On April 7, 2025, Cohen Milstein filed an amicus brief on behalf of distinguished federal jurisdiction scholars in support of respondents in the Supreme Court case Laboratory Corporation of America Holdings, D/B/A Labcorp v. Luke Davis, et al. (24-304).
Respondents, individuals who are legally blind, brought a class action lawsuit against Labcorp in 2020. They allege that Labcorp’s Express Self Check-In kiosks violate federal and California disability laws because they are not accessible to the blind.
Before the Supreme Court, Labcorp challenges the Ninth Circuit’s affirmance of the district court’s decision to certify the class and contends that both Federal Rule of Civil Procedure 23 and Article III of the Constitution prohibit class certification if the proposed class includes uninjured class members.
The Supreme Court will hear oral argument on April 29, 2025 on the question of whether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury?
Amici are legal scholars with expertise in federal courts, federal jurisdiction, and the jurisdiction of the Supreme Court:
- Erwin Chemerinsky is the Dean and Jesse H. Choper Distinguished Professor of Law at the University of California, Berkeley School of Law.
- Richard H. Frankel is a Professor of Law at Drexel University Thomas R. Kline School of Law.
- Margaret Kwoka is the Lawrence Herman Professor in Law at The Ohio State University Moritz College of Law.
- Marin Levy is a Professor of Law and Faculty Director of the Bolch Judicial Institute at Duke University School of Law.
- Alexander A. Reinert is the Max Freund Professor of Litigation & Advocacy at Benjamin N. Cardozo School of Law.
- Adam Steinman is Professor of Law at Texas A&M University School of Law, where he teaches Federal Courts.
- David C. Vladeck is the A.B. Chettle, Jr., Professor of Law at Georgetown University Law Center.
The amicus brief examines the tangle of jurisdictional, prudential, and factual issues in the case that stem from Labcorp’s appeal of the wrong class certification order. Amici offer this brief to assist the Court in evaluating the scope of its certiorari jurisdiction, the exercise of its discretion to dismiss improvidently granted petitions, and its unflagging obligation to assure itself that there exists a live controversy before it.
As there is no live controversy here with respect to the only class certification order within the bounds of the Court’s jurisdiction, Amici urge the Court to dismiss the writ of certiorari as improvidently granted or as moot.
On October 2, 2024, Cohen Milstein’s Laura Posner and Carol V. Gilden; and counsel from Schnapper-Cateras PLLC, Levi & Korsinsky, LLP, and Wolf Haldenstein Adler Freeman & Herz LLP submitted a brief for amici curiae, distinguished scholars on economics, accounting, statistics, data science, and forensic analysis in support of respondent in Nvidia Corp., et al. v. E. Ohman J:or Fonder AB, et al. (No. 23-970), before the Supreme Court.
Amici & Purpose of the Brief
Amici are leading scholars on economics, accounting, statistics, data science, and forensic analysis who have served as consultants and experts for a variety of clients, including the U.S. Department of Justice and the Securities and Exchange Commission (SEC), as well as both defense- and plaintiff-side law firms. They have each participated in expert analysis that has helped inform the filing of complaints, for example, on issues of stock price movements, industry pricing, market manipulation, insider trading, accounting fraud, and the results of pharmaceutical drug trials. They respectfully offer their professional views about the useful role that data science, and analysis of data-intensive and data-complex topics, can play at the complaint stage, as well as their practical experiences having served as experts themselves.
Amici curiae are:
- David Madigan: Provost and Senior Vice President of Academic Affairs at Northeastern University, as well as Professor in the College of Computer Sciences.
- Joshua Mitts: David J. Greenwald Professor of Law at Columbia Law School.
- Daniel Taylor: Arthur Andersen Chaired Professor at The Wharton School, and Director of the Wharton Forensic Analytics Lab.
