U.S. Supreme Court, Macquarie Infrastructure Corp. v. Moab Partners, L.P., Docket No. 22-1165

Securities

 

Securities Fraud Claim

 

Duty to Disclose

 

Pure Omissions

 

Private Action Under Rule 10b–5(b)

 

Section 10(b) of the Securities Exchange Act of 1934

 

Circuit Split

 

 

 

 

Securities and Exchange Commission (SEC) Rule 10b–5(b) makes it unlawful to omit material facts in connection with buying or selling securities when that omission renders “statements made” misleading. Separately, Item 303 of SEC Regulation S–K requires companies to disclose certain information in periodic filings with the SEC. The question in this case is whether the failure to disclose information required by Item 303 can support a private action under Rule 10b–5(b), even if the failure does not render any “statements made” misleading. The Court holds that it cannot. Pure omissions are not actionable under Rule 10b–5(b).

 

 

Section 10(b) of the Securities Exchange Act of 1934 makes it “unlawful for any person . . . to use or employ, in connection with the purchase or sale of any security . . ., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the SEC may prescribe.” 48 Stat. 891, 15 U. S. C. §78j(b). Rule 10b–5 implements this prohibition and makes it unlawful for issuers of registered securities 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.” 17 CFR §240.10b–5(b) (2022). This Court “has found a right of action implied in the words of §10(b) and its implementing regulation.” Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 157 (2008).

 

 

Section 13(a) of the Exchange Act requires issuers to file periodic informational statements. See 15 U. S. C. §§78m(a)(1), 78l(b)(1). These statements include the “Management’s Discussion and Analysis of Financial Conditions and Results of Operation” (MD&A), in which companies must “furnish the information required by Item 303 of Regulation S–K.” See SEC Form 10–K; SEC Form 10–Q. Item 303, in turn, requires companies to “describe any known trends or uncertainties that have had or that are reasonably likely to have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.” 17 CFR §229.303(b)(2)(ii) (2022).

 

 

(…) The courts of appeals disagree on whether a failure to make a disclosure required by Item 303 can support a private claim under §10(b) and Rule 10b–5(b) in the absence of an otherwise-misleading statement.1 This Court granted certiorari to resolve that disagreement. 600 U. S. ___ (2023).

 

 

1 Compare Stratte-McClure v. Morgan Stanley, 776 F. 3d 94, 101 (CA2 2015) (“Item 303’s affirmative duty to disclose in Form 10–Qs can serve as the basis for a securities fraud claim under Section 10(b)”), with In re Nvidia, 768 F. 3d 1046, 1056 (CA9 2014) (“Item 303 does not create a duty to disclose for purposes of Section 10(b) and Rule 10b–5”); see also Oran v. Stafford, 226 F. 3d 275, 288 (CA3 2000) (“The ‘demonstration of a violation of the disclosure requirements of Item 303 does not lead inevitably to the conclusion that such disclosure would be required under Rule 10b–5. Such a duty to disclose must be separately shown’”).

 

 

Rule 10b–5(b) makes it unlawful “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.” 17 CFR §240.10b–5(b). This Rule accomplishes two things. It prohibits “any untrue statement of a material fact”—i.e., false statements or lies. Ibid. It also prohibits omitting a material fact necessary “to make the statements made . . . not misleading.” Ibid. This case turns on whether this second prohibition bars only half-truths or instead extends to pure omissions.

A pure omission occurs when a speaker says nothing, in circumstances that do not give any particular meaning to that silence.

 

 

Rule 10b–5(b) does not proscribe pure omissions. The Rule prohibits omitting material facts necessary to make the “statements made . . . not misleading.” Put differently, it requires disclosure of information necessary to ensure that statements already made are clear and complete (…). This Rule therefore covers half-truths, not pure omissions. Logically and by its plain text, the Rule requires identifying affirmative assertions (i.e., “statements made”) before determining if other facts are needed to make those statements “not misleading.”

 

 

(…) It once again “bears emphasis that §10(b) and Rule 10b–5(b) do not create an affirmative duty to disclose any and all material information.

Disclosure is required under these provisions 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 Rule 10b–5(b)).

 

 

Statutory context confirms what the text plainly provides. Congress imposed liability for pure omissions in §11(a) of the Securities Act of 1933. Section 11(a) prohibits any registration statement that “contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading.” 15 U. S. C. §77k(a). By its terms, in addition to proscribing lies and half-truths, this section also creates liability for failure to speak on a subject at all. See Omnicare, 575 U. S., at 186, n. 3 (“Section 11’s omissions clause also applies when an issuer fails to make mandated disclosures—those ‘required to be stated’—in a registration statement”). There is no similar language in §10(b) or Rule 10b–5(b). Cf. Ernst & Ernst v. Hochfelder, 425 U. S. 185, 208 (1976).

 

 

“Silence, absent a duty to disclose, is not misleading under Rule 10b–5.” Basic Inc. v. Levinson, 485 U. S. 224, 239, n. 17 (1988). Even a duty to disclose, however, does not automatically render silence misleading under Rule 10b–5(b). Today, this Court confirms that the failure to disclose information required by Item 303 can support a Rule 10b–5(b) claim only if the omission renders affirmative statements made misleading.

