Source: https://www.jdsupra.com/legalnews/2016-securities-and-m-a-litigation-year-65446/
Timestamp: 2019-04-20 15:07:31+00:00

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Wilson Sonsini Goodrich & Rosati is pleased to present its 2016 Securities and M&A Litigation Year in Review. This report covers some of the major developments in securities and M&A litigation over the past year.
2016 SECURITIES AND M&A LITIGATION YEAR IN REVIEW AUSTIN BEIJING BOSTON BRUSSELS HONG KONG LOS ANGELES NEW YORK PALO ALTO SAN DIEGO SAN FRANCISCO SEATTLE SHANGHAI WASHINGTON, DC WILMINGTON, DE WSGR 2016 Securities and M&A Litigation Year in Review Introduction ......................................................................................................................................... 1 Developments in Federal Securities Law .............................................................................................. 2 Omnicare Analyses ....................................................................................................................... 2 General	Partner	Glenn	Tongue	v.	Sanofi ................................................................................... 2 Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu CPA, Ltd. .............................. 3 Querub v. Moore Stephens Hong Kong ................................................................................... 3 In re Deutsche Bank AG Securities Litigation ........................................................................... 3 In re BP p.l.c. Securities Litigation ............................................................................................ 4 Developments Related to Item 303 of Regulation S-K ................................................................... 5 Class	Certification	Decisions	Post-Halliburton II ............................................................................. 5 IBEW Local 98 Pension Fund v. Best Buy Co. ......................................................................... 6 In re Goldman Sachs Group, Inc., Securities Litigation ............................................................. 6 In re Intuitive Surgical Securities Litigation ................................................................................ 7 American Pipe Tolling .................................................................................................................... 8 Securities Fraud Claims: Scienter and the PSLRA Safe Harbor ..................................................... 8 Arena Pharmaceuticals ............................................................................................................ 8 PSLRA Safe Harbor ................................................................................................................. 9 Standard for Disclosure for Corporations Purchasing Their Own Stock ....................................... 10 Continued Increase in Cases Filed Under the Securities Act in State Court.................................. 11 O’Donnell v. Coupons.com .................................................................................................... 12 Cyan Petition for Certiorari ..................................................................................................... 12 Table of Contents WSGR 2016 Securities and M&A Litigation Year in Review Table of Contents (cont.) Developments in Delaware M&A Law ................................................................................................. 13 Trulia Resolves Recent Uncertainty Regarding Disclosure-Only Settlements ................................ 13 The Aftermath of Trulia ................................................................................................................ 14 Other State and Federal Courts Appear to Be Following Trulia Reasoning ................................... 15 Plaintiffs’	Bar’s	Response	to	Trulia ............................................................................................... 16 Rise of the “Mooting” Disclosure ............................................................................................ 16 Increase in Disclosure Claims Under Section 14(a) of the Exchange Act ................................ 16 Increase in Other Forms of Stockholder Activity ..................................................................... 17 Looking Forward ........................................................................................................................ 17 About	WSGR’s	Securities	and	M&A	Litigation	Practice ...................................................................... 18 WSGR 2016 Securities and M&A Litigation Year in Review 1 Wilson Sonsini Goodrich & Rosati is pleased to present its 2016 Securities and M&A Litigation Year in Review. This report covers some of the major developments in securities and M&A litigation over the past year. The	first	part	of	the	report	discusses	developments under the federal securities laws.	There,	many	of	the	most	significant	decisions concerned how lower courts would interpret and apply two recent decisions by the U.S. Supreme Court, the Omnicare decision issued in 2015 concerning whether statements of opinion are actionable,1 and the 2014 decision in the second Halliburton case, where	the	Court	reaffirmed	the	viability	of the fraud-on-the-market theory for class	certification.2 We expect that this will continue in the upcoming year, as courts increasingly deal with cases based on claims concerning qualitative statements and defendants challenging the feasibility of certifying a class of disparate shareholders. One trend that accelerated in	2016	was	the	attempt	by	plaintiffs	to	avoid	federal	courts	altogether	by	filing	cases under the Securities Act of 1933 (the “Securities Act”) in state courts, particularly in California. As discussed below, there is a petition for certiorari pending before the U.S. Supreme Court that has the potential to close this end-run around the federal courts. In the second part of the report, we cover some of the major cases and developments in Delaware, the epicenter of	cases	alleging	breaches	of	fiduciary	duties. Most notably, the past year saw a significant	change	in	cases	challenging	the	decisions of boards of directors of public companies to enter into mergers. Over the last few years, almost every public company board that agreed to a sale of the company was hit with a shareholder class action alleging that the board breached	its	fiduciary	duties	in	entering	into the transaction and/or in connection with the disclosures provided to shareholders. Most of those cases settled, with the company agreeing to issue additional disclosures to shareholders. After several decisions in 2015 called into question such settlements, at the start of 2016, the Delaware Court of Chancery issued a major decision in which it made clear that such settlements were disfavored absent shareholders being provided with clearly material supplemental disclosures. In response, the incidence of challenges to mergers decreased, but also expanded	in	scope,	as	plaintiffs	sought	to	file	such	cases	in	federal	court	under	the	federal securities laws. In looking back on the year that just ended, it is notable that shareholder litigation under both the federal securities laws and Delaware corporate law evolved on similar paths: In response to an increased judicial skepticism	of	shareholder	claims,	plaintiffs	moved to alternate forums. The upcoming year should provide greater clarity on whether	they	will	be	successful	in	finding	or maintaining a warmer welcome. We	hope	you	will	find	this	report	to	be informative on some of the key developments of the past year. If you have any questions or comments, please contact	a	member	of	WSGR’s	securities	and M&A litigation practice. Introduction WSGR 2016 Securities and M&A Litigation Year in Review 2 Developments in Federal Securities Law In 2016, courts addressed a wide variety of issues arising under the federal securities laws, including applying the U.S. Supreme Court’s	recent	decisions	in	Omnicare and Halliburton II. Below are summaries of some	of	the	year’s	most	notable	cases. Omnicare Analyses In its landmark 2015 decision Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, the U.S. Supreme Court resolved a circuit split regarding the scope of liability under Section 11 of the Securities Act for false statements of opinion.3 Section 11 provides securities purchasers with a private right of action against issuers (and	others)	where	an	already	effective	registration statement “contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.”4 In Omnicare, the Court held that a genuinely held statement of opinion is not an untrue statement of material fact for purposes of Section 11, regardless of whether it is ultimately proven incorrect. In doing so, the Court recognized that opinion-based assessments can be inherently subjective and uncertain, and that Section 11 should not be employed to “Monday morning quarterback	an	issuer’s	opinions.”5 However, the Court also recognized that there are circumstances where an omitted fact could render an otherwise nonactionable opinion statement misleading to a reasonable investor, such as where the registration statement “omits material	facts	about	the	issuer’s	inquiry	into or knowledge” regarding a statement of	opinion	when	those	facts	“conflict	with	what a reasonable investor would take from the statement itself.”6 The lower courts have applied Omnicare to claims under the Securities Exchange Act of 1934 (the “Exchange Act”) as well as the Securities Act. General Partner Glenn Tongue v. Sanofi On March 4, 2016, the Second Circuit had its	first	opportunity	to	analyze	and	apply	Omnicare when it issued its published opinion in General Partner Glenn Tongue v.	Sanofi.7	There,	the	plaintiffs	alleged	that	Sanofi,	a	global	pharmaceutical	company,	violated both federal and state securities laws by omitting key information regarding U.S. Food and Drug Administration (FDA) concerns over its drug trial methodology when expressing optimism regarding the timeline for approval of one of its key drugs, Lemtrada. The basis for these claims stemmed from Sanofi’s	2011	acquisition	of	Genzyme,	where it had agreed to a deal giving Genzyme’s	former	stockholders	partial	compensation	in	the	form	of	financial	instruments called contingent value rights (CVRs), which provided the holders with cash payouts upon the achievement of certain milestones tied to the success of Lemtrada. One milestone, the “approval milestone,” entitled CVR holders to a cash payout if Lemtrada was approved by	March	31,	2014,	and	Sanofi	made	statements	in	both	the	offering	materials	of the CVRs and to the market generally following the acquisition in which it expressed satisfaction with the progress of	Lemtrada’s	clinical	trials	and	described	the	drug’s	likelihood	of	approval	with	“exceptional optimism.”8 In discussions with the company, however, the FDA had allegedly expressed “major concern[s]” about the use of single-blind studies, indicating a strong preference for double- blinded controlled studies and noting that	Sanofi’s	trial	methodology	posed	a	“significant	problem	which	w[ould]	cause	serious	difficulties	in	interpreting	the	results	of the trial.”9 When the FDA subsequently released materials in October 2013 detailing	its	communications	with	Sanofi	regarding these concerns, the value of the CVRs dropped more than 62 percent. Lemtrada was ultimately approved by the FDA in November 2014, but this approval came months after the deadline for the approval milestone had passed. Plaintiff	CVR	holders	filed	class	action	complaints	against	Sanofi,	its	predecessor,	and three executives, alleging violations of Section 10(b) of the Exchange Act against all defendants and Section 20(a) against the individual defendants. These complaints were later consolidated, and a	separate	complaint	was	also	filed	by	a group of corporations alleging similar claims arising from the same set of facts (though alleging many additional violations). In an opinion authored prior to the	Supreme	Court’s	decision	in	Omnicare, the	district	court	granted	the	defendants’	WSGR 2016 Securities and M&A Litigation Year in Review 3 motion to dismiss as to all claims, applying a standard from Fait v. Regions