An amicus brief filed last week asks for reconsideration of a Ninth Circuit decision finding that Google should have disclosed more about a software vulnerability that the company had already identified and fixed in official Securities and Exchange Commission (SEC) filings. The submission argues that the amici’s member companies will be harmed both by the theory of liability endorsed by the appellate court and by the division among the circuits concerning liability for risk disclosures.
The case arrived at the Supreme Court after a San Francisco, California trial court held that Rhode Island’s accusations failed to meet the securities law’s scienter and falsity pleading requirements. In June, an appellate panel reversed, finding that the state investor plausibly alleged that Alphabet omitted relevant information about forward-looking risks related to the software vulnerability in two SEC quarterly disclosure forms.
Alphabet sought both rehearing en banc and a stay of mandate, the latter of which was granted. The company filed its certiorari petition in October, arguing that in an SEC filing, forward-looking disclosures need not include information about past events that relate to disclosed future risks. The court was wrong to conclude otherwise, Alphabet said, and its decision contributes to a rift between circuits that the Supreme Court should address.
On November 16, Rhode Island waived its right to respond.
The Chamber of Commerce, self-described as the world’s biggest business federation, the Securities Industry and Financial Markets Association, an industry trade association, and Business Roundtable, an association of CEOs of the nation’s leading companies, backed Alphabet, first contending that if it stands, the holding could open the floodgates “to the latest wave of event-driven and hindsight securities litigation.” The brief also points to statistics indicating that securities class actions have risen dramatically over the past decade to support this contention.
The amici further argued that the circuits need guidance on how to analyze “materialization-of-risk claims,” stating that the decision only adds to the current confusion. The brief reviewed various circuits’ positions on such claims and argued that the Ninth’s Circuit’s view point is an outlier. “No other circuit has permitted that type of purely backward-looking claim to proceed,” the filing claims.
The case has been distributed for conference scheduled for December 10. Alphabet is represented by Wilson Sonsini Goodrich & Rosati, Robbins Geller Rudman & Dowd LLP is lead counsel for Rhode Island, and the amici are represented by Sullivan & Cromwell LLP and their own counsel.