(Fn. 2: Moab and the United States spill much ink fighting the question presented, insisting that this case is about half-truths rather than pure omissions. The Court granted certiorari to address the Second Circuit’s pure omission analysis, not its half-truth analysis. See Pet. for Cert. I (“Whether . . . a failure to make a disclosure required under Item 303 can support a private claim under Section 10(b), even in the absence of an otherwise-misleading statement”); see also 2022 WL 17815767, *1 (Dec. 20, 2022) (distinguishing between these “two circumstances”). The Court does not opine on issues that are either tangential to the question presented or were not passed upon below, including what constitutes “statements made,” when a statement is misleading as a half-truth, or whether Rules 10b–5(a) and 10b–5(c) support liability for pure omissions.) 

 

 

 

 

 

(U.S. Supreme Court, April 12, 2024, Macquarie Infrastructure Corp. v. Moab Partners, L.P., Docket No. 22-1165, J. Sotomayor, Unanimous)

U.S. Court of Appeals for the Seventh Circuit, Komatsu Mining Corp. v. Columbia Casualty Comp., Docket No. 21-2695

 

Insurance Law & Securities

 

D&O Policies

 

Securities and State-Law Suits

 

Exclusions

 

Inadequate Consideration Claim

 

Wisconsin Law

 

 

 

 

Appeal from the United States District Court for the Eastern District of Wisconsin. No. 2:18-CV-02034

 

 

The policies in question address securities and state-law suits, which the insurers must defend at their expense. But the underwriters need not indemnify the insureds (directors and officers as well as Joy Global) for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs”. In these policies, words and phrases in boldface are defined terms. The definition of “inadequate consideration claim” is: that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate. And a “claim” is: any civil, criminal, administrative or regulatory proceeding (other than an investigation) or arbitration, mediation or any alternative dispute resolution proceeding, ...  alleging a Wrongful Act, including any appeal therefrom.

 

 

The district court, applying Wisconsin law (which the parties agree is appropriate), granted summary judgment to the insurers. 555 F. Supp. 3d 589 (E.D. Wis. 2021). The judge found that the suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price. That brought the suits within the definition of “inadequate consideration claim” and activated the exclusion from indemnification (though the insurers still had to cover defense costs). Consider why an insurance policy might exclude coverage for “inadequate consideration”. How much a company is worth depends on the market, but bidders would like to shift the cost to a third party if possible. Suppose Company X is worth $100 million. Company Y agrees to buy X for $80 million and promises that X’s shareholders will be made whole. The shareholders sue, contending that X has withheld the “fact” that the company is worth $100 million. X and Y settle that claim for $20 million and turn to their insurer for indemnity. The shareholders get their $100 million, but if this maneuver works Y completes the purchase for only $80 million, with the rest coming from insurance. Insurers use clauses about inadequate consideration to protect themselves from this moral hazard. The hypothetical in this paragraph looks a lot like the actual merger between Joy Global and Komatsu America. But an inadequate-consideration clause means that Y, not the insurer, pays the target’s full market value.

 

 

(…) The only objection to this merger was that Joy Global could and should have held out for more money, and that revealing this would have induced the investors to vote “no” (or file suit in state court) and so trigger a renegotiation of the price.

 

 

Like the district court, we recognize that one state judge’s decision supports the approach that Komatsu Mining pursues. Northrop Grumman Innovation Systems, Inc. v. Zurich American Insurance Co., 2021 Del. Super. LEXIS 92 (Feb. 2, 2021), application for interlocutory review denied, 2021 Del. LEXIS 106 (Mar. 18, 2021), finds an inadequate-consideration exclusion in a different policy inapplicable because the claim rested in part on inadequate disclosure. The judge of the Superior Court wrote that such exclusions apply only when inadequate price is the sole allegation in the underlying complaint. Any other kind of allegation (including insufficient disclosure) nullifies the exclusion, the state judge wrote.

 

 

The state judge invoked what he understood to be a rule of Delaware insurance law that all conceivable ambiguities be construed against an insurer. But as the district judge pointed out, 555 F. Supp. 3d at 595, that may be the law in Delaware but is not the law in Wisconsin. See, e.g., Danbeck v. American Family Mutual Insurance Co., 2001 WI 91 ¶10 (Sykes, J.). What’s more, the language of the exclusion in Northrop Grumman differs from the definition of “inadequate consideration claim” in Joy Global’s policies. Komatsu Mining wants us to proceed as if all D&O policies contain the same language, but they don’t, so we shouldn’t.

 

 

 

 

(U.S. Court of Appeals for the Seventh Circuit, Jan. 23, 2023, Komatsu Mining Corp. v. Columbia Casualty Comp., Docket No. 21-2695)

Cyan, Inc. v. Beaver County Employees Retirement Fund, Docket No. 15-1439

Securities: Jurisdiction: Class actions: Removal (state to federal):

This case presents two questions about the Securities Litigation Uniform Standards Act of 1998 (SLUSA), 112 Stat. 3227. First, did SLUSA strip state courts of jurisdic­tion over class actions alleging violations of only the Secu­rities Act of 1933 (1933 Act), 48 Stat. 74, as amended, 15 U. S. C. §77a et seq.? And second, even if not, did SLUSA empower defendants to remove such actions from state to federal court? We answer both questions no.

The petitioners in this case are Cyan, a telecommunica­tions company, and its officers and directors (together, Cyan). The respondents are three pension funds and an individual (together, Investors) who purchased shares of Cyan stock in an initial public offering.

(…) Complaint alleges that Cyan’s offering documents con­tained material misstatements, in violation of the 1933 Act. It does not assert any claims based on state law.

