistleblower” is “any individual who provides . . . information relating to a violation of the securities laws to the Commission.” §78u–6(a)(6) (emphasis added). Leaving no doubt as to the definition’s reach, the statute instructs that the “defi­nition shall apply” “in this section,” that is, throughout §78u–6. §78u–6(a)(6). (…) We find the statute’s defini­tion of “whistleblower” clear and conclusive. Because “Congress has directly spoken to the precise question at issue,” Chevron, 467 U. S., at 842, we do not accord defer­ence to the contrary view advanced by the SEC in Rule 21F–2. See 17 CFR §240.21F–2(b)(1). The statute’s unambiguous whistleblower definition, in short, precludes the Commission from more expansively inter­preting that term. See Burgess, 553 U. S., at 130.

To recover under §1514A, an aggrieved employee must exhaust administrative remedies by “filing a complaint with the Secretary of Labor.” §1514A(b)(1)(A); see Law­son, 571 U. S., at ___–___ (slip op., at 5–6). Congress prescribed a 180-day limitation period for filing such a complaint. §1514A(b)(2)(D). If the agency “does not issue a final decision within 180 days of the filing of a com­plaint, and the agency’s delay is not due to bad faith on the claimant’s part, the claimant may proceed to federal district court for de novo review.” Id., at ___ (slip op., at 6) (citing §1514A(b)). An employee who prevails in a pro­ceeding under §1514A is “entitled to all relief necessary to make the employee whole,” including reinstatement, backpay with interest, and any “special damages sus­tained as a result of the discrimination,” among such damages, litigation costs. §1514A(c).

Sarbanes-Oxley also prohibits retaliation against an “employee” who “files, . . . testifies, participates in, or otherwise assists in a proceeding filed or about to be filed . . . relating to an alleged violation of” the same provisions of federal law addressed in 18 U. S. C. §1514A(a)(1). See §1514A(a)(2).

(…) When enacting Sarbanes-Oxley’s whistleblower regime, in comparison, Congress had a more far-reaching objec­tive: It sought to disturb the “corporate code of silence” that “discouraged employees from reporting fraudulent behavior not only to the proper authorities, such as the FBI and the SEC, but even internally.” Lawson, 571 U. S., at ___ (slip op., at 4). Accordingly, the Sarbanes-Oxley anti-retaliation provision covers employees who report fraud not only to the SEC, but also to any other federal agency, Congress, or an internal supervisor. See 18 U. S. C. §1514A(a)(1).

(…) Somers and the Solicitor General express concern that our reading would jettison protection for auditors, attor­neys, and other employees subject to internal-reporting requirements. See Brief for Respondent 35; Brief for United States as Amicus Curiae 21. Sarbanes-Oxley, for example, requires auditors and attorneys to report certain information within the company before making disclosures externally. See 15 U. S. C. §§78j–1(b), 7245; 17 CFR §205.3. If the whistleblower definition applies, Somers and the Solicitor General fear, these professionals will be “left . . . vulnerable to discharge or other retaliatory action for complying with” their internal-reporting obliga­tions. Brief for United States as Amicus Curiae 22. Our reading shields employees in these circumstances, however, as soon as they also provide relevant information to the Commission. True, such employees will remain ineligible for Dodd-Frank’s protection until they tell the SEC, but this result is consistent with Congress’ aim to encourage SEC disclosures. See S. Rep. No. 111–176, at 38. Somers worries that lawyers and auditors will face retaliation quickly, before they have a chance to report to the SEC. Brief for Respondent 35–36. But he offers nothing to show that Congress had this concern in mind when it enacted §78u–6(h). Indeed, Con­gress may well have considered adequate the safeguards already afforded by Sarbanes-Oxley, protections specifically designed to shield lawyers, accountants, and similar professionals. See Lawson, 571 U. S., at ___ (slip op., at 17).

(U.S.S.C., Feb. 21, 2018, Digital Realty Trust, Inc. v. Somers, Docket No. 16-1276, J. Ginsburg)

Discussion et décision portant sur l'étendue de la protection, notamment contre des représailles, accordée aux lanceurs d'alertes par Sarbanes-Oxley et Dodd-Frank.

Sarbanes-Oxley protège tous les employés qui rapportent des irrégularités à la SEC, à l'administration, au Congrès, ou à un supérieur hiérarchique.

Dodd-Frank protège une classe plus restreinte d'employés : sont seuls protégés ceux qui ont rapporté à la SEC une violation du droit des Securities. C'est le rapport à la SEC qui déclenche la protection. La Cour parvient à cette conclusion après lecture de la définition donnée par la loi au terme "whistleblower", définition qui est à cet égard tout à fait clair. Le but de ce système est d'encourager les divulgations à la SEC. La SEC avait donné à ce terme une définition plus générale, qui ne saurait bénéficier de la déférence au sens de la jurisprudence Chevron, du fait de la clarté de la loi qui exclut une interprétation. Un tel employé qui dépose ainsi est donc aussi protégé par la loi pénale qui punit l'auteur de représailles contre un informant, cf. 18 U. S. C. §1513(e).

