Supreme Court Docket Report - January 22, 2013

Last Friday, the Supreme Court granted certiorari in two cases of interest to the business community:

Securities Litigation Uniform Standards Act—Misrepresentations "in Connection with" Securities Transactions Title VII—Retaliation—Mixed-Motive Claims Securities Litigation Uniform Standards Act—Misrepresentations "in Connection with" Securities Transactions

The Securities Litigation Uniform Standards Act ("SLUSA") precludes the filing in either state or federal court of most class actions under state law that allege "a misrepresentation or omission of a material fact in connection with the purchase or sale of" securities covered by the statute. 15 U.S.C. § 78bb(f)(1)(A). On Friday, the Supreme Court granted certiorari in three consolidated cases—Chadbourne & Parke LLP, No. 12-79, Willis of Colorado v. Troice, No. 12-86, and Proskauer Rose LLP v. Troice, No. 12-88—to clarify the standard for determining whether a misrepresentation qualifies as "in connection with" a securities transaction. In granting certiorari, the Court rejected the recommendation of the Solicitor General, whose views the Court had solicited, that certiorari be denied.

Because the Court's resolution of these cases is likely to clarify the range of class actions precluded by SLUSA, it may prove significant for all businesses that purchase, sell, or make representations concerning securities.

The respondents in all three cases—plaintiffs in the district court—filed class actions relating to certificates of deposit that they purchased from entities controlled by R. Allen Stanford. Respondents alleged that although the petitioners in Willis of Colorado represented the CDs to be safe investments with consistently above-market returns, the CDs were actually part of a Ponzi scheme run by Stanford. Respondents further alleged that the law-firm petitioners in Chadbourne & Parke and Proskauer Rose aided and abetted the scheme by, among other things, misrepresenting their ability to oversee Stanford's operations.

The district court held that SLUSA precluded respondents' claims. Specifically, the court concluded that respondents had alleged misrepresentations "in connection with" securities transactions for two reasons: (1) respondents alleged that they were induced to purchase the CDs because Stanford's companies represented, among other things, that their investments in securities allowed them to offer high rates of return on CDs, and (2) respondents had sold securities in order to...