We granted Cyan’s petition for certiorari, 581 U. S. ___ (2017), to resolve a split among state and federal courts about whether SLUSA deprived state courts of jurisdiction over “covered class actions” asserting only 1933 Act claims.

(…) By its terms, §77v(a)’s “except clause” does nothing to deprive state courts of their jurisdiction to decide class actions brought under the 1933 Act. And Cyan’s various appeals to SLUSA’s purposes and legislative history fail to overcome the clear statutory language. The statute says what it says—or perhaps better put here, does not say what it does not say. State-court jurisdiction over 1933 Act claims thus continues undisturbed.

(…) This Court has emphasized that SLUSA’s operative provisions (including its state-law class-action bar, see §77p(b)) apply to only “transactions in covered securities”: The statute “ex­presses no concern” with “transactions in uncovered securities”—precisely because they are not traded on national markets. Chadbourne & Parke LLP v. Troice, 571 U. S. 377, ___ (2014) (slip. op., at 9) (…) Those securities, the Court explained, are “primarily of state concern,” and SLUSA “maintains state legal authority” to address them. Chadbourne, 571 U. S., at ___ (slip op., at 13).

(…) The 1934 Act regulates all trading of securities whereas the 1933 Act addresses only securities offerings. See Blue Chip Stamps, 421 U. S., at 752 (characterizing the 1933 Act as “a far narrower statute”).

(U.S.S.C., March 20, 2018, Cyan, Inc. v. Beaver County Employees Retirement Fund, Docket No. 15-1439, J. Kagan, unanimous)

SLUSA ne retire nullement la compétence des cours des états de connaître des actions de classe n'invoquant que la violation de la loi de 1933 (Securities Act of 1933).

En outre, SLUSA ne confère pas à la défenderesse le droit d'obtenir le transfert de la procédure en faveur d'une cour fédérale.

En l'espèce, la demande alléguait que l'offre publique initiale de papiers-valeurs contenait des indications matérielles de nature à induire l'investisseur en erreur, en violation de la loi de 1933. La demande ne formulait pas de prétentions basées sur le droit étatique.

(Le cadre de la loi de 1933 (ne réglemente que les offres publiques) est plus restreint que celui de la loi de 1934 (règlemente aussi les transactions postérieures à l'offre publique initiale)).

(SLUSA ne s'applique pas aux papiers-valeurs qui ne sont pas échangés sur le marché national, c'est le droit des états qui s'applique ici).

Universal Health Services, Inc. v. United States ex rel. Escobar, Docket 15-7

Misrepresentation: Common law: Tort: Securities: In tort law, for exam­ple, “if the defendant does speak, he must disclose enough to prevent his words from being misleading.” W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §106, p. 738 (5th ed. 1984). Contract law also embraces this principle. See, e.g., Restate­ment (Second) of Contracts §161, Comment a, p. 432 (1979). And we have used this definition in other statutory contexts. See, e.g., Matrixx Initiatives, Inc. v. Siracusano, 563 U. S. 27, 44 (2011) (securities law).

A classic example of an actionable half-truth in contract law is the seller who reveals that there may be two new roads near a property he is selling, but fails to disclose that a third potential road might bisect the property. See Junius Constr. Co. v. Cohen, 257 N. Y. 393, 400, 178 N. E. 672, 674 (1931) (Cardozo, J.). “The enumeration of two streets, described as unopened but projected, was a tacit represen­tation that the land to be conveyed was subject to no others, and certainly subject to no others materially affect­ing the value of the purchase.” Ibid. Likewise, an appli­cant for an adjunct position at a local college makes an actionable misrepresentation when his resume lists prior jobs and then retirement, but fails to disclose that his “retirement” was a prison stint for perpetrating a $12 million bank fraud. See D. Dobbs, P. Hayden, & H. Bublick, Law of Torts §682, pp. 702–703, and n. 14 (2d ed.2011) (citing Sarvis v. Vermont State Colleges, 172 Vt. 76, 78, 80–82, 772 A. 2d 494, 496, 497–499 (2001)).

(…) Materiality “looks to the effect on the likely or actual behavior of the recipient of the alleged misrepre­sentation.” R. Lord, Williston on Contracts §69:12, p. 549 (4th ed. 2003) (Williston). In tort law, for instance, a “matter is material” in only two circumstances: (1) “if a reasonable man would attach importance to it in deter­mining his choice of action in the transaction”; or (2) if the defendant knew or had reason to know that the recipient of the representation attaches importance to the specific matter “in determining his choice of action,” even though a reasonable person would not. Restatement (Second) of Torts §538, at 80. Materiality in contract law is substan­tially similar. See Restatement (Second) of contracts §162(2), and Comment c, pp. 439, 441 (1979) (“A misrep­resentation is material” only if it would “likely . . . induce a reasonable person to manifest his assent,” or the defend­ant “knows that for some special reason the representa­tion is likely to induce the particular recipient to manifest his assent” to the transaction). Accord, Williston §69:12, pp. 549–550 (“most popular” understand­ing is “that a misrepresentation is material if it concerns a matter to which a reasonable person would attach importance in determining his or her choice of action with respect to the transaction involved: which will induce action by a complaining party, knowledge of which would have induced the recipient to act differently”); id., at 550 (noting rule that “a misrepresentation is material if, had it not been made, the party complaining of fraud would not have taken the action alleged to have been induced by the misrepresentation”); Junius Constr. Co. v. Cohen, 257 N. Y. 393, 400, 178 N. E. 672, 674 (1931) (a misrepresentation is material if it “went to the very essence of the bargain”); cf. Neder v. United States, 527 U. S. 1, 16, 22, n. 5 (1999) (relying on “ ‘natural tendency to influence’ ” standard and citing Restatement (Second) of Torts §538 definition of materiality).