Summary of Argument
The second Question Presented, as framed by Petitioners, presupposes that plaintiffs rely on expert opinions to “substitute for particularized allegations of fact.” (emphasis added). That core assumption about the role of experts is fundamentally mistaken and does not reflect the practices of experts and data scientists in a range of securities law cases.
In reality, experts can and do play a vital and appropriate role in cases at the pre-filing stage by analyzing data to inform, supplement, and corroborate – but not to substitute for – particularized allegations, including through quantitative analysis. Quantitative experts (like amici) can apply statistics and data science to distill complex and/or voluminous data for plaintiffs and courts alike. Quantitative experts play a key role in securities law cases by, for example, assessing whether a stock price drop was statistically significant, whether a given share was traceable to a registration statement, or whether stock option backdating or market manipulation have occurred.
More broadly, the involvement of pre-trial experts can promote judicial efficiency by ensuring that complaints are well-pled, well-vetted, and as detailed as possible. For instance, explaining the complex nuances of drug trial results, engineering concepts,
Generally Accepted Accounting Principles, and various other technical standards that lawyers lack necessary training and expertise to understand. As numerous scholars and courts have recognized, encouraging the parties to consult with experts early in litigation incentivizes more thorough evaluation and preparation of claims before filing a complaint.
Involving quantitative experts in these ways is fully consistent with – and, indeed, encouraged by – the judicial policy of vigorous, early evaluation of claims under the Private Securities Litigation Reform Act (PSLRA).
Finally, two of Petitioners’ amici appear to misunderstand the common functions of experts and therefore propose an unusually limited role for them in securities law cases. One amicus brief from the Chamber of Commerce suggests that experts should not be allowed to use publicly available information and should only rely on internal company documents.
But that argument cannot be right: plaintiffs (and investors) rely on public data all the time (and courts regularly take judicial notice of such information). A contrary rule could incentivize the theft or leaking of corporate information. A second amicus brief from the Atlantic Legal Foundation argues that courts must apply Federal Rule of Evidence 702 at the complaint stage to assess the reliability of experts involved. The Rules of Evidence govern the admissibility of evidence at trial and in certain evidentiary hearings, not all proceedings or pleadings. Moreover, neither the Rules of Evidence nor the Federal Rules of Civil Procedure provide any support for requiring some new form of a Daubert hearing at the pleading stage.
Overall, amici respectfully stress that it is important to clarify that the central assumption of the second Question Presented does not accurately capture the practice of experts in a range of securities law cases. Furthermore, this Court should be careful to resolve the case at bar in a way that does not inadvertently limit this important and widespread practice.
On July 10, 2024, Cohen Milstein, the National Fair Housing Alliance, and the Lawyers’ Committee for Civil Rights Under Law, on behalf of other interested parties as Amicus Curiae, submitted an amicus brief to the United States Court of Appeals for the District of Columbia Circuit in support of appellees in National Association of Mutual Insurance Companies v. United States Department of Housing and Urban Development, Case No. 23-5275.
Identity of Amici Curie
Amici are the National Fair Housing Alliance, the Lawyers’ Committee for Civil Rights Under Law, AARP, the National Consumer Law Center, the Poverty & Race Research Action Council, the National Low Income Housing Coalition, the National Housing Law Project, and the NAACP Legal Defense and Educational Fund. Each is a non-profit organization that has long sought to eliminate housing segregation and promote equal housing opportunity for all.
Introduction
As the Supreme Court has made clear, a plaintiff can succeed on a Fair Housing Act (“FHA”) claim using evidence of the unjustified discriminatory effects of a facially neutral housing policy or practice. Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 576 U.S. 519, 542 (2015) (“Inclusive Communities”). Appellant National Association of Mutual Insurance Companies (hereinafter, “NAMIC” or “Appellant”) remains unwilling to accept this reality, at least with respect to the business of homeowner’s insurance.