Financial Corp.10 in addressing the allegedly false and misleading statements of opinion. Under Fait,	a	defendant’s	statement	of	opinion would be actionable only where it is both “objectively false and disbelieved by the defendant at the time it was expressed.”11 The district court found that the	plaintiffs	had	failed	to	adequately	allege	either prong—that the defendants “did not genuinely believe what they were saying at the time they said it,” or that the claims were objectively false.12 Importantly, the district	court	also	rejected	the	plaintiffs’	arguments	that	Sanofi’s	disclosures	omitted	facts	regarding	the	FDA’s	feedback	that were necessary in order to make Sanofi’s	optimistic	statements	about	FDA	approval not misleading. On	appeal,	the	Second	Circuit	affirmed	both	the	district	court’s	“reasoning	and holding,” but took the opportunity to engage in a thorough analysis of Omnicare as applied to the facts of the case.13 The Second Circuit found that under Omnicare, the two requirements articulated in Fait were to be applied separately such that only one of the two prongs	must	be	satisfied	in	order	to	find	a statement to be actionable. Further, the Second Circuit found that under Omnicare, opinions that satisfy this standard “may nonetheless be actionable if the speaker omits information whose omission makes the statement misleading to a reasonable investor.”14 Notably, the Second Circuit emphasized both the sophistication of securities investors and the principle, derived from Omnicare, that liability does not follow “merely because an issuer failed to disclose information that ran counter to an opinion expressed in the registration statement.”15	Even	in	the	face	of	Sanofi’s	“exceptional optimism,” investors were charged with knowledge of the context in which the statements were issued, including as to the “[c]ontinuous dialogue between	the	FDA	and	[Sanofi]”	surrounding	the	sufficiency	of	“various	aspects	of	the	clinical trials,” the “numerous caveats to the reliability of the projections” made in offering	materials,	and	the	“wide	variety	of information” that formed the basis for the projections.16 Future cases will tell whether these points of emphasis indicate the	Second	Circuit’s	intention	to	narrowly	construe those statements or omissions that may give rise to liability under Omnicare. Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu CPA, Ltd. In an unpublished decision issued later in the spring of 2016, the Second Circuit also applied Omnicare to a claim brought under Section 18 of the Exchange Act. Under Section 18, any person who “make[s] or cause[s] to be made” a false or misleading statement in a document filed	pursuant	to	the	Exchange	Act	is	liable	to any person who purchased or sold a security in reliance on that statement.17 In Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu CPA, Ltd., the	Second	Circuit	affirmed	a	district	court’s	dismissal	of	a	Section	18	claim	on	the	grounds	that	the	plaintiffs	failed	to adequately allege that opinions by a company’s	auditors,	included	in	Form	10- Ks from 2007-2010, supported allegations of misrepresentations.18 In doing so, it recited the standard from Omnicare as part of its Section 18 analysis, saying in a footnote that because the parties had not	commented	on	the	textual	difference	between Section 11 of the Securities Act and Section 18 of the Exchange Act, the court “assume[d], arguendo, that the standard announced in Omnicare applies to § 18 claims.”19 This further underscores the	influence	of	the	Omnicare decision within	the	Second	Circuit’s	securities	law	jurisprudence. Querub v. Moore Stephens Hong Kong In May 2016, the Second Circuit issued another unpublished opinion applying an Omnicare analysis to purportedly false	audit	opinions.	In	affirming	a	district	court’s	grant	of	summary	judgment	for	the	defendants, the Second Circuit reasoned that audit reports labeled “opinions” involve “considerable subjective judgment,” and held that such reports are statements of opinion subject to the Omnicare standard for claims under Section 11 of the Securities Act.20 Finding evidence of neither a subjective belief inconsistent with the opinions at issue, nor the omission of material facts about the basis for those opinions,	the	court	found	that	the	plaintiffs	could not sustain their Section 11 claims under Omnicare. In re Deutsche Bank AG Securities Litigation Consistent	with	the	Second	Circuit’s	strict	interpretation of Omnicare, in July 2016, the U.S. District Court for the Southern District of New York granted in part a motion to dismiss claims against Deutsche Bank	involving	a	series	of	shelf	offerings	WSGR 2016 Securities and M&A Litigation Year in Review 4 between May 2007 and May 2008 in which	allegedly	false	or	misleading	offering	materials were used to sell billions of dollars in preferred securities purportedly in violation of Sections 11, 12(a)(2), and 15 of the Securities Act. In In re Deutsche Bank AG Securities Litigation,21 the district court considered a motion to dismiss a third amended complaint made possible following	the	Supreme	Court’s	order	vacating judgment and remanding the case for further consideration in light of Omnicare,	and	the	Second	Circuit’s	subsequent remand to the district court. The	plaintiffs’	new	complaint	alleged,	in	essence, that the defendants—including Deutsche Bank, underwriters, and individuals—were aware of facts regarding the status of the subprime market and Deutsche	Bank’s	subprime	assets	at	the	time	of	the	offerings,	which	would	have required them to disclose more information	about	the	bank’s	exposure	during the subprime crisis, particularly as	the	situation	worsened.	The	plaintiffs	alleged that the defendants had a duty to disclose additional information in order to render other statements they made not misleading, both because of: (1)	management’s	knowledge	at	the	time;	and (2) regulatory obligations under Items 303 and 503 of Regulation S-K. While	the	court	denied	the	defendants’	motion	to	dismiss	as	to	certain	offerings	due to regulatory obligations, it granted the motion with respect to alleged omissions based	on	management’s	knowledge.	Citing Omnicare, the court required the plaintiffs	to	allege	“particular	(and	material)	facts going to the basis for [Deutsche Bank]’s	opinion—facts	about	the	inquiry	[Deutsche Bank] did or did not conduct or the knowledge it did or did not have— whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context.”22 Despite allegations that	one	of	Deutsche	Bank’s	top	traders	testified	before	a	Senate	subcommittee	that he had warned “anyone who would listen”23 regarding the suspect quality of securities underlying CDOs before the crisis and had hedged against the collapse of mortgage-backed securities, saving Deutsche Bank billions of dollars, the court held that the defendants were not required to disclose further information. Because senior	bank	officials	disagreed	with	his	assessment, the court likened the situation to one in which “a single junior attorney expressed doubts about a practice when six of his more senior colleagues gave a stamp of approval.”24 As to several other claims, the court emphasized the presence	of	disclaimers	in	the	offering	materials,	pointing	to	specific	provisions	underscoring	Deutsche	Bank’s	disclosure	of the “tentativeness of its belief” in the true value of write-downs.25 In re BP p.l.c. Securities Litigation Outside of the Second Circuit, district courts have been the primary interpreters of Omnicare. For example, in the Southern District of Texas, a district court engaged in a thorough analysis of Omnicare while granting in part and denying in part the defendants’	motion	for	summary	judgment	as to Section 10(b) claims. In In re BP p.l.c. Securities Litigation, the court considered evidence of falsity and scienter regarding public statements concerning the	range	of	oil	flow	estimates	made	by	BP representatives in the days immediately following the Deepwater Horizon oil spill.26 After concluding that the statements at issue were statements of opinion, the court applied Omnicare’s	analysis	as	to	misleading omissions under Section 11— that	liability	flows	if	a	statement	“omits	material	facts	about	the	issuer’s	inquiry	into or knowledge concerning a statement of	opinion,	[where]	those	facts	conflict	with what a reasonable investor would take from the statement itself”27—to the omissions provision of SEC Rule 10b-5, stating that “courts have overwhelmingly applied [Omnicare’s]	holdings	in	the	context of alleged omissions under Section 10(b).”28, 29 The court found that omitted facts as to internal estimates regarding the flow	rates	did	not	“?fairly	align’	with	what	a reasonable investor would have taken” from the several statements at issue.30 And while context can sometimes make clear the tentativeness of beliefs, the lack of surrounding	“‘hedges’	or	‘disclaimers’	of	any	kind”	in	the	offending	statements	failed	to alert investors of the “extraordinarily tentative	nature	of	BP’s	estimate.”31 As to scienter, the court found that because “falsity is the foundation of scienter, not a wholly unrelated structure[,] . . . to establish scienter . . . post-Omnicare, a court looks to whether the record contains evidence upon which a reasonable jury could conclude that the defendant ‘omitt[ed] material facts about [his] inquiry into or knowledge concerning a	statement	of	opinion’	with	the	‘intent	to	deceive, manipulate, or defraud or severe recklessness.’”32	Where	the	plaintiffs	had	presented evidence for certain claims that the speaker knew of the wide range of	potential	flow	rates,	that	the	estimates	WSGR 2016 Securities and M&A Litigation Year in Review 5 were highly uncertain and inaccurate, and that	flow	rate	estimates	themselves	were	market-sensitive information, a reasonable jury could conclude that omitting those facts	while	stating	“a	specific	estimate	. . . with some degree of certainty” in prepared remarks	was	sufficient	for	a	finding	of	knowledge or recklessness.33 But the court was careful to note that its holding was “driven by the unique factual contours of the case—specifically,	the	unusual	asymmetry	of	information between BP and its investors,” and that “[o]missions that might not have been misleading under conventional circumstances . . . were particularly misleading	given	the	market’s	relative	lack	of	familiarity with the [D]eepwater oil leaks.”34 While only some of the claims at issue survived summary judgment, this case is an illustration	of	district	courts’	willingness	to	apply Omnicare’s	holdings	to	Section	10(b)	claims and of the methodology they employ when doing so. Developments Related to Item 303 of Regulation S-K Also of note in 2016 were further developments regarding the circuit split over whether Item 303 of Regulation S-K creates an actionable duty to disclose under the antifraud provisions of the Exchange Act.	