Materiality, in addition, cannot be found where noncompliance is minor or insubstantial. See United States ex rel. Marcus v. Hess, 317 U. S. 537, 543 (1943) (contractors’ misrepresentation that they satisfied a non-collusive bidding requirement for federal program contracts violated the False Claims Act because “the government’s money would never have been placed in the joint fund for payment to respondents had its agents known the bids were collusive”); see also Junius Constr., 257 N. Y., at 400, 178 N. E., at 674 (an undisclosed fact was material because “no one can say with reason that the plaintiff would have signed this contract if informed of the likelihood” of the undisclosed fact).

Secondary sources: W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts §106, p. 738 (5th ed. 1984); Restate­ment (Second) of Contracts §161, Comment a, p. 432 (1979); D. Dobbs, P. Hayden, & H. Bublick, Law of Torts §682, pp. 702–703, and n. 14 (2d ed.2011); R. Lord, Williston on Contracts §69:12, p. 549 (4th ed. 2003).

(U.S.S.C., June 16, 2016, Universal Health Services, Inc. v. United States ex rel. Escobar, Docket 15-7, J. Thomas, unanimous).

Induire en erreur, en responsabilité extracontractuelle ou contractuelle : en droit de la responsabilité civile, si l’adverse partie s’est exprimée, elle doit en avoir dit suffisamment pour éviter d’induire en erreur. Le droit des contrats connaît le même principe (Restate­ment (Second) of Contracts §161, Comment a, p. 432 (1979)), que la Cour a repris dans d’autres contextes statutaires (p. ex. en droit des Securities).

Un exemple classique d’une demi-vérité actionnable en droit des contrats est la déclaration du vendeur qui informe son acheteur que deux routes pourraient bien dans le futur être construites à proximité de l’immeuble en vente, mais qui omet d’informer qu’une troisième route pourrait être construite, cette dernière partageant la propriété en deux. En effet, la mention des deux routes constitue une représentation tacite qu’aucune autre route n’est projetée, et certainement qu’aucune autre route affectant la valeur de la propriété n’est projetée (cf. Junius Constr. Co. v. Cohen, 257 N. Y. 393, 400, 178 N. E. 672, 674 (1931) (Cardozo, J.)). De même, celui qui postule à une offre d’emploi comme professeur assistant induit en erreur, et peut être actionné à ce titre, si son CV donne la liste de ses emplois antérieurs, la liste comprenant par ailleurs une période de retraite, sans mentionner que cette retraite correspond à une période d’incarcération pour avoir commis une fraude bancaire portant sur 12 millions de dollars.

(…) La condition de matérialité s’intéresse au comportement soit effectif soit vraisemblable de celui qui est – est-il allégué – induit en erreur (R. Lord, Williston on Contracts §69:12, p. 549). En droit des « Torts », une matière est « matérielle » dans seulement deux circonstances : (1) si un homme raisonnable attache de l’importance à dite matière pour déterminer son action dans le cadre de la transaction, ou (2) si le défendeur savait ou avait des raisons de savoir que celui recevant les informations attachait de l’importance à dite matière dans la détermination de son action, même si une personne raisonnable n’y attacherait pas d’importance (cf. Restatement (Second) of Torts §538, at 80). La notion de matérialité est substantiellement similaire en droit des contrats : selon le Restatement (Second) of contracts §162(2), and Comment c, pp. 439, 441 (1979), le fait d’induire en erreur est matériel seulement s’il est de nature à vraisemblablement induire en erreur une personne raisonnable, l’incitant ainsi à manifester sa volonté, ou seulement si le défendeur savait que pour certaines raisons, la représentation induirait vraisemblablement celui qui l’a reçue à conclure la transaction. Un fait qui induit en erreur est matériel s’il porte sur l’essence même de la transaction.

Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, Docket 14-1132

Jurisdiction (federal court v. state court): Federal question statute (28 U.S.C. §1331), Securities: Equity: Short sales: Naked short sales: New Deal, Removal to federal court: Section 27 of the Securities Exchange Act of 1934 (Exchange Act), 48 Stat. 992, as amended, 15 U. S. C. §78a, et seq., grants federal district courts exclusive jurisdiction “of all suits in equity and actions at law brought to enforce any liability or duty created by the Exchange Act or the rules or regulations thereunder.” §78aa(a). We hold today that the jurisdictional test established by that provision is the same as the one used to decide if a case “arises under” a federal law. See 28 U. S. C. §1331.

Respondent Manning held more than two million shares of stock in Escala Group, Inc., a company traded on the NASDAQ. Between 2006 and 2007, Escala’s share price plummeted and Manning lost most of his investment. Manning blames petitioners, Merrill Lynch and several other financial institutions (collectively, Merrill Lynch), for devaluing Escala during that period through “naked short sales” of its stock.

A typical short sale of a security is one made by a borrower, rather than an owner, of stock. In such a transaction, a person borrows stock from a broker, sells it to a buyer on the open market, and later purchases the same number of shares to return to the broker. The short seller’s hope is that the stock price will decline between the time he sells the borrowed shares and the time he buys replacements to pay back his loan. If that happens, the seller gets to pocket the difference (minus associated transaction costs).