Summary of Argument
This appeal concerns the U.S. Department of Housing and Urban Development’s 2023 rule (“HUD Rule”) regarding disparate impact liability under the FHA. The HUD Rule reinstates a 2013 rule that codified a three-part burden-shifting framework for assessing disparate impact claims. Under that framework, to establish disparate impact liability, a plaintiff (or complainant in an administrative proceeding) must first show that “a challenged practice caused or predictably will cause a discriminatory effect.” 24 C.F.R § 100.500(c)(1). If that burden is satisfied, the defendant (or respondent in an administrative proceeding) must prove that “the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.” Id. at §100.500(c)(2). And if the defendant bears its burden, the plaintiff can still prevail if it shows that the defendant’s interests “could be served by another practice that has a less discriminatory effect.” Id. at §100.500(c)(3).
For over a decade, NAMIC has waged war on various versions of HUD’s disparate impact rule. It now challenges the HUD Rule as inconsistent with the Supreme Court’s decision in Inclusive Communities, D. Ct. Dkt. 146 at 150-151, even though that decision confirmed the availability of disparate impact liability under the FHA and took no issue with HUD’s proposed burden-shifting framework. Contrary to NAMIC’s assertion that the FHA is designed solely to ensure race-blindness in housing, see Appell. Br. 32-33, the purpose of the FHA is to ensure equal opportunities for housing. This legislation was and remains necessary to counteract pervasive discrimination and impermissible disparities in housing. The district court rightly rejected NAMIC’s argument. See D. Ct. Dkt. 155 (“Op.”).
On appeal, NAMIC insists once again that the HUD Rule cannot be reconciled with Inclusive Communities. Amici agree with the arguments presented by Appellee in support of the HUD Rule, see HUD Br., Document No. 2063070, but write separately to emphasize three reasons that Inclusive Communities does not preclude the application of the HUD Rule to homeowner’s insurance.
First, contrary to Appellant’s characterization, insurance underwriting and ratemaking are not solely the result of objective, scientific risk-grouping and risk-rating practices; these processes weigh many factors that have nothing to do with risk and can cause unjustified disparities by race or other protected characteristics. While Appellant insists that insurers should enjoy a blanket exemption from FHA disparate impact liability because of their purportedly distinct focus on risk assessment, courts have soundly rejected this argument.
Second, monitoring related to and compliance with the HUD Rule do not somehow force insurers to engage in discrimination prohibited by the Constitution or Inclusive Communities. Instead, consistent with Inclusive Communities, the HUD Rule requires the elimination of unjustified practices that cause racial disparities. Despite Appellant’s misleading arguments to the contrary, Inclusive Communities contains safeguards that are designed to ensure that disparate impact liability does not create constitutional issues. As the district court found, the HUD Rule incorporates these safeguards. Op. at 22-23. To comply with the HUD Rule, insurers need not adopt racial quotas or charge different rates to insureds of different races. They need only change any unjustified policies that cause racial disparities. Following the HUD Rule may cause insurers to take race-neutral actions aimed at reducing unjustified racial disparities, but those actions raise no constitutional issues.
Third, Appellant and several of its amici conjure up supposed tensions between the HUD Rule and the limiting principles on disparate impact liability set forth in Inclusive Communities. But as the district court correctly observed, the HUD Rule does not induce greater consideration of race and other protected characteristics than the FHA, as interpreted in Inclusive Communities, already did. Read together, the HUD Rule, the FHA, and Inclusive Communities appropriately distinguish between unnecessary, discriminatory barriers to housing and valid policies and practices that advance legitimate business interests.
On March 28, 2024, the National Women’s Law Center filed an amicus brief, co-authored by Cohen Milstein, with the Supreme Court of the United States, addressing Moyle v. U.S.A. (No. 23-726) and Idaho v. U.S.A. (23-727) and the Emergency Medical Treatment and Labor Act (EMTALA).