Item	303	imposes	specific	disclosure	requirements	on	companies	filing	reports	on SEC Forms 10-K and 10-Q, including requiring that the reporting company “[d]escribe any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations.”35 In an opinion authored in 2000 by then- Circuit Judge Alito, the Third Circuit explicitly rejected the “claim that SEC Regulation S-K, Item 303(a) impose[s] an	affirmative	duty	of	disclosure	on	[a	company] that could give rise to a claim under Rule 10b-5.”36 In its opinion, the Third Circuit recognized a distinction between the materiality standards for Item 303 and SEC Rule 10b-5, noting that the test under Item 303 “varies considerably from the general test for securities fraud materiality set out by the Supreme Court.”37 The Oran decision also cited an SEC release stating that the tests were “inapposite,” while noting that the disclosure obligations under Item 303 “extend considerably beyond those required by Rule 10b-5.”38 The Ninth Circuit Court of Appeals has similarly held that “Item 303 does not create a duty to disclose for purposes of Section 10(b) and Rule 10b-5. Such a duty to disclose must be separately shown according to the principles set forth by the Supreme Court in Basic and Matrixx Initiatives.”39 With its 2016 opinion in Indiana Public Retirement System v. SAIC, Inc., the Second	Circuit	Court	of	Appeals	confirmed	an earlier ruling at odds with the Oran and NVIDIA decisions, and recognized once again that, in the Second Circuit, Item 303 disclosure obligations can form a basis for liability under Section 10(b).40, 41 In SAIC, the Second Circuit vacated in part a district court decision denying the plaintiffs’	post-judgment	motion	to	amend	their complaint alleging violations of Rule 10b-5, in part based on the holding that the	plaintiffs’	amended	complaint	made	sufficient	allegations	to	“support	the	strong	inference” that the defendant actually knew	of	offending	conduct	that	it	would	be	required to disclose under Item 303.42 In late October 2016, the defendant SAIC, now operating under the name Leidos, Inc.,	filed	a	petition	for	writ	of	certiorari with the U.S. Supreme Court in order to resolve the “open disagreement” between the Second, Third, and Ninth Circuits regarding whether Item 303 creates a duty to disclose that is actionable under Section 10(b) of the Exchange Act and SEC Rule 10b-5.43 The petition argues that the	Second	Circuit’s	opinions	are	at	odds	with views expressed in the Sixth and Eleventh Circuits, and will lead to disparate outcomes between circuits and forum shopping.44 Given the substantial potential liability for claims stemming from Item 303 disclosures, the disposition of this petition for certiorari warrants careful observation in the year to come. Class	Certification	Decisions Post- Halliburton II In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), the U.S. Supreme Court	reaffirmed	the	applicability	of	the fraud-on-the-market presumption established in Basic Inc. v. Levinson (the “Basic presumption”), but held that defendants must be allowed to challenge that	presumption	at	the	class	certification	stage.45 Until this past year, district courts had	been	alone	in	defining	the	contours	WSGR 2016 Securities and M&A Litigation Year in Review 6 of	what	constitutes	sufficient	evidence	for	rebuttal.	2016	saw	the	first	appellate	court	ruling on what evidence a defendant must present to rebut the Basic presumption. More appellate decisions are likely in 2017, making this an area to continue to watch. Since Basic,	plaintiffs	suing	for	federal	securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5 have benefited	from	the	ability	to	invoke	a rebuttable fraud-on-the-market presumption of reliance at the class certification	stage.	Under	Federal	Rule	of Civil Procedure 23(b)(3), in order to be certified,	a	proposed	class	must	show	that	“questions of law or fact common to class members predominate over any questions affecting	only	individual	members.”46 But as the Supreme Court noted in Basic, this predominance requirement would place an “unrealistic	evidentiary	burden”	on	plaintiffs	in the context of securities class actions, where each individual investor would have to prove how he or she would have acted in the absence of the misrepresentation.47 Therefore, the Court held in Basic that Rule	10b-5	plaintiffs	may	invoke	the	rebuttable presumption that, in the case of publicly known material misrepresentations related to stocks traded in well-developed efficient	markets,	where	plaintiffs	traded	the stock between the time when the misrepresentations were made and the truth was revealed, they did so “in reliance on the integrity of [the market] price.”48 This is commonly referred to as the “fraud-on- the-market” theory of reliance. While Halliburton II	reaffirmed	the	fraud- on-the-market	theory,	the	Court	clarified	that	after	plaintiffs	make	a	prima facie showing of reliance, defendants must also be	afforded	the	opportunity	to	rebut	the	presumption with evidence that “severs the link between the alleged misrepresentation and the price received (or paid) by the plaintiff.”49 IBEW Local 98 Pension Fund v. Best Buy Co. In	April	2016,	in	the	first	court	of	appeals	ruling on the issue following the Supreme Court’s	opinion	in	Halliburton II, a court held that direct evidence presented by the defendants had successfully severed that link, thereby rebutting the Basic presumption. In IBEW Local 98 Pension Fund v. Best Buy Co., the U.S. Court of Appeals for the Eighth Circuit held that a district court abused its discretion in certifying a class and had “misapplied the price impact analysis mandated by Halliburton II.”50 The district court had certified	a	class	based	on	two	allegedly	misleading statements made during a conference call with analysts that took place only hours after a press release announcing quarterly earnings. The parties agreed that the economic substance of statements made during the conference call was “virtually the same” as that of non-fraudulent press release statements and “would have been expected to be interpreted similarly by investors.”51 Importantly,	both	parties’	experts	agreed	that the conference call statements had “no additional price impact” beyond that caused by the earlier press release.52 Halliburton II invited defendants “to defeat the presumption [of reliance] through evidence that an alleged misrepresentation did	not	actually	affect	the	market	price	of the stock.”53	Where	both	parties’	experts agreed that the allegedly false statements at issue had caused no price impact upon their publication, a majority of the Eighth Circuit panel held that “overwhelming	evidence	of	no	‘front-end’	price impact . . . severed any link between the alleged . . . misrepresentations and the stock price.54 Though they conceded that there was no price impact on the day of the	announcement,	the	plaintiffs	argued	that a decline in stock price following an alleged corrective disclosure was sufficient	to	support	a	price	maintenance	theory—whereby the alleged fraudulent disclosure maintains a stock price that would otherwise decline—but a majority of the panel disagreed, stating that the theory provided “no evidence that refuted defendants’	overwhelming	evidence	of	no price impact,” especially where “[t]he allegedly	‘inflated	price’	was	established	by	[a] non-fraudulent press release.”55 While the opinion included a vigorous dissent arguing that the defendant had not “produc[ed] evidence showing that the alleged misrepresentations had not counteracted a price decline that would have otherwise occurred,” on June 1, 2016, the Eighth Circuit nonetheless denied rehearing en banc.56 In re Goldman Sachs Group, Inc., Securities Litigation While	the	Eighth	Circuit	was	the	first	court	of appeals to interpret Halliburton II, it will not be the last. Pending appeals to be decided in 2017 and other district court cases throughout the country will further define	the	implications	of	Halliburton II. The Second Circuit recently granted appellate WSGR 2016 Securities and M&A Litigation Year in Review 7 review of two decisions from the Southern District of New York touching on the evidentiary standard that defendants must meet to rebut the Basic presumption. In	the	first	case,	In re Goldman Sachs Group, Inc., Securities Litigation,57 the district court found that the defendants could not rebut the presumption through evidence that “suggests a price decline for an alternate reason” than the alleged false statements “but does not provide conclusive evidence that no link exists between the price decline and the misrepresentation.”58 The claims in Goldman Sachs are based on statements Goldman made about its internal controls	to	address	conflicts	of	interest— statements	the	plaintiffs	allege	were	revealed to be false when the SEC and DOJ announced investigations of allegedly conflicted	Goldman	CDO	transactions.59 Goldman presented expert evidence that the price drop was caused by market reaction to the fact of the investigations, not by corrective disclosure of the alleged misstatements.60 That was not enough to rebut the presumption, the district court ruled, because it “failed to demonstrate a complete lack of price impact,” i.e., that “no part of the decline was caused by the corrective disclosure.”61 “[W]here [d]efendants cannot demonstrate a complete absence of price impact, and where	[p]laintiffs	have	demonstrated	an	efficient	market,”	the	district	court	held,	“the Basic presumption applies.”62 In their brief seeking reversal of class certification,	the	appellant	defendants	have asked the Second Circuit to review what they characterized as the “virtually insurmountable legal standard” employed by the district court in requiring that defendants must present “conclusive evidence” demonstrating a “complete lack of price impact.”63 They argue that this high standard contravenes both Halliburton II’s	“any showing that severs the link” standard and Federal Rule of Evidence 301.64 They have also asked the court of	appeals	to	review	the	district	court’s	refusal to consider what they characterize as “unrebutted empirical evidence demonstrating an absence of any . . . price impact”65 owing to the fact that this evidence also bore on materiality.66 Similarly, in Strougo v. Barclays PLC,67 the defendants attempted to show lack of price impact by arguing that the disclosure of a government investigation, not the alleged misstatements themselves, caused the price drop.68 The district court responded that	“[w]hile	defendants’	arguments	suggest that the post-disclosure price movement does not support a strong inference or provide compelling evidence of price impact,” that was not enough to rebut the presumption because “they have not met their burden of proving lack of price impact.”69 “The fact that other factors contributed to the price decline does not establish by a preponderance of the evidence that the drop in the price . . . was not caused at least in part by the disclosure of fraud . . . .”70 According to the court in Strougo, to show lack of price	impact	sufficient	to	rebut	the	Basic presumption, “defendants must prove by a preponderance of the evidence that the price drop on the corrective disclosure date was not due to the alleged fraud,” and the defendants there had not done so.71 In their Petition for Permission to Appeal Pursuant to Federal Rule of Civil Procedure 23(f), the defendant petitioners presented issues that they say “overlap substantially with those in [Goldman].”72 In particular, they seek immediate review as to the district	court’s	ruling	that,	in	order	to	rebut	the Basic presumption under Halliburton II, defendants must prove a lack of price impact “by a preponderance of the evidence”—in other words, “that the alleged misstatements could not have impacted the [stock] price.”73 They also argue that the district court erred in failing to consider undisputed evidence of a lack of price movement on the day of the alleged misstatements simply because the	plaintiffs	had	asserted	a	“tenable	theory of price maintenance,” arguing that this “improperly decides the Rule 23 inquiry	solely	on	the	basis	of	[p]laintiffs’	pleadings.”74 In re Intuitive Surgical Securities Litigation Similar issues were presented in In re Intuitive Surgical Securities Litigation.75 In Intuitive Surgical, the court acknowledged that Halliburton II allows a defendant to “attempt to rebut the Basic presumption at	the	class	certification	stage	with	evidence showing a lack of price impact,” but nevertheless found that the defendants’	evidence	of	no	price	impact	was	insufficient	to	defeat	the	presumption	of reliance.76	In	so	finding,	the	court	held	that “[d]efendants bear both the burden of production and the burden of persuasion on the issue of price impact . . . . That is,	where	[p]laintiffs	have	satisfied	the	requirements entitling them to the initial WSGR 2016 Securities and M&A Litigation Year in Review 8 presumption of reliance, in order to rebut this presumption [d]efendants must convince the court that their evidence is more probative of price impact than the evidence	offered	by	[p]laintiffs.”77After reviewing the competing expert reports submitted by the parties, the court found that the defendants had not “met their burden” to persuade the court that no price impact existed.78, 79 The defendants have sought leave to appeal the	district	court’s	ruling	to	the	Ninth	Circuit	Court of Appeals pursuant to Federal Rule of Civil Procedure 23(f). The defendants argue	that	the	district	court’s	holding	was	“pure legal error,” because it improperly shifted the burden of persuasion from plaintiffs	to	defendants.80, 81 According to the defendants, “[a]ny showing that severs the link between the alleged misrepresentation and the price received (or paid) by the plaintiff	[should]	be	sufficient	to	rebut	the	presumption of reliance.”82 The burden of persuasion, the defendants contend, should	then	“shift	back	to	plaintiffs	who, at all times, retain the burden of persuading the court that the essential element of reliance can be proven on a classwide basis.”83, 84 The outcome of these cases will determine whether the Second, Fifth, and Ninth Circuits join the Eighth Circuit on the issue of evidence required for rebuttal of the Basic presumption in the wake of Halliburton II, or if a circuit split emerges. American Pipe Tolling The Sixth Circuit Court of Appeals issued an opinion with important implications for when certain securities claims may be time-barred. The case, Stein v. Regions Morgan Keegan Select High Income Fund, Inc.,85 weighed in on a question that has split other federal courts of appeal: whether statutes of repose, such as the ones governing claims under the federal securities laws, are tolled for individual	plaintiffs	pending	resolution	of	class	certification	in	related	class	action	suits. This type of tolling—referred to as American Pipe tolling after the 1974 Supreme Court case that created the doctrine—stops the running of statutes of limitation from the time a class action is commenced through the denial of class certification.	