In a “naked” short sale, by contrast, the seller has not borrowed (or otherwise obtained) the stock he puts on the market, and so never delivers the promised shares to the buyer. See “Naked” Short Selling Antifraud Rule, Securities Exchange Commission (SEC) Release No. 34–58774, 73 Fed. Reg. 61667 (2008). That practice (beyond its effect on individual purchasers) can serve “as a tool to drive down a company’s stock price”—which, of course, injures shareholders like Manning. Id., at 61670. The SEC regulates such short sales at the federal level: The Commission’s Regulation SHO, issued under the Exchange Act, prohibits short sellers from intentionally failing to deliver securities and thereby curbs market manipulation. See 17 CFR §§242.203–242.204 (2015).

In this lawsuit, Manning (joined by six other former Escala shareholders) alleges that Merrill Lynch facilitated and engaged in naked short sales of Escala stock, in violation of New Jersey law. (…) That conduct, Manning charges, contravened provisions of the New Jersey Racketeer Influenced and Corrupt Organizations Act (RICO), New Jersey Criminal Code, and New Jersey Uniform Securities Law; it also, he adds, ran afoul of the New Jersey common law of negligence, unjust enrichment, and interference with contractual relations.

Manning chose not to bring any claims under federal securities laws or rules. His complaint, however, referred explicitly to Regulation SHO, both describing the purposes of that rule and cataloguing past accusations against Merrill Lynch for flouting its requirements. And the complaint couched its description of the short selling at issue here in terms suggesting that Merrill Lynch had again violated that regulation, in addition to infringing New Jersey law.

Manning brought his complaint in New Jersey state court, but Merrill Lynch removed the case to Federal District Court. See 28 U. S. C. §1441 (allowing removal of any civil action of which federal district courts have original jurisdiction).

Manning moved to remand the case to state court.

The District Court denied his motion. See No. 12–4466 (D NJ, Mar. 18, 2013).

The Court of Appeals for the Third Circuit reversed, ordering a remand of the case to state court. See 772 F. 3d 158 (2014).

The U.S. Supreme Court affirmed.

Like the Third Circuit, we read §27 as conferring exclusive federal jurisdiction of the same suits as “arise under” the Exchange Act pursuant to the general federal question statute. See 28 U. S. C. §1331. (…) The construction fits with our practice of reading jurisdictional laws, so long as consistent with their language, to respect the traditional role of state courts in our federal system and to establish clear and administrable rules.

Section 27, as noted earlier, provides federal district courts with exclusive jurisdiction “of all suits in equity and actions at law brought to enforce any liability or duty created by the Exchange Act or the rules and regulations thereunder.” 15 U. S. C. §78aa(a). Much the same wording appears in nine other federal jurisdictional provisions—mostly enacted, like §27, as part of New Deal-era regulatory statutes.

Natural reading of §27’s text: “Brought” in this context means “commenced,” Black’s Law Dictionary 254 (3d ed. 1933); “to” is a word “expressing purpose or consequence,” The Concise Oxford Dictionary 1288 (1931); and “enforce” means “give force or effect to,” 1 Webster’s New International Dictionary of the English Language 725 (1927). So §27 confers federal jurisdiction when an action is commenced in order to give effect to an Exchange Act requirement. That language, in emphasizing what the suit is designed to accomplish, stops short of embracing any complaint that happens to mention a duty established by the Exchange Act. Consider, for example, a simple state-law action for breach of contract, in which the plaintiff alleges, for atmospheric reasons, that the defendant’s conduct also violated the Exchange Act—or still less, that the defendant is a bad actor who infringed that statute on another occasion. (…) But that hypothetical suit is “brought to enforce” state contract law, not the Exchange Act—because the plaintiff can get all the relief he seeks just by showing the breach of an agreement, without proving any violation of federal securities law. The suit, that is, can achieve all it is supposed to even if issues involving the Exchange Act never come up.

(…) There is no doubt, as Manning says, that a suit asserting an Exchange Act cause of action fits within §27’s scope: Bringing such a suit is the prototypical way of enforcing an Exchange Act duty. But it is not the only way. On rare occasions, as just suggested, a suit raising a state-law claim rises or falls on the plaintiff ’s ability to prove the violation of a federal duty. See, e.g., Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308, 314–315 (2005); Smith v. Kansas City Title & Trust Co., 255 U. S. 180, 201 (1921). If in that manner, a state-law action necessarily depends on a showing that the defendant breached the Exchange Act, then that suit could also fall within §27’s compass.

A plaintiff seeking relief under that state law must undertake to prove, as the cornerstone of his suit, that the defendant infringed a requirement of the federal statute. (Indeed, in this hypothetical, that is the plaintiff ’s only project.) Accordingly, his suit, even though asserting a state-created claim, is also “brought to enforce” a duty created by the Exchange Act.

An existing jurisdictional test well captures both classes of suits “brought to enforce” such a duty. As noted earlier, 28 U. S. C. §1331 provides federal jurisdiction of all civil actions “arising under” federal law. This Court has found that statutory term satisfied in either of two circumstances. Most directly, and most often, federal jurisdiction attaches when federal law creates the cause of action asserted.

As this Court has explained, a federal court has jurisdiction of a state-law claim if it “necessarily raises a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance” of federal and state power. Grable, 545 U. S., at 314; see Gunn, 568 U. S., at ___ (slip op., at 6).

That description typically fits cases, like those described just above, in which a state-law cause of action is “brought to enforce” a duty created by the Exchange Act because the claim’s very success depends on giving effect to a federal requirement. Accordingly, we agree with the court below that §27’s jurisdictional test matches the one we have formulated for §1331, as applied to cases involving the Exchange Act. If (but only if) such a case meets the “arising under” standard, §27 commands that it go to federal court.