This brief is also submitted on behalf of In Our Own Voice: National Black Women’s Reproductive Justice Agenda, National Asian Pacific American Women’s Forum, and National Latina Institute for Reproductive Justice, as well as 98 organizations. Like the NWLC, these organizations are committed to equitable and adequate healthcare access for everyone who is pregnant or can become pregnant.
The amicus brief addresses two concerns: 1) Whether SCOTUS will interpret the law to permit women and pregnant people to be singled out for disfavored treatment when it comes to federal protections. 2) Whether states can make exceptions to federal laws they disagree with.
Introduction & Summary of the Argument
The Emergency Medical Treatment and Labor Act (EMTALA) is a life raft for people who have systematically been denied medical care.
Recognizing the cruelty of denying medical treatment to patients in crisis, Congress created EMTALA to ensure that Medicare funded hospitals would, at the very least, provide “necessary stabilizing treatment” for “any” patient with an “emergency medical condition,” regardless of the patient’s ability to pay. 42 U.S.C. § 1395dd(b). In 1989, Congress amended the statute to clarify and extend protections for pregnant people. The plain text of EMTALA now requires that emergency departments stabilize pregnant patients in labor, pregnant patients who have emergency conditions unrelated to labor, and patients who need emergency treatment to prevent pregnancy loss. Because more than half of pregnant people seek emergency department treatment at some point during their pregnancy, and up to 15% suffer a life-threatening condition during the first trimester, EMTALA’s safeguards are critical for everyone who can become pregnant in the United States.
The importance of EMTALA has only increased as this country reckons with a maternal health crisis. While structural barricades to quality prenatal care were erected long ago—particularly for pregnant patients in Black and Indigenous communities—rates of severe and fatal pregnancy complications in the United States are rising. The crisis has now reached fever pitch: The United States’ maternal mortality rate is ten times that of other high-income countries. And while the risk of pregnancy-related death is unacceptably high across demographic groups, it is worst for Black women, who are three times as likely to die as white women, and Indigenous women, who are twice as likely to die as white women.
In the wake of Dobbs v. Jackson Women’s Health Organization, 597 U.S. 215 (2022), Idaho raises the novel theory that it has the power to carve protections for pregnant people out of federal law. Accepting Idaho’s reading of EMTALA—which distorts the statutory text beyond reason and recognition—would deepen the United States’ maternal health crisis, particularly for Black, Indigenous, immigrant, rural, and low-income communities. It would decimate treatment options for patients experiencing pregnancy-related emergencies and accelerate the exodus of healthcare providers from areas that are already considered pregnancy-care deserts, making even routine pregnancy care harder to find.
Amici urge the Court to reject Petitioners’ atextual reading of EMTALA and prevent the catastrophic consequences that would flow from it.
On January 22, 2020, Cohen Milstein, on behalf of the North American Securities Administrators Association as Amicus Curiae, submitted an amicus brief to the Supreme Court of the United States in support of the respondent in Charles C. Liu and Xin Wang v. Securities and Exchange Commission, No. 18-1501.
Introduction
The North American Securities Administrators Association, Inc. (“NASAA”) is the non-profit association devoted to protecting investors from fraud and abuse in the offer and sale of securities.
NASAA and its members have an interest in this appeal because they, like their federal counterpart, the Securities Exchange Commission (“SEC”), have a strong interest in enforcing the securities laws to protect investors from fraud and abuse. In order to effectively address the many varieties of investment fraud in an increasingly complex market, securities regulators must have the flexibility to obtain all appropriate remedies, including disgorgement. NASAA and its members regularly encounter a wide variety of frauds in which disgorgement is essential to providing compensation to fraud victims and to deterring fraud.
NASAA members and the SEC regularly work together to address widespread and complex frauds, including frauds arising out of the EB-5 Immigrant Investor Program. For example, in 2014, the Vermont Department of Financial Regulation (“DFR”) began an investigation into an EB-5 fraud involving Jay Peak Inc., a ski resort operated by two residents of Florida and Vermont (“Jay Peak”). After working closely with DFR, in April 2016, the SEC charged the developers of Jay Peak with 52 counts of fraud and the misuse of approximately $200 million in funds from hundreds of investors in 74 countries. Ultimately, DFR and the SEC together obtained nearly $81 million in disgorgement for the benefit of investors from the perpetrators of the Jay Peak fraud.
