January 8, 2019
Tender Offers: SCOTUS to Decide If 14(e) Requires Scienter
Section 14(e) is the Williams Act’s general anti-fraud provision, and prohibits misstatements or omissions in connection with tender offers. Last year, in Varjabedian v. Emulex, the 9th Circuit split with the other circuits that had addressed the issue & held that 14(e) liability may be based on negligence. Last week, the SCOTUS granted cert in the case – and this Wachtell memo says its decision could be an important one for M&A practitioners:
Emulex exemplifies a trend apparent since Delaware’s crackdown on the disclosure settlement racket: Deal disclosure cases have flooded into other states and into federal court. In deals involving tender offers, the legal vehicle of choice has been Section 14(e). If the Ninth Circuit’s decision endorsing a negligence standard is allowed to stand, the ongoing flood of tender-offer disclosure cases in to the federal courts could become a deluge. But if it is reversed, and depending on how, that flood could be slowed—or altogether stemmed.
– John Jenkins