With Emulex Corp., Supreme Court Could Raise Bar for “Merger Tax” Securities Suits

bainbridgeFeatured Expert Contributor, Corporate Governance/Securities Law

Stephen M. Bainbridge, William D. Warren Distinguished Professor of Law, UCLA School of Law.

In the wake of the Delaware Chancery Court’s pathbreaking decision in the Trulia case,1 which sharply increased the scrutiny given settlements of cases challenging mergers and other takeovers, there has been a dramatic shift of M&A litigation to federal courts.2 How receptive federal courts will be to this flood of new claims will be determined in part by Emulex Corporation, et al., v. Varjabedian, which is currently pending before the U.S. Supreme Court. Emulex turns on whether scienter is an element of the private-party cause of action under § 14(e) of the Securities Exchange Act of 1934. Section 14(e) prohibits fraud in connection with tender offers and thus will be a key provision in assessing the survivability of these new M&A lawsuits.3 Continue reading “With Emulex Corp., Supreme Court Could Raise Bar for “Merger Tax” Securities Suits”