Similar to the Jay Peak defendants, Petitioners here engaged in an EB-5 Immigrant Investor Program fraud in which they induced fifty investors to invest a total of nearly $27 million dollars, telling investors that the money would fund the constructions of a cancer treatment center. Petitioners, in direct violation of the terms of the offering documents, then misappropriated and funneled that money to themselves and used it to pay for personal expenses, exhausted all but a couple hundred thousand of the money raised, and never even obtaining the required permits to break ground for the cancer treatment center. The District Court ordered the disgorgement of $26.7 million, less than the amount that Petitioners fraudulently took from innocent investors, since – in the court’s opinion – there were no legitimate business expenses incurred by Petitioners. The court of appeals concurred with this assessment.
Question Presented
Whether a district court, in a civil enforcement action brought by the Securities and Exchange Commission, may order disgorgement of money acquired through fraud.
Summary Argument
As this Court made clear just last year: “Congress intended to root out all manner of fraud in the securities industry. And it gave to the Commission the tools to accomplish that job.” Lorenzo v. SEC, 139 S. Ct. 1094 (2019). For more than half a century, the Courts and Congress consistently agreed that one of those “tools” was the SEC’s ability to seek disgorgement in Court.
More than fifty years ago, the Second Circuit first recognized that district courts may require defendants in SEC actions to disgorge their illicit gains “as an ancillary remedy in the exercise of the courts’ general equity powers to afford complete relief.” Texas Gulf Sulphur Co., 446 F.2d 1301, 1307 (1971), cert. denied, 404 U.S. 1005 (1971). Since then, the circuits have uniformly held that disgorgement is an available remedy in the SEC’s enforcement actions. Following this Court’s Kokesh decision, every court of appeals and every district court that considered the issue also uniformly determined that nothing in that decision called into question the availability of disgorgement in SEC enforcement actions. See SEC v. Weaver, 773 Fed. Appx. 354, 356-357 (9th Cir. 2019).
This is unsurprising given that the disgorgement of profits is a “historic equitable remedy.” SEC v. Commonwealth Chem. Securities, Inc., 574 F.2d 90, 95 (2d Cir. 1978) (“Disgorgement of profits in an action brought by the SEC . . . appears to fit” the description of “[a] historic equitable remedy” because “the court is not awarding damages to which plaintiff is legally entitled but is exercising the chancellor’s discretion to prevent unjust enrichment”).
Congress has also repeatedly and expressly recognized court authority to order disgorgement in SEC enforcement actions. See, e.g., Sarbanes-Oxley Act of 2002, § 308(b), 15 U.S.C. 7246(a)(separate civil penalties assessed against securities wrongdoers may “be added to and become part of a disgorgement fund or other fund established for the benefit of the victims of such violation.”); Private Securities Litigation Reform Act of 1995, Pub. L. 104-67, § 103(b), 109 Stat. 737 (codified at Securities Act of 1933 (“1933 Act”) § 20(f), 15 U.S.C. § 77t(f)); Securities Exchange Act of 1934 (“1934 Act”) § 21(d)(4), 15 U.S.C. § 78u(d)(4)) (Prohibition of Attorneys’ Fees Paid From Commission Disgorgement Funds – Except as otherwise ordered by the court upon motion by the Commission, or, in the case of an administrative action, as otherwise ordered by the Commission, funds disgorged as the result of an action brought by the Commission in Federal court, or as a result of any Commission administrative action, shall not be distributed as payment for attorneys’ fees or expenses incurred by private parties seeking distribution of the disgorged funds.).