That	allows	plaintiffs	to	file	individual claims after either opting out of	the	class	or	after	class	certification	is	denied, even if the statute of limitations on their claim would otherwise have expired. Claims under the federal securities laws, however, are governed not only by statutes of limitation, but also by statutes of repose. In the case of the Securities Act, claims must be brought within one year of their discovery (the limitations period), and in “no event” can they be brought more than three years after the sale of the security (the repose period).86 Similarly, the Exchange Act provides that claims must be brought “not later than the earlier of” two years after “discovery of the facts constituting the violation” (the limitations period)	or	five	years	“after	such	violation”	(the repose period).87 Like statutes of limitation, statutes of repose create time limits for bringing claims. But unlike statutes of limitation, statutes of repose are	not	only	requirements	that	plaintiffs	diligently	pursue	known	claims,	they	“effect	a legislative judgment that a defendant should be free from liability after the legislatively determined period of time.”88 The key issue in Stein was whether the principle set forth in American Pipe—that statutes of limitation do not run against individual class members while class actions are pending—should also apply to statutes of repose. The Sixth Circuit, noting a split on the issue in its sister circuits, held that it does not apply because “statutes of repose vest a substantive right in defendants to be free of liability” and “give	priority	to	defendants’	right	to	be	free	of liability after a certain absolute period of	time	(rather	than	plaintiffs’	ability	to	bring claims).”89 Accordingly, under Stein, individual	plaintiffs	must	bring	securities	claims	within	the	strict	three-year	or	five- year periods prescribed in the statutes of repose, regardless of whether that time may	expire	while	certification	of	a	class	of	which they are a member is pending.90 Securities Fraud Claims: Scienter and the PSLRA Safe Harbor Arena Pharmaceuticals The Ninth Circuit delivered an important opinion in October 2016 regarding the “scienter”—or state of mind—requirement in securities fraud cases. Schueneman v. Arena Pharmaceuticals, Inc.91 centered on public statements Arena made about the likelihood that its diet drug would ultimately be approved by the FDA. Between 2006 and 2009, Arena conducted two Phase III human clinical trials on the drug Locaserin, while simultaneously conducting a nonclinical study on lab rats to determine whether there was a risk of humans developing cancer from the drug.92 By February 2007, initial results showed that Locaserin was causing various forms of WSGR 2016 Securities and M&A Litigation Year in Review 9 cancer in the rats.93 Arena reported those results to the FDA in May 2007, indicating that it believed the reason for the cancer was a build-up of a hormone—prolactin— that had been linked to cancer in rats.94 The FDA permitted Arena to continue the human clinical trials while Arena conducted follow-up testing on whether the rats experienced increased prolactin levels.95 Over the next two years, Arena met with and provided updates to the FDA on the rat study while also continuing the human studies. In February 2009, Arena submitted to the	FDA	a	final	report	on	the	rat	study,	concluding that follow-up studies “substantiated the connection between prolactin and the increased cancer.”96 The	following	month,	Arena’s	CEO	told	investors	that	Arena	was	confident	Locaserin would be approved based on human trials, preclinical trials, and “all the animal studies that have been completed.”97 Over the following months, Arena made statements that “the long term safety	and	efficacy”	of	Locaserin	had	been	“demonstrated” in part by “preclinical, animal studies” designed to assess the risk that the drug could cause cancer in humans;	that	Arena	had	“favorable	results	on	everything	that	we’ve	compiled	so	far”;	and	that	it	was	“not	expecting	any	surprises” associated with FDA review.98 Arena	submitted	its	final	application	for Locaserin in December 2009.99 In September 2010, the FDA published the documentation around the application, including documents discussing the rat study and the possible carcinogenic effects	it	raised.	Investors	were	surprised,	and	Arena’s	stock	fell	by	40	percent	in	a	day.100	The	FDA	initially	rejected	Arena’s	application based on concerns that the studies did not show enough increases in prolactin levels in the rats to ensure safety in humans.101, 102 A	class	action	suit	was	filed	after	the	stock	drop. The trial court dismissed the case, holding that Arena could not be liable because “the strongest inference from the alleged facts was that Arena experienced an	unexpected	scientific	disagreement	with the FDA, and that because there was a reasonable basis to believe that the	data	supported”	Arena’s	theory	about	prolactin	levels,	any	omissions	in	Arena’s	public statements were not made with the requisite level of intent for securities fraud.103 On appeal, the Ninth Circuit reversed	the	trial	court’s	ruling,	and	allowed the case to proceed. The Ninth Circuit described this as a “close case,” but held that “once they raised the animal studies” in their public statements, “[d]efendants were obligated to	disclose	the	rat	study’s	existence	to the market.”104 As the court made clear, Arena “may not have had a duty to disclose the rat study had they not been representing that animal studies supported	Locaserin’s	safety	and	therefore	its likelihood of being approved.”105 But crucially, “Arena did more than just express its	confidence	in	Locaserin’s	future.”106 Rather,	it	“affirmatively	represented	that	‘all the animal studies that had been completed’	supported	Arena’s	case	for	approval” while knowing that “the animal studies were the sticking point with the FDA.”107 As the court explained: “Arena was	free	to	express	confidence	in	FDA	approval. It might have represented that Arena was working through some requests from	the	FDA	and	was	confident	the	data	would vindicate Locasarin. But what it could	not	do	was	express	confidence	by	claiming that all of the data was running in Locaserin’s	favor.	It	was	not.”108 Arena Pharmaceuticals carries important implications for companies, both in the pharmaceutical industry and beyond. The court took pains to say that it was not creating	an	affirmative	duty	to	disclose	all adverse information a company is aware	of,	nor	finding	scienter	whenever	a	company’s	reasonable	scientific	belief	met	with disagreement from a regulator. But the opinion should remind companies to be	careful	about	making	definitive	claims	on a topic without disclosing information relevant to that topic that might negatively color	investors’	views	of	the	company’s	prospects. PSLRA Safe Harbor District courts in California and Massachusetts issued opinions in 2016 further clarifying the extent of the Private Securities Litigation Reform Act (PSLRA) safe harbor for “forward-looking statements” from claims alleging securities fraud under Section 10(b) of the Exchange Act. In Grobler v. Neovasc Inc.,109 a securities fraud	plaintiff	claimed	that	defendant	Neovasc misled investors about the likely outcome of a lawsuit accusing the company of misappropriating a competitor’s	trade	secrets	for	one	of	its products. While the trade secret lawsuit was pending, the company and its executives opined publicly that the claims against it were “without merit” and “baseless.”110 A jury in the trade secrets WSGR 2016 Securities and M&A Litigation Year in Review 10 litigation ultimately found against Neovasc on	several	of	the	competitor’s	claims,	awarding $70 million in damages, among other relief.111	The	company’s	stock	price	fell from $1.84 to $0.46 per share following the jury verdict. A securities fraud class action soon followed, accusing Neovasc and certain of its executives of misleading investors about the trade secrets litigation and	its	effect	on	the	prospects	for	Neovasc’s	product.112 On a motion to dismiss the securities fraud complaint, the defendants argued that the challenged statements were protected	by	the	PSLRA’s	safe	harbor	for	“forward-looking statements,” and thus could not be the basis for a securities fraud claim.113 The court agreed, and made several important holdings about the safe harbor. First, the court held that the statements	asserting	that	the	competitor’s	claims were meritless were forward- looking “because they were predictions about the future outcome of the pending litigation, and could only be invalidated by reference to the ultimate outcome of the case.”114	Second,	the	court	reaffirmed	that where forward-looking statements are accompanied by meaningful cautionary statements—as were the statements in Neovasc—the safe harbor applies even if a	plaintiff	can	plead	facts	demonstrating	that the defendants had actual knowledge that the statements were false or misleading.115 Third, the court rejected the plaintiff’s	argument	that	it	could	base	a	claim on “embedded assertions of present fact”	in	the	defendants’	forward-looking	statements—“specifically,	that	defendants	purported to actually believe” that the competitor’s	claims	were	meritless.116 That argument, the court held, could not be used to circumvent the safe harbor because “[v]irtually every statement about a future event could be said to imply a statement of present belief. Yet examining an alleged present belief apart from the forward-looking aspects of the statement requires an inquiry into the state of mind of the defendant—something that the first	prong	of	the	safe-harbor	provision	is	written to ignore.”117 As such, “[t]reating all such projections as containing an implicit statement of present fact—that the speaker actually holds the opinion expressed—would render meaningless the protections” of the safe harbor.118 An opinion from the Northern District of California	also	reaffirmed	application	of	the PSLRA safe harbor to statements forecasting	financial	results	and	discussing	future operations. In that case, In re Leapfrog Enterprise, Inc. Securities Litigation,119	the	plaintiff	challenged	a	number of statements LeapFrog made regarding the planned rollout of a new product,	inventory	levels,	and	its	financial	outlook. In dismissing the complaint, the court determined that not only were statements	forecasting	future	financial	results forward-looking, but so were statements discussing the launch date of the new product, how that launch date would	affect	the	product’s	performance,	and	LeapFrog’s	“plans	and	ability	to	work	through carryover inventory.”120 Because these forward-looking statements were accompanied by meaningful cautionary language, the court found that the PSLRA safe harbor applied.121 Standard for Disclosure for Corporations Purchasing Their Own Stock In Fried v. Stiefel Laboratories, Inc., the Eleventh	Circuit	helped	to	define	the	scope	of	fiduciary	