The concurrence adopts a slightly different approach, placing in federal court Exchange Act claims plus all state-law claims necessarily raising an Exchange Act issue. See post, at 2–3 (THOMAS, J., concurring in judgment). In other words, the concurrence would not ask, as the “arising under” test does, whether the federal issue embedded in such a state-law claim is also substantial, actually disputed, and capable of resolution in federal court without disrupting the congressionally approved federal-state balance.

(…) to analyze the jurisdictional issue in the manner set out in our “arising under” precedents. Federal question jurisdiction lies, the Court wrote, only if “it appears from the face of the complaint that determination of the suit depends upon a question of federal law.” That inquiry focuses on “the particular claims a suitor makes” in his complaint—meaning, whether the plaintiff seeks relief under state or federal law. In addition, the Court suggested, a federal court could adjudicate a suit stating only a state-law claim if it included as “an element, and an essential one,” the violation of a federal right. Id., at 663 (quoting Gully v. First Nat. Bank in Meridian, 299 U. S. 109, 112 (1936)). With those principles of “arising under” jurisdiction laid out, the Court held that § x did not enable a federal court to resolve the buyer’s case, because he could prevail merely by proving breach of the contract. See 366 U. S., at 663–665. “Brought to enforce” has the same “limitations” (meaning, the same scope) as “arising under.” 366 U. S., at 665, n. 2.

Our reading, unlike Merrill Lynch’s, gives due deference to the important role of state courts in our federal system. And the standard we adopt is more straightforward and administrable than the alternative Merrill Lynch offers.

After all, Congress specifically affirmed the capacity of such courts to hear state-law securities actions, which predictably raise issues coinciding, overlapping, or intersecting with those under the Act itself. See 15 U. S. C. §78bb(a)(2); Matsushita, 516 U. S., at 383. So, for example, it is hardly surprising in a suit like this one, alleging short sales in violation of state securities law, that a plaintiff might say the defendant previously breached a federal prohibition of similar conduct. And it is less troubling for a state court to consider such an issue than to lose all ability to adjudicate a suit raising only state-law causes of action.

Our holding requires remanding Manning’s suit to state court. The Third Circuit found that the District Court did not have jurisdiction of Manning’s suit under §1331 because all his claims sought relief under state law and none necessarily raised a federal issue. (…) And that means, under our decision today, that the District Court also lacked jurisdiction under §27. Accordingly, we affirm the judgment below.

(U.S.S.C., May 16, 2016, Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, Docket 14-1132, J. Kagan, in which Roberts, C.J., Kennedy, Ginsburg, Breyer, and Alito, JJ., joined. Thomas, J., filed an opinion concurring in the judgment, in which J.  Sotomayor joined).

Selon le standard habituel et fonctionnel « arises under » a federal law, une cour fédérale est compétente pour connaître d’une action fondée sur le droit fédéral. La question que pose la présente affaire est de savoir si la notion d’action « brought to » enforce a federal law est de signification équivalente à « arises under » s’agissant de fonder la compétence d’une cour fédérale. La réponse est affirmative. Cette question est d’importance car un certain nombre de lois fédérales utilisent les termes « brought to » et il s’agissait ici de déterminer si ces termes avaient une influence différente aux termes « arises under » sur la compétence des cours fédérales ou étatiques. Il n’en est rien.

En l’espèce c’est la Section 27 du Sec. Exch. Act de 1934 qui est en cause. Cette disposition attribue la compétence exclusive aux cours fédérales de connaître des actions (in equity ou at law) concluant à l’exécution de tous devoirs ou responsabilités créés par dite loi ou par ses dispositions d’application.

Le demandeur M. (intimé dans la présente procédure) détenait des actions d’une compagnie, pour plus de 2 millions. Sur une période de deux ans, le cours de ces actions s’est effondré et M. a perdu son investissement. M. reproche à diverses grandes institutions financières d’avoir dévalué la valeur des actions par le mécanisme des « naked short sales ».

Une « short sale » typique d’un papier-valeur est une vente faite par un emprunteur d’un titre plutôt que celle faite par son propriétaire. Par une telle transaction, une personne emprunte des titres à un courtier, les vends à un acheteur sur le marché libre, puis ultérieurement achète le même nombre de titres et les remets au courtier. Le vendeur à court terme espère que la valeur des titres va diminuer entre le moment de la vente des titres empruntés et le moment de l’achat des titres de remplacement. Si la diminution de valeur se produit, le vendeur conserve la différence (diminuée des frais de transactions).

Par contraste, dans le cadre d’une « naked short sale », le vendeur n’a pas emprunté ni autrement obtenu les titres qu’il place sur le marché, de sorte qu’il ne remet jamais les titres promis à l’acheteur. Au-delà de ses effets sur un acheteur individuel, cette pratique peut servir d’outil pour réduire la valeur du titre d’une compagnie, causant un dommage aux actionnaires, tel M. en l’espèce. Au niveau fédéral, la SEC règlemente de telles pratiques en interdisant aux vendeurs à court terme de manquer intentionnellement à délivrer les titres. Cette règlementation sert à restreindre les manipulations du marché (cf. 17 CFR §§242.203–242.204 (2015)).