The Courts and Congress are correct. Without the remedy of disgorgement, regulators would lose a “tool” necessary to deter wrongdoing and compensate victims of fraud. Disgorgement is most often imposed on individual fraudsters and investment advisers who prey on small, unsophisticated retail investors. These retail investors typically lack not only the capacity and resources to monitor their investments, but also to bring suit to recover their losses when they fall victim to fraud. The SEC thus serves an important role in bringing securities enforcement actions that private litigants will not fill. Accordingly, in many circumstances, disgorgement is the primary vehicle through which funds are returned to investors.
Every dollar that is lost to a fraudulent investment is a dollar that is not invested in a legitimate business or market. Requiring disgorgement of these dollars puts the funds back into the hands of investors for future investment. When disgorged funds cannot be returned to investors, they are used by the SEC in ways that benefit the markets and investors, including, compliance and examinations of registrants, investigations of fraudulent schemes, and investor education outreach. Disgorged funds, regardless of whether they flow to identifiable investors (as is typically the case) or the U.S. Treasury, thus further the purpose of the federal securities laws: protecting investors and maintaining market integrity. If the “tool” of disgorgement was suddenly unavailable, the hundreds of millions of dollars returned to fraud victims every year by the SEC would escheat to fraudsters at the direct expense of their victims, and wrongdoers would be emboldened to engage in misconduct in violation of the federal securities laws.
On October 12, 2018, Cohen Milstein, on behalf of the North American Securities Administrators Association as Amicus Curiae, submitted an amicus brief to the Supreme Court of the United States in support of the respondent in Francis V. Lorenzo v. Securities and Exchange Commission, No. 17-1077.
Introduction
The North American Securities Administrators Association, Inc. (“NASAA”) is the non-profit association devoted to protecting investors from fraud and abuse in the offer and sale of securities.
NASAA is submitting this amicus curiae brief to provide its views on this litigation and to rebut arguments made by Petitioner and his two amici in briefs filed August 27, 2018, the Brief of Amici Curiae Securities Law Professors in Support of Petitioner (hereinafter, the “Professors’ Brief”) and the Brief of Amici Curiae Securities Industry and Financial Markets Association and Chamber of Commerce of the United States of America Supporting Petitioner (hereinafter, the “SIFMA/Chamber Brief”).
Summary of Argument
Petitioner was found liable for making material misstatements and engaging in a fraudulent scheme in violation of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 thereunder by the U.S. Securities and Exchange Commission (the “SEC” or “Commission”). See In re Francis V. Lorenzo, SEC Release No. 34-74836 (Apr. 29, 2015). A majority of the judges on a three-judge panel of the Court of Appeals for the District of Columbia Circuit (the “Circuit Court”) found substantial evidence to support nearly all of the Commission’s findings. See Lorenzo v. SEC, 872 F.3d 578 (D.C. Cir. 2017). Arguing that the facts and law do not support the Circuit Court’s decision, Petitioner seeks to overturn it. Petitioner is wrong.
The Circuit Court properly found Petitioner liable for engaging in a fraudulent scheme within the meaning of Section 10(b) and Rules 10b-5(a) and (c). Petitioner’s act of knowingly sending two materially false and misleading emails to effectuate the sale of securities his brokerage firm was underwriting is precisely the sort of fraudulent scheme that Congress intended the securities laws to prevent and punish.
In addition, although not squarely before the Court, the Commission properly found in its underlying administrative court decision that Petitioner was also liable under Rule 10b-5(b) as the “maker” of the misstatements in his two emails pursuant to Janus Capital Grp. v. First Derivative Traders, 564 U.S. 135 (2011). Finally, given the findings of liability under Rule 10b-5, Petitioner’s liability under Section 17(a) of the Securities Act of 1933 logically follows as well.