obligations	owed	by	a private corporation purchasing its own stock, holding that those corporations do not have a duty under Rule 10b-5(b) to disclose “all material information” to potential sellers in the absence of a prior affirmative	representation.122 Richard Fried, the former CFO of a privately held pharmaceutical company, brought a lawsuit against his former employer, Steifel Labs (SLI), and its president, Charles Stiefel, stemming from the sale (back to the company) of shares previously issued to him as a part of his pension plan. Following a meeting between Fried and Stiefel in the fall of 2008 in which Stiefel	revealed	the	company’s	challenging	short-term outlook—interpreted by Fried as “kind of a sell signal”—Fried exercised his “put” right, selling 30 shares of stock back to SLI in January 2009 for roughly $16,500 per share.123 Unbeknownst to Fried, during the intervening period, Stiefel was approached by a larger pharmaceutical company and entered into negotiations that eventually resulted in its sale to GlaxoSmithKline in April at a valuation that netted stockholders over $69,000 per share.124 In the resulting lawsuit, among other claims, Fried alleged fraud under Section 10(b) of the Exchange Act and Rule WSGR 2016 Securities and M&A Litigation Year in Review 11 10b-5(b), arguing that SLI committed an actionable omission when it failed to inform him that it was in the midst of negotiations regarding the potential sale. At trial, a jury returned a verdict in favor of the defendants after	the	court	refused	to	include	Fried’s	proposed jury instruction stating that the defendants had a duty under Rule 10b-5(b) to disclose “all material information” when trading.125 Fried appealed, arguing that his proposed jury instruction had correctly stated	Stiefel	Labs’	disclosure	duties	as	a	corporate insider. On appeal, the Eleventh Circuit reviewed the	district	court’s	refusal	to	give	Fried’s	proposed jury instruction, holding that while Rule 10b-5(b) prohibits misrepresentations and omissions of material fact, the “plain text of the Rule . . . describes an omission that makes other ‘statements	made’	misleading,”	thereby	proscribing fraud “only in connection with an	affirmative	representation.”126 While omissions under Rule 10b-5(a) and (c) are not	restricted	to	affirmative	representations	and therefore “do not require making statements,”	Fried’s	proposed	jury	instruction did not adequately state the elements of insider-trading claims under those provisions, as it neither explained the corporation’s	duty	to	disclose	stemming	from its role as an insider nor explained how insider trading occurs.127 The court therefore	affirmed	the	judgment	in	favor	of	the defendants. In late May 2016, Fried petitioned the U.S. Supreme Court for review, claiming that the	Eleventh	Circuit’s	“strict	insistence	that	a claim resting on this relationship-based duty to disclose must proceed under subsection (a) or (c) of Rule 10b-5 and satisfy the elements of a classical insider- trading	claim”	conflicted	with	the	Second,	Ninth,	and	Tenth	Circuits’	“less	formalistic	approach.”128 While the Supreme Court has taken up important securities law issues in recent terms, it denied the petition for certiorari,	effectively	leaving	clarification	of	this	important	issue	for	a	later date. Continued Increase in Cases Filed Under the Securities Act in State Court Securities class actions brought under the federal securities laws are largely found in federal courts. In fact, the Exchange Act (under which most securities class actions are	filed)	has	always	provided	for	exclusive	federal jurisdiction. In 2016, however, we saw the acceleration of a trend that had been building for several	years—the	filing	of	class	actions	under the Securities Act in California state courts. While the number of such cases grew this past year, so did the prospect that this end-run around federal jurisdiction over the federal securities laws would be closed. When the Securities Act was adopted, it included a unique provision: cases could be brought in either federal or state court, but	if	a	case	was	filed	in	state	court,	it	could not be removed to federal court. In	1995,	after	finding	many	abuses	in	the	filing	of	securities	class	actions,	Congress	toughened the pleading standard for the securities laws and created a number of other procedural protections. The passage of the PSLRA had an “unintended	consequence”—plaintiffs	began	filing	securities	class	actions	in	state court.129 Congress again responded, passing the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Among the changes in SLUSA was a revision of the anti-removal provision of the Securities Act, to provide that concurrent state-court subject matter jurisdiction over Securities Act claims will continue “except as provided in [Section 16 of the Securities Act] with respect to covered class actions.”130 Section 16, as amended by	SLUSA,	defines	“covered	class	action”	as any damages action on behalf of more than 50 people. It also precludes covered class actions alleging state-law securities claims and permits precluded actions to be removed to and dismissed in federal court. In the decade following the adoption of SLUSA, few Securities Act class actions were	filed	in	state	courts.	That	changed	after the decision by the California Court of Appeal in Luther v. Countrywide Financial Corp.,131 which held that state courts retained jurisdiction over Securities Act class	actions	despite	SLUSA’s	revisions,	as well as the decisions of many federal district	courts	in	California	also	finding	that state courts retained jurisdiction over such cases and, therefore, defendants could not remove those cases to federal court. Notably, the views of the California state and federal courts are contrary to those in other jurisdictions, particularly federal district courts in New York and New Jersey, which have held that SLUSA took away state court jurisdiction over Securities Act class actions. WSGR 2016 Securities and M&A Litigation Year in Review 12 In the years that followed, more such class	actions	were	filed	in	California	state	courts,	slowly	at	first,	with	2011,	2012,	2013,	and	2014	seeing	the	filing	of	three,	four,	one,	and	five	cases,	respectively,	by our calculations. The pace picked up significantly	in	2015,	with	14	such	cases	filed.	2016	saw	even	more,	with	18	such	cases	filed.	The	reason	why	plaintiffs	sought	California	state courts is not hard to fathom. In general,	California’s	pleading	standards	and their application by the courts are viewed as more permissive than their federal counterparts. In addition, some of the	provisions	of	the	PSLRA	are	specifically	geared toward cases in federal court, and plaintiffs	could	evade	those	by	filing	in	state courts. O’Donnell v. Coupons.com One	notable	exception	to	the	difficulties	defendants have experienced in state court was	the	dismissal	of	a	class	action	filed	against Coupons.com and its directors in Santa Clara County Superior Court.132 In	that	case,	the	plaintiffs	alleged	that	the	results	in	an	IPO	prospectus	were	inflated	because they were driven in substantial part by incremental spending outside of the annual plan commitments by holiday coupon campaigns during December 2013.	In	response	to	the	defendants’	demurrers, the superior court dismissed the complaint with leave to amend, holding that the company was under no obligation to predict that past spending by customers may or may not occur again in the future.133 In so dismissing, the court discussed at length federal case law	finding	that	companies	were	under	no obligation to predict the future in their offering	documents.	Following amendment, the court considered and sustained the renewed demurrer, this time without leave to amend,	holding	that	the	“plaintiffs’	theory	that defendants should have disclosed that the growth resulting from the ‘December to	Remember’	campaign	was	not	to	be	replicated calls for the type of prediction as to future performance that courts have held is not required.”134	The	plaintiffs	opted	not to appeal the dismissal. Although the Coupons.com decision was	a	welcome	affirmation	that	federal	law and pleading standards should apply to Securities Act claims, it stands out because it is rare. The majority of Securities Act class actions in state courts have seen similar motions denied, and the cases have then settled even where on the merits the defendants had a strong argument that there was no viable claim under the federal securities law. Cyan Petition for Certiorari The year that just ended saw the potential for stopping this end-run around the federal securities laws. In May 2016, a petition for certiorari	was	filed	in	the	U.S.	Supreme Court by Cyan Inc. and its officers	and	directors,	who	were	named	as	defendants	in	a	securities	class	action	filed	in San Francisco Superior Court.135 In May 2013, Cyan conducted its initial	public	offering.	Following	an	announcement of weaker-than-expected results, shareholders sued in San Francisco County Superior Court. The complaint alleged claims solely under the Securities Act on behalf of purchasers of Cyan stock issued in the IPO. In August 2015,	the	defendants	filed	a	motion	for	judgment on the pleadings for lack of subject matter jurisdiction. The superior court denied the motion, explaining that its “hands are tied by” Countrywide. Cyan and the individual defendants then challenged that order in a writ petition with the California Court of Appeal. That petition was denied without opinion. The defendants	then	filed	a	petition	for	review	with the Supreme Court of California, which also denied the petition without opinion.	In	May	2016,	Cyan	and	its	officers	and	directors	filed	a	petition	for	certiorari with the U.S. Supreme Court, arguing that SLUSA divested state courts of jurisdiction over	class	actions	filed	under	the	Securities	Act.136 The petition attracted two amicus briefs	in	support,	one	filed	by	the	Securities	Industry and Financial Markets Association and the U.S. Chamber of Commerce, and the	other	filed	by	a	group	of	prominent	law	professors. In response to the petition, the	plaintiffs	waived	their	right	to	file	a	response, but the Court asked that they do so. In October 2016, the Court asked that the Solicitor General (SG) of the United States	file	a	brief	setting	out	the	views	of	the	United	States.	The	SG’s	response	is	pending. If the Supreme Court agrees with the petitioners (as well as a number of federal district courts) that SLUSA divested the state courts of jurisdiction over Securities Act class actions, the loophole to evade the federal courts would close. That is a development that	many	companies	and	their	officers	and	directors are eager to see in 2017. WSGR 2016 Securities and M&A Litigation Year in Review 13 This past year saw a seismic shift in M&A litigation with the Delaware Court of	Chancery’s	decision	in	Trulia, which effectively	eliminated	so-called	“disclosure- only” settlements—i.e., settlements where stockholders receive only additional disclosures, often consisting of minutiae of limited value, in exchange for an often broad release of claims—that had become the primary mechanism to resolve stockholder challenges to M&A transactions. In Trulia’s	wake,	there	has	been a notable decrease in stockholder suits	challenging	M&A	transactions	filed	in Delaware state courts, and we expect to see similar trends in other state courts that adopt Trulia’s reasoning. At the same time, we have observed more vigorous litigation of post-closing claims and an increase in claims under Section 14(a) of the Exchange Act and other forms of stockholder	litigation,	as	plaintiffs’	lawyers	seek other paths to monetary recovery. We expect these trends to continue into 2017 and beyond. Trulia Resolves Recent Uncertainty Regarding Disclosure- Only Settlements During the last half of 2015, disclosure- only settlements came under increased scrutiny. This had an immediate chilling effect	on	strike-suit	M&A	litigation,	as	the	percentage of M&A transactions that saw stockholder challenges fell to its lowest level in the previous six years.137 Indeed, in 2015, the percentage of deals worth $100 million or more that resulted in stockholder litigation dropped to below 90 percent for the	first	time	since	2009.	