Emulex Corp. v. Varjabedian

The case originated from the 2015 acquisition of Emulex Corporation by Avago Technologies. Shareholders led by Gary Varjabedian filed a class action alleging that the proxy statement recommending the merger omitted material financial information, violating Section 14(e) of the Securities Exchange Act of 1934. The Ninth Circuit held that private plaintiffs need only allege negligence, not fraudulent intent (scienter), to state a claim. The U.S. Supreme Court granted certiorari to resolve a circuit split but, after oral argument, dismissed the writ as improvidently granted on April 23, 2019. The one-sentence per curiam decision left the Ninth Circuit’s ruling intact, meaning the lower negligence pleading standard remained in effect for tender offer omission claims within that circuit.

The U.S. Supreme Court dismissed the writ of certiorari as improvidently granted, leaving the Ninth Circuit’s ruling in place that negligence is sufficient to state a claim under Section 14(e).

Whether a private lawsuit brought under Section 14(e) of the Securities Exchange Act of 1934 for material omissions in tender offer materials requires proof that the defendant acted with scienter (fraudulent intent), or whether mere negligence is sufficient.

The dismissal preserved a circuit split but significantly lowered the litigation threshold for securities class actions concerning tender offers within the Ninth Circuit. It increased potential liability exposure for acquiring companies and influenced drafting practices for M&A disclosures, while leaving uncertainty about the standard in other jurisdictions.