En l’espèce, M., en tant qu’actionnaire de la compagnie E., reproche aux institutions financières qu’il a actionnées devant une cour étatique du New Jersey, de s’être compromises dans des « naked short sales » de titres de E., en violation du droit du New Jersey. Selon M. la conduite de ses parties adverses constituerait violations de la loi RICO (celle de l’état du New Jersey, M. ne mentionnant pas son équivalent fédéral), du code pénal du New Jersey, de la loi du New Jersey sur les Securities, de la Common law du New Jersey en matière de « negligence », des règles sur l’enrichissement illégitime, et des règles sur les interférences avec des relations contractuelles.

M. a choisi de ne pas invoquer le droit fédéral des Securities. Sa demande, cependant, se réfère explicitement à 17 CFR §§242.203–242.204 (2015) en décrivant le but de cette réglementation fédérale publiée au CFR, et en détaillant des accusations passées dirigées contre ces institutions financières, leur reprochant d’avoir ignoré les exigences que pose cette réglementation fédérale.

Et la demande en justice décrit les comportements dont elle se plaint en des termes suggérant que les institutions financières ont à nouveau porté atteinte à la réglementation fédérale précitée, en sus des violations invoquées du droit de l’état du New Jersey.

M. avait déposé sa demande devant la cour de l’état du New Jersey, mais les institutions financières défenderesses ont fait transférer le dossier à la cour de district fédérale, au sens de 28 U. S. C. §1441, disposition permettant le transfert de toutes les affaires civiles dans lesquelles les cours de district fédérales disposent d’une compétence originelle.

M. demanda le renvoi de la cause devant la cour de l’état du New Jersey.

La cour de district fédérale a rejeté sa requête.

Saisie à son tour, la cour d’appel fédérale pour le 3è Circuit annule la décision précitée de la cour de district, et ordonna le renvoi du dossier à la cour de l’état du New Jersey. Décision confirmée in casu par la Cour Suprême fédérale.

La Cour Suprême fédérale précise ici qu’elle lit la Section 27 de la même manière que le 3è Circuit, dite Section conférant juridiction fédérale exclusive si l’action est fondée sur la loi fédérale de 1934, tout cela conformément à la disposition légale (28 U.S.C. §1331) attribuant dite juridiction dans les cas où une question fédérale se pose comme fondement de l’action. Dans les autres cas, la compétence des cours des états est respectée, leur place étant bien établie dans un système fédéraliste. La règle attributive de juridiction soit au système fédéral soit au système étatique est ainsi claire et aisément gérable.

La Section 27 est ainsi attributive de juridiction exclusive aux cours de district fédérales dans le cadre de toutes actions en équité (in equity) et dans le cadre de toutes actions légales (at law) fondées sur la loi fédérale de 1934 ou sur ses dispositions d’application. Le même type de formulation (« brought to enforce »)  apparaît dans neuf autres dispositions légales attributives de juridiction fédérale, la plupart, comme la Section 27, passées dans le cadre du programme législatif de l’époque du New Deal.

Selon une interprétation littérale du texte de la Section 27, « Brought » ici signifie « commencée », « to » est un mot qui exprime un but ou une conséquence, et « enforce » signifie « donner force ou effet à ». La Cour se réfère à des dictionnaires de l’époque de l’entrée en vigueur de la loi de 1934. Par conséquent la Section 27 attribue compétence juridictionnelle fédérale quand une action en justice débute en vue de donner effet à une exigence posée par la loi de 1934. Cette interprétation n’inclut pas les actions qui mentionnent certes un devoir prévu par loi sur les Securities, mais qui sont basées sur le droit étatique. Ne relèvera par exemple pas de la juridiction fédérale une action déposée devant une cour étatique et invoquant une violation contractuelle, dans laquelle, par surabondance, le demandeur soutient que la partie défenderesse aurait porté en outre atteinte à la loi fédérale de 1934, ou que la partie défenderesse aurait violé cette loi fédérale par le passé. Une telle action ne vise qu’à faire respecter le droit de l’état, parce que le demandeur peut obtenir réparation uniquement en démontrant une violation du droit contractuel de l’état, sans avoir à prouver de violation du droit fédéral des Securities.

Il est hors de doute, ainsi que le soutient M., qu’une action fondée sur la loi de 1934 se comprend dans le cadre de la Section 27. Le dépôt d’une telle action constitue la voie royale en vue de faire exécuter un devoir découlant de dite loi de 1934. Mais ce n’est pas la seule voie. En de rares occasions, le sort d’une action déposée devant la cour d’un état et invoquant la violation du droit de cet état peut dépendre de la capacité du demandeur à prouver la violation d’un devoir stipulé par du droit fédéral. Si de cette manière le sort d’une action étatique dépend nécessairement de la démonstration que le défendeur a violé la loi fédérale de 1934, alors l’action étatique tombe également dans le cadre de la Section 27. Une telle action est ainsi également déposée en vue de « brought to enforce » une obligation créé par la loi fédérale de 1934.

Comme la Cour l’a expliqué, une cour fédérale est compétente pour connaître d’une action fondée sur le droit d’un état si cette action nécessairement soulève une question de droit fédéral, en dispute dans l’affaire, de nature substantielle, qu’une cour fédérale peut connaître sans porter atteinte à l’équilibre des pouvoirs fédéraux et étatiques tels que voulus par le Congrès fédéral.

