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The Daily Journal Podcast: Interview with O’Melveny’s Matt Close: Implications of Supreme Court Securities Case

January 30, 2019

In a “Securities Law Special” on The Daily Journal’s podcast, O’Melveny partner Matt Close offers his analysis of Emulex v. Varjabedian, a closely watched securities case that the US Supreme Court recently added to its docket. 

The case centers around the issue of whether a company can be penalized for negligent omissions made to its shareholders recommending that they accept an acquiring company’s tender offer, or whether a more culpable or fraudulent state of mind is required.

“The Ninth Circuit expressly disagreed with the Second, Third, Fifth, Sixth, and Eleventh Circuits and held that mere negligence would be enough,” said Close. 

Close believes there are challenges with the Ninth Circuit’s rationale. He also believes there will be a significant impact in the securities arena if the US Supreme Court affirms the Ninth Circuit. 

“It makes a tender offer structure a lot less appealing in many more circumstances. . .It will potentially be seen as carrying disproportionate litigation risk on the front end,” said Close.