Likewise,	the	number of lawsuits that were resolved before closing also decreased, from between 74 and 78 percent from 2009 to 2014 to only 57 percent in 2015.138 While Delaware courts had long criticized aspects of disclosure-only settlements, this criticism built to a crescendo in early July 2015 with two important rulings by the	Court	of	Chancery.	In	the	first,	on	July 8, 2015, Vice Chancellor J. Travis Laster denied approval of a disclosure- only settlement and cast doubt on the continued viability of the practice, questioning whether defendants should get	a	broad	release	of	claims	and	plaintiffs’	counsel get a large fee where the only consideration given to stockholders was additional disclosure.139 In another decision issued later that same day, Vice Chancellor John W. Noble weighed in with similar concerns, questioning whether the practice of disclosure-only settlements coupled with broad releases of claims amounted to court-sponsored “deal insurance.”140 Vice Chancellor Sam Glasscock III joined the fray in September 2015 in In re Riverbed Technology Inc. Stockholders Litigation.141, 142 There, a Fordham Law School professor—who had previously published pieces questioning the propriety of disclosure-only settlements and had started buying stock in companies for the purpose of objecting to the anticipated settlements—filed	an	objection,	echoing	the concerns raised in Aeroflex and Intermune, and urged the court to reject the settlement. Although Vice Chancellor Glasscock ultimately approved the settlement	over	the	professor’s	objection,	he raised concerns about the continued practice and indicated that he would be much more circumspect in the future when evaluating such settlements. In October 2015, Vice Chancellor Laster again rejected a proposed disclosure-only settlement in In re Aruba Networks Inc. Stockholder Litigation.143, 144 In Aruba, he described the practice of disclosure-only settlements coupled with broad releases of claims as a “systemic problem” and was critical	of	the	plaintiffs’	counsel’s	litigation	efforts,	which	seemed	to	be	geared	toward	achieving a disclosure-based settlement rather than securing meaningful relief for stockholders. These decisions left M&A practitioners questioning whether disclosure-only settlements remained a viable path to resolving stockholder challenges. This not only led to a decrease in the number of new	cases	being	filed	in	Delaware	in	the	second half of 2015, but also created a logjam of agreed-upon settlements based on supplemental disclosures waiting for court approval, as practitioners sought alternative paths to resolve those cases (some of which are discussed below). In January 2016, Chancellor Andre G. Bouchard resolved this uncertainty by issuing his decision in In re Trulia, Inc. Stockholder Litigation,145 which rejected Developments in Delaware M&A Law WSGR 2016 Securities and M&A Litigation Year in Review 14 a proposed disclosure-only settlement of claims related to the merger of Trulia and Zillow. In doing so, Chancellor Bouchard provided guidance to practitioners on how the Court of Chancery would approach disclosure-only settlements and pre- closing M&A litigation more generally. Moreover, he expressed the hope of reducing the number of strike suits and freeing resources for more meritorious cases capable of generating meaningful benefits	for	stockholders—for	example,	cases where “the integrity of a sales process	has	been	corrupted	by	conflicts	of	interest	on	the	part	of	corporate	fiduciaries	or their advisors.”146 Before embarking on his legal analysis, Chancellor Bouchard discussed the dynamics in M&A litigation that led to the disclosure-only settlement epidemic, noting: “Today, the public announcement of virtually every transaction involving the acquisition of a public corporation provokes	a	flurry	of	class	action	lawsuits	alleging	that	the	target’s	directors	breached	their	fiduciary	duties . . . .”147 He	observed	that	plaintiffs	use	the	threat	of derailing the deal as leverage, while defendants seek to settle quickly to minimize expense, to guarantee the deal closes, and to secure broad releases as a form of “deal insurance.”148 But he noted that the lack of any kind of adversarial process once the parties reach an agreement to settle—which in turn makes	it	difficult	for	courts	to	judge	the	materiality of the additional disclosures— has led to the proliferation of deal litigation “beyond the realm of reason.”149 Chancellor	Bouchard’s	principal	holding,	which he arrived at after discussing the background dynamics, was that, going forward, to support a disclosure-only settlement, additional disclosures would have to be “plainly material” and the related release would have to be “narrowly circumscribed.”150 He also expressed his hope that “sister courts will reach the same conclusion if confronted with the issue.”151 Chancellor Bouchard then examined the four supplemental disclosures that the	plaintiffs	had	obtained—some	of	which were the familiar type of additional minutiae, such as the disclosure of additional	multiples	in	the	bankers’	comparable companies analysis—and concluded that none of the disclosures were “plainly material.” The Aftermath of Trulia The impact of Trulia on M&A litigation has been both quantitative and qualitative. The decline	in	the	number	of	filings	in	late	2015	became much more pronounced in 2016. A recent study issued by Cornerstone Research detailed the substantial extent to which “[t]he rate of M&A litigation has declined . . . since the Delaware Court of Chancery’s	decision	in	Trulia.”152 According to that study, 84 percent of M&A deals were sued upon in 2015, but only 64 percent	were	sued	upon	in	the	first	half	of	2016 (the most recent data available).153 The	average	number	of	lawsuits	filed	per	deal also decreased, from 4.6 in 2014, to 4.1	in	2015,	and	to	2.9	in	the	first	half	of	2016.154 The average length of time from deal	announcement	to	the	filing	of	the	first	lawsuit increased as well, from 14 days in	2014	to	22	days	in	2015	and	the	first	half of 2016.155	The	percentage	of	filings	in Delaware also declined: 61 percent of deal	litigation	was	filed	in	Delaware	in	the	first	three	quarters	of	2015,	but	only	26	percent	of	deal	litigation	was	filed	there	in	the	last	quarter	of	2015	and	the	first	half	of 2016.156 For Delaware corporations, the number	of	cases	filed	in	Delaware	declined	from 74 percent in 2015 to 36 percent in the	first	half	of	2016.157 Litigation outcomes also changed—although between 74 and 78 percent of cases were resolved before closing from 2009 to 2014, only 56 percent were resolved pre-closing in the first	half	of	2016.158 The reduced number of cases brought in the Delaware Court of Chancery, coupled with a recent shift in the standard of review applicable to M&A transactions, has also had a qualitative impact on the cases that are being litigated. Indeed, the Court of Chancery’s	increased	focus	on	settlements	in M&A litigation occurred at the same time	that	the	court’s	jurisprudence	shifted	to	give	greater	legal	effect	to	the	fully	informed vote of stockholders approving M&A transactions. Under the rubric outlined	in	the	Delaware	Supreme	Court’s	decision in Corwin v. KKR Financial Holdings LLC159 in the fall of 2015, the fully informed and uncoerced vote of a majority of disinterested stockholders approving a transaction shifts the standard of review to the more deferential business judgment rule. In May 2016, the Delaware Supreme Court extended the reasoning in Corwin in Singh v. Attenborough,160 holding that a fully informed stockholder vote not only invokes the business judgment rule, but that the presumption is irrebuttable and “dismissal is typically the result” absent a showing of waste.161 WSGR 2016 Securities and M&A Litigation Year in Review 15 In several decisions in 2016, each member of the Court of Chancery has applied the Corwin-Singh reasoning to dismiss post-closing challenges to M&A transactions absent material disclosure claims.162 Notably, in In re Volcano Corp. Stockholder Litigation,163 Vice Chancellor Tamika Montgomery-Reeves held that the acceptance	of	a	“first-step	tender	offer	by	fully informed, disinterested, uncoerced stockholders representing a majority of a corporation’s	outstanding	shares	in	a	two- step merger . . . has the same cleansing effect . . . as a vote in favor of a merger by a fully informed, disinterested, uncoerced stockholder majority.” More recently, in In re OM Group, Inc. Stockholders Litigation,164 Vice Chancellor Joseph R. Slights	III	dismissed	the	plaintiffs’	complaint,	declining to apply Revlon and noting that he had	to	“first	account	for	the	fact	that	another	‘qualified	decision	maker,’	the	disinterested	OM stockholders, overwhelmingly approved the transaction.”165 Indeed, in the last half of 2016, defendants relied on Corwin- Singh at the motion to dismiss stage with considerable success to get rid of cases lacking material disclosure claims or significant	allegations	of	breaches	of	the	duty	of loyalty. Thus, as a result of Trulia, we have seen a smaller number of M&A cases than before. But the combination of Trulia and the application of Corwin-Singh has had a	significant	impact	on	the	types	of	cases	that are being litigated. If the cases we have seen so far are any indication, we expect the cases	that	are	filed	in	Delaware	in	the	future	to be more vigorously litigated, and to involve post-closing challenges based on allegations of interested board majorities and material non-disclosures. Other State and Federal Courts Appear to Be Following Trulia Reasoning Critically, a number of state and federal courts have followed the approach that the Delaware courts outlined in Trulia. The most notable endorsement of Trulia’s rejection of disclosure-only settlements came from Judge Richard Posner on the Seventh Circuit in In re Walgreen Co. Stockholder Litigation.166 Walgreen involved a stockholder challenge to the company’s	2014	acquisition	of	Alliance	Boots GmbH. Before the deal closed, the company agreed to make certain supplemental disclosures in exchange for a	broad	release	of	claims,	and	the	plaintiffs	sought	attorneys’	fees	of	$350,000.	The	district court approved the settlement. On appeal to the Seventh Circuit Court of Appeals, after considering the supplemental disclosures, Judge Posner found that it was “inconceivable” that they “either reduced support for the merger by frightening the shareholders or increased that support by giving the shareholders a sense that now they knew everything.”167 Describing	the	benefit	to	the	class	from	the disclosures in this case as “non- existent,” he characterized the practice of pursuing class claims that serve only to produce	attorneys’	fees	as	“no	better	than	a racket.”168 Judge Posner then adopted the “plainly material” standard from Trulia, found	that	it	was	not	satisfied	in	this	case,	and	reversed	the	district	court’s	approval	of the settlement.169 Likewise, Judge Peter Kirwan, who oversaw the complex litigation docket for the California Superior Court in Santa Clara County during the last several years, followed the reasoning in Trulia and Walgreen in two recent decisions. In Drulias v. 1st Century Bancshares, Inc.,170 the court addressed a proposed disclosure-only settlement arising out of Midland	Financial	Company’s	acquisition	of 1st Century. The defendants agreed to make certain supplemental disclosures related	to	potential	conflicts	of	certain	board	members	and	the	company’s	financial	advisor,	and	related	to	“don’t	ask,	don’t	waive”	provisions	in	confidentiality	agreements with potential buyers, in exchange	for	a	broad	release.	The	plaintiffs	sought	$400,000	in	attorneys’	fees.	