Selon la Cour, une question implique la compétence des cours fédérales seulement s’il apparaît à la lecture de la demande que la résolution du litige dépend d’une question de droit fédéral. Plus particulièrement, il s’agit tout d’abord de déterminer si les conclusions du demandeur se fondent sur le droit étatique ou fédéral. La cour fédérale sera également compétente si la résolution d’une question de droit étatique implique résolution préalable d’une question, essentielle, de droit fédéral. Par exemple, si un demandeur dans une action contractuelle peut l’emporter uniquement par la démonstration d’une violation contractuelle (selon le droit de l’état), la compétence d’une cour fédérale n’est pas donnée.

La Cour rappelle encore que le Congrès fédéral a admis la capacité des cours des états de connaître des actions fondées sur le droit étatique des Securities, lesquelles actions sont susceptibles de poser des questions qui coïncident avec des questions similaires relevant du droit fédéral. De la sorte, par exemple, il n’est guère surprenant, dans une action telle la présente, qui allègue l’existence de « short sales » en violation du droit étatique des Securities, de voir un demandeur soutenir que le défendeur aurait par le passé violé une prohibition fédérale dans le cadre d’une conduite similaire. Et il est moins troublant de laisser une cour étatique considérer une question fédérale de cette sorte plutôt que de la priver de la capacité de juger d’une action qui ne se fonde que sur le droit étatique pour former ses conclusions.

Conséquemment, la Cour affirme la décision du 3è Circuit fédéral et retourne le dossier directement à la cour de l’état, dont la compétence est confirmée.

Halliburton Co. v. Erica P. John Fund, Inc., Docket 13-317

Securities:  investors can recover damages in a private securities fraud action only if they prove that they relied on the defendant’s misrepresentation in deciding to buy or sell a company’s stock. In Basic Inc. v. Levinson, 485 U. S. 224, this Court held that investors could satisfy this reli­ance requirement by invoking a presumption that the price of stock traded in an efficient market reflects all public, material infor­mation—including material misrepresentations. The Court also held, however, that a defendant could rebut this presumption by showing that the alleged misrepresentation did not actually affect the stock price—that is, that it had no “price impact.” For the same reasons the Court declines to overrule Basic’s pre­sumption of reliance, it also declines to modify the prerequisites for invoking the presumption by requiring plaintiffs to prove “price im­pact” directly at the class certification stage. The Basic presumption incorporates two constituent presumptions: first, if a plaintiff shows that the defendant’s misrepresentation was public and material and that the stock traded in a generally efficient market, he is entitled to a presumption that the misrepresentation affected the stock price.

Second, if the plaintiff also shows that he purchased the stock at the market price during the relevant period, he is entitled to a further presumption that he purchased the stock in reliance on the defend­ant’s misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first constituent presumption.

The Court agrees with Halliburton, however, that defendants must be afforded an opportunity to rebut the presumption of reliance before class certification with evidence of a lack of price impact. De­fendants may already introduce such evidence at the merits stage to rebut the Basic presumption, as well as at the class certification stage to counter a plaintiff’s showing of market efficiency. (…) The fact that a misrepresentation has price impact is “Basic’s fundamental premise.” It thus has everything to do with the issue of predominance at the class certification stage. That is why, if reliance is to be shown through the Basic presumption, the publicity and market efficiency prerequi­sites must be proved before class certification. Given that such indi­rect evidence of price impact will be before the court at the class certi­fication stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact (U.S.S.Ct., 23.06.2014, Halliburton Co. v. Erica P. John Fund, Inc., Docket 13-317, C.J. Roberts).

Valeurs boursières : fraude, perte : un investisseur ne peut récupérer son dommage que s’il prouve s’être fié à des indications trompeuses du défendeur pour prendre sa décision de vente ou d’achat. Dans sa jurisprudence Basic, la Cour a jugé que l’investisseur pouvait satisfaire à la condition de « s’être fié à » en invoquant la présomption que le prix des valeurs échangées dans le cadre d’un marché efficient reflète toutes informations matérielles publiques, y compris les informations trompeuses. La Cour a également jugé que le défendeur pouvait renverser cette présomption en démontrant que la tromperie alléguée n’avait pas affecté le prix des valeurs boursières, soit qu’elle n’avait pas eu d’impact sur le prix. L’investisseur n’a dès lors pas à prouver l’impact sur le prix lors de la phase de certification de la procédure de classe (class action). Le mécanisme des présomptions fonctionne ainsi dans ce type d’affaires : si un investisseur, demandeur à l’action, démontre que la tromperie du défendeur était publique et matérielle, et que la valeur boursière en cause s’échangeait sur un marché de manière générale efficient, dit investisseur se trouve au bénéfice d’une présomption que la tromperie a exercé un effet sur le prix de la transaction boursière. Ensuite, si le demandeur démontre qu’il a acheté la valeur boursière au prix du marché à l’époque de l’achat, il est au bénéfice d’une présomption supplémentaire selon laquelle il a acheté en se fiant à la tromperie. La Cour précise cependant que la défenderesse doit avoir l’opportunité de renverser la présomption de « s’être fié à » avant la certification de classe, à l’aide de la preuve de l’absence d’impact sur le prix. Dès lors, si le fait de « s’être fié à » est démontré par le biais de la présomption établie par la jurisprudence Basic, les prérequis de tromperie rendue publique et de marché efficient sont tous deux à prouver avant la certification de classe. Considérant ainsi le fait que la question de l’impact sur le prix sera devant la cour, de manière indirecte, au stade de la certification de classe, il n’existe aucune raison de limiter artificiellement l’administration des preuves, à ce stade de certification de classe, en excluant l’apport de la preuve directe d’un impact sur le prix.