La procédure prévue par Sarbanes-Oxley est tout d'abord de nature administrative, devant le Secrétaire au Travail, éventuellement devant la cour de district fédérale si le Secrétaire ne rend pas sa décision dans un certain délai. L'employé victorieux peut obtenir une décision de réintégrande, et se voir accorder les rémunérations dues, avec intérêts, ainsi que d'autres dommages à prouver, tels par exemple les frais de la procédure.

Chadbourne & Parke LLP v. Troice, Docket 12-79

Securities: class actions: state power: the Securities Litigation Uniform Standards Act of 1998 (Litigation Act or Act) forbids the bringing of large securities class actions “based upon the statutory or common law of any State” in which the plain­tiffs allege “a misrepresentation or omission of a material fact in con­nection with the purchase or sale of a covered security,” 15 U. S. C. §78bb(f)(1). The Act defines “covered security” to include, as relevant here, only securities traded on a national exchange. §§78bb(f)(5)(E), 77r(b)(1).

Several factors support the conclusion that the scope of §78bb(f)(1)(A)’s phrase “misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security” does not extend further than misrepresentations that are material to the decision by one or more individuals (other than the fraudster) to purchase or sell a covered security. (…) The interpretation is supported by the Act’s language. The phrase “material fact in connection with the purchase or sale” suggests a connection that matters. And a connec­tion matters where the misrepresentation makes a significant differ­ence to someone’s decision to purchase or to sell a covered security, not an uncovered one, something about which the Act expresses no concern. See Matrixx Initiatives, Inc. v. Siracusano, 563 U. S. __ (…) This Court reads the Litigation Act in light of and consistent with the language and purpose of the underlying regulatory statutes, the Securities Ex­change Act of 1934 and the Securities Act of 1933, which refer to per­sons engaged in securities transactions that lead to the taking or dis­solving of ownership positions, and which make it illegal to deceive a person when he or she is doing so. The basic purpose of the 1934 and 1933 regulatory statutes is to protect investor confidence in the secu­rities markets. Nothing in those statutes, or in the Litigation Act, suggests their object is to protect persons whose connection with the statutorily defined securities is more remote than buying or selling (…)

A broader interpretation of the necessary statutory “connec­tion” would interfere with state efforts to provide remedies for vic­tims of ordinary state-law frauds, despite the fact that the Litigation Act purposefully seeks to avoid such results by maintaining States’ legal authority over matters that are primarily of state concern, see, e.g., §§78bb(f)(4) (…) The Government warns that a narrow interpretation would curtail the Securities and Ex­change Commission’s enforcement powers under §10(b) of the Securi­ties Exchange Act of 1934, which uses the same “in connection with the pur­chase or sale” phrase. To the contrary, this Court’s interpretation is perfectly consistent with past SEC practice. The authority of the SEC and the Department of Justice extends to all “securities” under §10(b), not just to those traded on national exchanges. 15 U. S. C. §78c(a)(10). The SEC has accordingly brought successful enforce­ment actions against Stanford and his associates, based on the Bank’s fraudulent sales of certificates of deposit—products that are “securities” even if not “covered securities.” (U.S.S.Ct., 26.02.2014, Docket 12-79, Chadbourne & Parke LLP v. Troice, J. Breyer).

Securities, papiers-valeurs négociés en bourse : une disposition de la loi fédérale de 1998 sur les standards uniformes en matière de procès portant sur des Securities vise à maintenir la compétence des états et du droit étatique en disposant que ne sont pas recevables les actions de classes en droit des Securities lorsque ces actions sont fondées sur le droit ou sur la Common law de l’un des états, les requérants invoquant une mauvaise représentation ou l’omission d’un fait matériel en relation avec l’achat ou la vente de Securities couverte par la loi fédérale en question.

Les Securities couvertes, pour ce qui est du présent litige, ne concernent que les Securities échangées dans le cadre d’une bourse nationale.

La loi en question ne couvre, conformément à son texte, que les mauvaises représentations en rapport avec la décision portant sur un acte d’achat ou sur un acte de vente.

La Cour interprète la loi fédérale précitée d’une manière conforme au texte et conforme au but de la régulation de base en la matière, soit le Securities Ex­change Act de 1934 et le Securities Act de 1933. Le but de base de ces deux lois est de protéger la confiance de l’investisseur dans le fonctionnement des marchés des papiers-valeurs. Pour ce faire, seuls les actes d’achats ou de ventes sont protégés. Des fraudes qui ne seraient pas en relation avec un acte d’achat ou de vente ne sont ainsi pas couvertes par ces dispositions légales. Le but est de ne pas interférer avec le droit étatique, qui reste ainsi libre de protéger à sa manière les victimes des fraudes ordinaires de droit étatique. Il est rappelé que l’autorité de la SEC et du Département fédéral de Justice s’étend à toutes les Securities couvertes par le § 10(b) de la loi de 1934, et non pas seulement à celles qui sont échangées dans une bourse fédérale.