Noting	first	that	most	of	the	supplemental	disclosures had in fact been contained in the original proxy, Judge Kirwan then commented that he found it “troubling” that, despite the fact that Delaware law applied,	the	plaintiff	had	not	acknowledged	the	Court	of	Chancery’s	decision	in	Trulia. Judge Kirwan summarized and then endorsed the holding in Trulia, stating that “deal practitioners should not be encouraged	to	file	strike	suits	in	California	in order to avoid Trulia, a possibility which Trulia itself recognized.”171 Considering both that the supplemental disclosures had in substance been contained in the original proxy and the very broad scope of the releases, Judge Kirwan determined that the settlement was not fair and declined to approve it. In another recent decision, Anderson v. Alexza Pharmaceuticals, Inc.,172 Judge Kirwan ordered a continuance of the settlement hearing after the	plaintiff	failed	to	acknowledge	Trulia in its submissions and also gave the court insufficient	information	to	determine	the	materiality of the disclosures at issue. WSGR 2016 Securities and M&A Litigation Year in Review 16 Lastly,	North	Carolina’s	business	court	has	also acknowledged Trulia in the context of approving disclosure-only settlements, though it has declined to adopt it at this time.173 Plaintiffs’	Bar’s	Response to Trulia As 2016 progressed, we also gained clarity	on	how	the	plaintiffs’	bar	would	react to the post-Trulia environment. Specifically,	in	2016	we	saw:	(1)	the	rise	of	the	“mooting	disclosure”;	(2)	the	filing	of	more federal securities lawsuits, especially under	Section	14(a)	of	the	Exchange	Act;	and (3) the increase of alternate forms of stockholder litigation, including stockholder inspection demands under Section 220 of the Delaware General Corporation Law and invalidity challenges to charter and bylaw provisions. Rise of the “Mooting” Disclosure Plaintiffs’	lawyers,	faced	with	the	less- than-promising prospects of seeking court approval of previously agreed-upon disclosure-only	settlements	or	of	filing	new	actions based on arguably non-material disclosure claims, have found a new avenue to seek a fee—the “mootness” fee dismissal. In these cases, the stockholder plaintiff	files	a	complaint	and	immediately	moves to expedite on targeted disclosure claims in the hope of causing the company to “moot” those disclosure claims. If the company makes supplemental disclosures before the scheduled stockholder vote, the plaintiff	voluntarily	dismisses	the	complaint,	and then tries to collect a mootness fee from the company. Chancellor Bouchard described this approach as preferable to the court-approved class action settlement of disclosure claims in Trulia because it does not involve a court-sanctioned release of claims and preserves the adversarial process. That is, because securing a broad release of claims is not on the table—unlike in the context of a disclosure-only settlement—defendants have a greater incentive to oppose fees they view as excessive. The scenario contemplated in Trulia has already played out on various occasions in the Court of Chancery. In two cases decided in hearings on consecutive days in July 2016, Chancellor Bouchard awarded fees far below what the plaintiffs’	attorneys	sought	after	examining	the relevant disclosures and considering opposition from the defendants. First, he slashed	the	plaintiffs’	requested	fee	award	of $350,000 down to $100,000 in In re Receptos, Inc. Stockholder Litigation.174 The parties had actually agreed to a disclosure-only settlement in 2015, only	for	the	plaintiffs	to	try	to	salvage	it as a mootness-fee case after Trulia. Although Chancellor Bouchard found that some of the disclosures—particularly management’s	estimates	for	the	likelihood	of	regulatory	approval	of	Receptos’	lead	drug—had limited “therapeutic” value, he found that no disclosure rose to the level of materiality articulated in Trulia. He observed	that	“plaintiffs	should	not	expect	to receive a fee in the neighborhood of $300,000 for supplemental disclosures in a post-Trulia world unless some of the supplemental information is material under the standards of Delaware law.”175 The next day, in In re Keurig Green Mountain Inc. Stockholders Litigation,176 Chancellor Bouchard completely denied the	plaintiffs’	attorneys’	application	for	$300,000 in fees for securing various mooting disclosures related to alleged promises to keep management on after the deal and information about a possible strategic	buyer’s	prior	commercial	relations with Keurig. He denied the fee application because the disclosures merely confirmed	what	was	already	in	the	proxy	or were not relevant to the stockholders, providing	“no	compensable	benefit	to	Keurig stockholders.”177 Thus, whether the mooting disclosure route remains a viable	path	for	plaintiffs	in	cases	where	the	materiality of the disclosures is marginal remains an open question. Increase in Disclosure Claims Under Section 14(a) of the Exchange Act In the aftermath of the Trulia decision in Delaware and its adoption in other jurisdictions,	plaintiffs’	lawyers	have	also	increasingly recast state-law disclosure claims as federal securities claims under Section 14(a) of the Exchange Act.178 Indeed, the number of federal securities lawsuits	filed	in	the	first	half	of	2016	increased 17 percent over the second half of 2015, mostly due to a substantial increase	in	M&A-related	filings.179 In the first	half	of	2016,	M&A-related	filings	increased 167 percent over the second half of 2015, and were the highest they have been since 2010.180 Of those, 58 percent	of	M&A-related	filings	were	in	the	Third Circuit (which includes the District of Delaware) and the Ninth Circuit (which WSGR 2016 Securities and M&A Litigation Year in Review 17 includes California).181 Cornerstone Research has posited that this increase can	be	attributed	to	the	effect	of	Trulia, as it “may have resulted in some venue shifting for merger objection lawsuits, many of which in recent years have been filed	in	Delaware.”182 There will likely be a continued increase in the number of federal	securities	lawsuits	filed,	as	plaintiffs	increase	their	efforts	to	find	friendly	forums	in which to bring disclosure claims, as well as alternate or novel theories by which to articulate those claims. But these numbers may be obscuring the reality on the ground. So far, shareholder plaintiffs	have	not	found	the	federal	courts	to be all that welcoming. For one thing, federal securities class actions brought under Section 14(a) remain subject to the heightened pleading and procedural requirements of the PSLRA.183 Moreover, federal courts are generally less willing to grant injunctive relief than the Court of Chancery. Rarely—if ever—do federal courts enjoin merger transactions based on alleged disclosure violations. For example, in Rosati v. Marketo, Inc.,184, 185 a	federal	district	court	denied	the	plaintiff’s	motion to enjoin a stockholder vote to approve a pending merger because the proxy supposedly omitted material facts about	management’s	discussions	with	the	acquirer.	The	court	found	that	the	plaintiff	failed to demonstrate the likelihood of irreparable harm, because in the absence of	an	injunction,	the	plaintiff	could	still	seek “to rescind the transaction or [to seek money] damages.”186 If cases like these	are	any	indication,	plaintiffs	may	find	that Section 14(a) claims do not provide a viable alternative in the post-Trulia environment. Increase in Other Forms of Stockholder Activity Meanwhile, the increased scrutiny on pre- closing M&A litigation has also resulted in an increase in other forms of stockholder litigation and litigation-related demands. For example, WSGR has observed an uptick in Section 220 demands seeking books and records in connection with M&A transactions under Section 220 of the Delaware General Corporation Law. Delaware courts have long encouraged practitioners to use the “tools at hand” rather than bring pre-closing litigation based solely on publicly available information. With the greater scrutiny on pre-closing	litigation,	plaintiffs’	firms	appear	to be using Section 220 at a greater rate to investigate	potential	breaches	of	fiduciary	duty in connection with M&A deals in order to bring post-closing lawsuits. One indicator of the growth in the use of Section 220 is the increase in Section 220 complaints	filed	in	Delaware	(although,	even then, the vast majority of Section 220	demands	do	not	result	in	the	filing	of a complaint). During 2016, 68 Section 220	complaints	were	filed,	up	roughly	20 percent from 56 in 2015 as well as the yearly average of 54.5 from 2010 to 2015.187 We expect stockholders to bring increasingly more Section 220 demands going forward. We also expect to see an increase in various kinds of quasi-extortionist stockholder demands and related litigation, such as the recent spate of stockholder demands challenging the validity of charter or bylaw provisions following the Court of	Chancery’s	ruling	in	In re VAALCO Energy, Inc. Stockholder Litigation.188 In VAALCO, the court invalidated a charter provision that limited stockholders to removing directors for cause only, as contrary to Section 141(k) of the Delaware General Corporation Law. Following the decision,	enterprising	plaintiffs’	firms	sent	out stockholder demands to dozens of companies with similar provisions in their charters demanding that those companies take corrective action. When those companies	agreed	to	amend	the	offending	provisions,	the	plaintiffs’	firms	sought	a	quick fee for having caused the companies to take corrective action. Looking Forward As would be true after any event as disruptive to the M&A litigation environment as Trulia, the new “normal” will come into focus only with the passage of time. So far, however, the trend appears to be a decrease in the overall number of stockholder challenges to M&A transactions under state law, with those remaining cases being more vigorously litigated post-closing. At the same time, plaintiffs’	firms	have	sought	out	alternative	avenues to secure a recovery—or a fee. WSGR 2016 Securities and M&A Litigation Year in Review 18 Wilson	Sonsini	Goodrich	&	Rosati’s	securities and M&A litigation practice is characterized by a unique and sophisticated	understanding	of	our	clients’	businesses. This understanding allows us to execute creative, aggressive strategies in litigation. We have built a reputation as one of the top securities defense firms	in	the	country,	and	have	defended	cases in 32 states and in all of the federal courts. Between 1999 and 2015, WSGR defended companies in 213 federal securities class actions—more than any other	law	firm	in	the	country,	according	to	Securities Law360. We have also represented companies, their	directors,	and	officers	in	other	closely related types of litigation, including shareholder derivative lawsuits alleging breaches	of	fiduciary	duties,	and	formal	and informal investigations before the Securities and Exchange Commission and other regulatory agencies. We have defended virtually every conceivable type of securities class action, including cases involving	alleged	financial	fraud,	new	drugs	and medical devices, defective products, and	financial	forecasts.	Beyond	our	core	technology and life sciences clients, we have represented companies in a broad array of industries, including aerospace and avionics, consumer products, construction, energy, entertainment, financial	services,	gaming,	restaurants,	and social media. Between 1996 and 2016, we completely prevailed for our clients in 121 cases. During the same period, we successfully convinced	plaintiffs’	lawyers	to	abandon	27 cases, won 94 motions to dismiss all claims with prejudice, and obtained complete summary judgment victories in 12 cases. Our winning percentage is	significantly	higher	than	the	national	average, based upon data published by NERA Economic Consulting. Our demonstrated and sustained ability to win cases across the country and in a wide variety of industries places us in a unique position	among	leading	defense	firms.	In addition, our track record of success provides leverage that enables our clients to obtain favorable settlements. About	WSGR’s	Securities	and	M&A	Litigation	Practice 1 Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund, 135 S. Ct. 1318 (2015). 2 Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II), 134 S. Ct. 2398 (2014). 3 135 S. Ct. 1318 (2015). 4 15 U.S.C. § 77k(a). 5 Omnicare, 135 S. Ct. at 1327. 6 Id. at 1329. 7 816 F.3d 199 (2d Cir. 2016). 8 Sanofi, 816 F.3d at 211. 9 Id. at 204. 10 655 F.3d 105 (2d Cir. 2011). 11 Sanofi, 816 F.3d at 209 (emphasis added) (citation omitted). 12 In	re	Sanofi	Sec.	Litig., 87 F. Supp. 3d 510, 531 (S.D.N.Y. 2015). 13 Sanofi, 816 F.3d at 202. 14 Id. at 210 (citing Omnicare, 135 S. Ct. at 1332). 15 Id. at 213. 16 Id. at	211	(first	alteration	in	original)	(citations	omitted). 17 15 U.S.C. § 78r(a). 18 645	F.	App’x	72	(2d	Cir.	2016),	cert. denied, 137 S. Ct. 186 (2016). 19 Id. at 76 n.3. 20 Querub v. Moore Stephens Hong Kong, 649 F.	App’x	55,	58	(2d	Cir.	2016). 21 No. 09 CV 1714 (DAB), 2016 WL 4083429 (S.D.N.Y. July 25, 2016). 22 Id. at *17 (quoting Omnicare, 135 S. Ct. at 1332). 23 Id. at *23. 24 Id. at *25 (citation omitted). 25 Id. at *31 (citing Omnicare, 135 S. Ct. at 1332). 26 No. 4:10-MD-2185, 2016 WL 3090779 (S.D. Tex. May 31, 2016). 27 Omnicare, 135 S. Ct. at 1329. 28 BP, 2016 WL 3090779, at *10. Endnotes WSGR 2016 Securities and M&A Litigation Year in Review 19 29 As the court in BP noted, district courts around the country have applied Omnicare to the analysis of Section 10(b) claims. For example, within the Ninth Circuit, the district court for the Eastern District of Washington in In re Iso Ray, Inc. Securities Litigation cited Omnicare in holding that a press release statement regarding “outstanding patient outcomes” resulting from the use of a drug to treat non-small cell lung cancer was actionable where	omitted	facts	“conflict[ed]	with	what	a reasonable investor would take” from the statement. 189 F. Supp. 3d 1057, 1071 (E.D. Wash. 2016). WSGR represented the defendants in this matter. 30 Id. at *12 (alteration in original) (citation omitted). 31 Id. (citations omitted). 32 Id. at *10 (alterations in original) (citations omitted). 33 Id. at *13. 34 Id. 35 17 C.F.R. § 229.303(a)(3)(ii). 36 Oran	v.	Stafford, 226 F.3d 275, 286 n.6 (3d Cir. 2000). 37 Id. at 288. 38 Id. (citations omitted). 39 In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1056 (9th Cir. 2014), cert. denied, 135 S. Ct. 2349 (2015). 40 818 F.3d 85 (2d Cir. 2016). 41 The earlier decision by the Second Circuit was Stratte-McClure v. Morgan Stanley, 776 F.3d 94 (2d Cir. 2015), in which the court held that “Item 303	imposes	an	‘affirmative	duty	to	disclose	that can serve as the basis for a securities fraud claim	under	Section	10(b).’”	SAIC, 818 F.3d at 94 n.7 (quoting Stratte-McClure, 776 F.3d at 101). 42 Id. at 95-96. 43 Pet. for Writ of Cert., Leidos, Inc. f/k/a SAIC, Inc. v. Ind. Pub. Ret. Sys., No. 16-581, 2016 WL 6472615 (U.S. Oct. 31, 2016). 44 Id. at *17. 45 134 S. Ct. 2398 (2014). 46 Fed. R. Civ. P. 23(b)(3). 47 Basic Inc. v. Levinson, 485 U.S. 224, 245 (1988). 48 Id. at 247. 49 Halliburton II, 134 S. Ct. at 2415 (quoting Basic, 485 U.S. at 248). 50 818 F.3d 775, 777 (8th Cir. 2016). 51 Id. at 782. 52 Id. 53 134 S. Ct. at 2417. 54 Best Buy, 818 F.3d at 782-83. 55 Id. at 783. 56 Id. at 784. 57 No. 10 Civ. 3461 (PAC), 2015 WL 5613150 (S.D.N.Y. Sept. 24, 2015), appeal docketed, No. 16-250 (2d Cir. Jan. 26, 2016). 58 Id. at *7. 59 Id. at *1. 60 Id. at *4-6. 61 Id. at *6-7. 62 Id. at *7. 63 Br. of Appellant at 2, In re Goldman Sachs Grp., Inc., No. 16-250 (2d Cir. Apr. 27, 2016). 64 Id. at 24 (citing Halliburton II, 134 S. Ct. at 2415). 65 Id. at 15. 66 Id. at 25. 67 312 F.R.D. 307 (S.D.N.Y. 2016), appeal docketed, No. 16-450 (2d Cir. June 15, 2016). 68 Id. at 326. 69 Id. at 327. 70 Id. 71 Id. at 326. 72 Pet. for Permission to Appeal at 3, Strougo v. Barclays PLC, No. 16-450 (2d Cir. Feb. 16, 2016). 73 Id. at 10-11. 74 Id. at 12. 75 No. 5:13-cv-01920-EJD, 2016 WL 7425926 (N.D. Cal. Dec. 22, 2016), appeal docketed, No. 17-80001 (9th Cir. Jan. 6, 2017). 76 Id. at *13. 77 Id. 78 Id. at *14. 79 Intuitive Surgical followed a similar holding in Hatamian v. Advanced Micro Devices, Inc., No. 14-cv-00226 YGR, 2016 WL 1042502, at *7 (N.D. Cal. Mar. 16, 2016), which held that “the burden is on [d]efendants” to convince the court of no price impact. The court in Hatamian also held that the court must not only consider price impact at the time of a misrepresentation, it must also consider price decrease at the time of a corrective disclosure. Id. (“[A] misstatement could serve to maintain the stock price at an artificially	inflated	level	.	.	.	.	Plaintiffs	can	travel	on the fraud-on-the-market theory by showing that the negative truthful information that caused the share price to drop was related to the prior false positive statements.” (citations omitted)). 80 See Pet. for Permission to Appeal at 15, Abrams v. Intuitive Surgical, Inc., No. 17-80001 (9th Cir. Jan. 5, 2017) (“Petition”) (“Rule 301, which is cited in Basic itself, provides that ‘the party against whom a presumption is directed has the burden of producing evidence to rebut	the	presumption,’	but	[the]	‘burden	of	persuasion . . . remains on the party who had it originally.” (alteration in original)). 81 WSGR represents a group of law professors and	former	SEC	officials	who	have	filed	an	amicus brief in support of the petition. 82 Basic, 485 U.S. at 248 (emphasis added). 83 Petition at 15. 84 There is also an appeal pending in the Fifth Circuit Court of Appeals to consider burden shifting in light of Halliburton II (Erica P. John Fund, Inc., v. Halliburton Co., No. 15-90038, 2015	WL	10714013	(5th	Cir.	Nov.	4,	2015));	however, the appeal was put on hold pending the	district	court’s	consideration	of	a	proposed	settlement agreement that would end the litigation. 85 821 F.3d 780 (6th Cir. 2016). 86 Id. at 787 (citation omitted). 87 Id. 88 Id. at 787 (quoting CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2183 (2014)). 89 Id. at 794. 90 The Eleventh Circuit has since agreed with Stein, describing it as a “well-reasoned discussion of why the Rules Enabling Act would prohibit tolling,” and holding that “American Pipe tolling does not apply to the statute of repose.” See Dusek v. JPMorgan Chase & Co., 832 F.3d 1243, 1248-49 (11th Cir. 2016), petition for cert. filed, (U.S. Sept. 26, 2016) (No. 16-389). 91 840 F.3d 698 (9th Cir. 2016). 92 Id. at 701. 93 Id. 94 Id. 95 Id. at 702. 96 Id. Endnotes (continued...) WSGR 2016 Securities and M&A Litigation Year in Review 20 97 Id. 98 Id. 99 Id. at 702-03. 100 Id. 101 In 2012, after Arena submitted a new application, the FDA approved Locaserin and it went on the market. Id. at 703. 102 Id. at 703. 103 Id. at 704. 104 Id. at 704. 105 Id. at 707. 106 Id. at 708. 107 Id. 108 Id. 109 No. 16-11038-RGS, 2016 WL 6897760 (D. Mass. Nov. 22, 2016). 110 Id. at *2. 111 Id. at *1. 112 Id. at *1-2. 113 Id. at *2. 114 Id. at *3. 115 Id. at *4. 116 Id. 117 Id. at *5. 118 Id. 119 No. 15-cv-00347-EMC, 2016 WL 4091395 (N.D. Cal. Aug. 2, 2016). 120 Id. at *17. 121 Id. 122 814 F.3d 1288, 1292 (11th Cir. 2016), cert. denied, 137 S. Ct. 102 (2016). 123 Id. at 1291. 124 Id. 125 Id. at 1292. 126 Id. at 1294 (citations omitted). 127 Id. at 1295. 128 Pet. for Writ of Cert. at 3, Fried v. Stiefel, No. 15-1458 (U.S. May 31, 2016), 2016 WL 3136684. 129 Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 82 (2006). 130 15 U.S.C. § 77v(a). 131 195 Cal. App. 4th 789 (2011). 132 WSGR represented Coupons.com and its officers	and	directors	in	the	litigation. 133 O’Donnell v. Coupons.com, No. 1-15-CV- 278399, slip op. (Cal. Super. Ct. Santa Clara Cty. Nov. 12, 2015). 134 O’Donnell v. Coupons.com, No. 1-15-CV- 278399, 2016 Cal. Super. LEXIS 1097, at *11 (Cal. Super. Ct. Santa Clara Cty. May 24, 2016) (citing authority). 135	WSGR	represents	Cyan	and	its	officers	and	directors in the litigation. A subsequent petition for certiorari raising	the	same	question	was	filed	in another action. FireEye, Inc. v. Superior Court, No. 16-744 (docketed Dec. 8, 2016). WSGR represents	FireEye	and	its	officers	and	directors	in the litigation. 136 Cyan, Inc. v. Beaver County Employees Retirement Fund, No. 15-1439 (docketed May 27, 2016). 137 See Cornerstone Research, Shareholder Litigation Involving Acquisitions of Public Companies: Review of 2015 and 1H 2016 M&A Litigation 1 (2016). 138 Id. at 4. 139 See	Acevedo	v.	Aeroflex	Holding	Corp.,	C.A. No. 7930-VCL (Del. Ch. July 8, 2015) (Transcript). 140 In re InterMune, Inc. Stockholder Litig., C.A. No. 10086-VCN (Del. Ch. July 8, 2015) (Transcript). 141 See In re Riverbed Tech. Inc. Stockholders Litig., No. 10484-VCG, 2015 WL 5458041 (Del. Ch. Sept. 17, 2015). 142 WSGR represented Riverbed Technology, Inc. and members of its board of directors in this matter. 143 C.A. No. 10765-VCL (Del. Ch. Oct. 9, 2015) (Transcript). 144 WSGR represented Aruba Networks, Inc. and members of its board of directors in this matter. 145 129 A.3d 884 (Del. Ch. 2016). 146 Id. at 891. 147 Id. 148 Id. at 892. 149 Id. at 894. 150 Id. at 898. 151 Id. at 899. 152 Cornerstone Research, Shareholder Litigation Involving Acquisitions of Public Companies: Review of 2015 and 1H 2016 M&A Litigation 2 (2016). 153 Id. 154 Id. 155 Id. 156 Id. at 3. 157 Id. 158 Id. at 4. 159 125 A.3d 304 (Del. 2015). 160 137 A.3d 151 (Del. 2016). 161 Id. at 151-52. 162 See,	e.g.,	Huff	Energy	Fund,	L.P.	v.	Gershen,	No. CV 11116-VCS, 2016 WL 5462958 (Del. Ch.	Sept.	29,	2016);	Larkin v. Shah, No. CV 10918-VCS, 2016 WL 4485447 (Del. Ch. Aug.	25,	2016);	City of Miami Gen. Emps. & Sanitation Emps. Ret. Trust v. Comstock, No. CV 9980-CB, 2016 WL 4464156 (Del. Ch. Aug. 24,	2016);	Chester Cty. Ret. Sys. v. Collins, C.A. No. 12072-VCL, 2016 Del. Ch. LEXIS 197 (Del. Ch. Dec. 6, 2016). 163 143 A.3d 727, 747 (Del. Ch. 2016). 164 No. CV 11216-VCS, 2016 WL 5929951 (Del. Ch. Oct. 12, 2016). 165 Id. at *10 (citation omitted). 166 832 F.3d 718 (7th Cir. 2016). 167 Id. at 723. 168 Id. at 724. 169 Id. at 725-26. 170 No. 16-CV-294673, slip op. (Cal. Super. Ct. Santa Clara Cty. Nov. 21, 2016). 171 Id. 172 No. 16-CV-295357 (Cal. Super. Ct. Santa Clara Cty. Dec. 2, 2016). 173 See In re Newbridge Bancorp S’holder Litig., No. 15 CVS 10047, 2016 WL 6885882, at *1 (N.C. Super. Ct. Guilford Cty. Nov. 22, 2016) (declining to follow Trulia but indicating that the court	may	elect	to	do	so	in	the	future);	Corwin v. British Am. Tobacco PLC, No. 14 CVS 8130, 2016 WL 635191, at *4 (N.C. Super. Ct. Guilford Cty. Feb. 17, 2016) (acknowledging the potential significance	of	Trulia but declining to adopt it based	on	“differences	between	Delaware	law	and North Carolina law”). 174 C.A. No. 11316-CB (Del. Ch. July 21, 2016) (Transcript). 175 Id. at 76. Endnotes (continued...) WSGR 2016 Securities and M&A Litigation Year in Review 21 176 C.A. No. 11815-CB (Del. Ch. July 22, 2016) (Transcript). 177 Id. at 77. 178 E.g., Bumgarner v. Williams Companies, No. 16-CV-26-GKF-FHM, 2016 WL 3162062 (N.D. Okla. June 3, 2016) (seeking to enjoin merger of a Delaware corporation and alleging violations of	Section	14(a));	Guerra v. Linear Tech. Corp., No. 4:16-cv-05514-PJH (N.D. Cal. Sept. 28, 2016)	(same);	Borrego v. Ruckus Wireless, Inc., No. 1:16-cv-00340-SLR (D. Del. May 11, 2016) (same). 179 Cornerstone Research, Securities Class Action Filings: 2016 Midyear Assessment 4 (2016). 180 Id. at 10. 181 Id. 182 Id. 183 Private Securities Litigation Reform Act of 1995, Pub. L. No. 104-67, 109 Stat. 737. 184 No. C 16-03907 CW, slip op. (N.D. Cal. July 26, 2016). 185 WSGR represented Marketo, Inc. and members of its board of directors in this matter. 186 Id. at	2; see also Erickson v. Hutchinson Tech. Inc., 158 F. Supp. 3d 751, 760 (D. Minn. 2016) (denying preliminary injunction of stockholder merger vote for alleged disclosure violations,	finding	inability	to	cast	informed	vote would not be irreparable harm because stockholders could recover money damages or	seek	appraisal	remedy);	Masters v. Avanir Pharm., Inc., 996 F. Supp. 2d 872, 885 (C.D. Cal. 2014) (“In the context of motions to enjoin shareholder votes, federal courts . . . have rejected the per se rule . . . that ‘denying stockholders their right to cast an informed vote	constitutes	irreparable	harm.’”	(citations	omitted)). 187 WSGR research based on a review of the Delaware	Court	of	Chancery’s	electronic	docket	system. 188 C.A. No. 11775-VCL (Del. Ch. Dec. 21, 2015) (Transcript). Endnotes (continued...) WSGR 2016 Securities and M&A Litigation Year in Review 650 Page Mill Road, Palo Alto, California 94304-1050 | Phone 650-493-9300 | Fax 650-493-6811 | www.wsgr.com Austin Beijing Boston Brussels Hong Kong Los Angeles New York Palo Alto San Diego San Francisco Seattle Shanghai Washington, DC Wilmington, DE © 2017 Wilson Sonsini Goodrich & Rosati, Professional Corporation. All rights reserved. This communication is provided as a service to our clients and friends and is for informational purposes only. It is not intended to create an attorney-client relationship or constitute an advertisement, a solicitation, or professional advice as to any particular situation.

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