In contrast, Petitioner and his amici ask this Court to significantly limit the scope of liability under Rules 10b-5(a) and (c). They assert this is necessary to maintain fidelity with the Court’s relevant precedents, to achieve consistency between Section10(b) and Section 17(a), and because the nation’s securities markets would be imperiled otherwise. None of these points are valid. The Circuit Court’s opinion affirming defendant’s culpability under Rules 10b-5(a) and (c) was correct and on all fours with this Court’s jurisprudence. This is aptly demonstrated by both the Circuit Court’s opinion and other relevant precedent cited below. Furthermore, Petitioner’s purported concern that the securities markets are or will be harmed by enforcing the securities laws is baseless. To the contrary; the securities laws, and Rules 10b-5(a) and (c) in particular, were intended first and foremost to protect investors and the securities markets generally from fraud.
On March 3, 2021, Cohen Milstein, on behalf of the North American Securities Administrators Association as Amici Curiae, submitted an amicus brief to the Supreme Court of the United States in support of respondents in Goldman Sachs Group, Inc., et al. v. Arkansas Teacher Retirement System, et al., No. 20-222.
Introduction
The North American Securities Administrators Association, Inc. (“NASAA”) is the non-profit association devoted to protecting investors from fraud and abuse in the offer and sale of securities.
NASAA and its members have an interest in this matter because this case could have important implications for the integrity and viability of private antifraud actions brought under the federal securities law and, potentially, under state securities laws as well. Meritorious private securities fraud suits, particularly class actions, are crucial to ensuring compliance with the securities laws. Such suits are an essential supplement to the criminal, civil, and administrative enforcement actions pursued by NASAA’s U.S. members and federal regulators for the benefit of all investors. NASAA submits this brief to support the continued vitality of the class action mechanism for seeking redress for harmed investors.
Summary of Argument
Petitioners argue that the court of appeals erred by holding that Petitioners had the burden of persuasion to rebut the Basic presumption, and by supposedly preventing Petitioners from “point[ing] to the generic nature of the alleged misstatements” in that endeavor. They seek fundamental changes to the operation of the Basic presumption that would practically eliminate defendants’ burden, and would do so precisely in the sorts of cases where the presumption matters most. Modifying the operation of the Basic presumption in the manner proposed by Petitioners is contrary to the remedial purposes of the federal securities laws, contravenes the continually expressed support of Congress and the Court for private class actions, would significantly undermine the ability of innocent investors to recover their losses, and would inevitably result in a loss of confidence in the U.S. markets.
As the Court recently affirmed in Lorenzo v. SEC, 139 S. Ct. 1094 (2019), the securities laws are intentionally robust and are designed to provide redress for all forms of securities fraud. Id. at 1104 (“Congress intended to root out all manner of fraud in the securities industry”). Private securities class actions are crucial to ensuring compliance with the securities laws and promoting investor confidence in the markets. They provide critical remedies to harmed investors and address the collective action problems and financial and informational disadvantages facing individual investors in litigation against corporate defendants. Private class actions are also a necessary and important supplement to government enforcement because state and federal regulators do not have sufficient resources to detect, investigate, prosecute, and remedy all securities law violations. It is in part for these reasons that courts should continue to apply the Basic presumption when a plaintiff establishes through economic evidence that the market was efficient unless the defendants can prove that there was no price impact.
Furthermore, false statements or omissions which artificially boost a stock’s price or maintain existing price inflation, are both instances of fraud. It does not matter whether the fraudulent statements “initially introduce” inflation into a defendant’s stock price, or instead “wrongfully prolong” the presence of that inflation. FindWhat Inv’r Grp. v. FindWhat.com, 658 F.3d 1282, 1316 (11th Cir. 2011). The latter situation is simply a “mirror image” of the former, but “in black ink, rather than red.” Schleicher v. Wendt, 618 F.3d 679, 683 (7th Cir. 2010). In either case, investors are harmed when the truth underlying the misrepresentation or omission comes to light. Accordingly, there is no reason to treat “theories of ‘inflation maintenance’ and ‘inflation introduction’” as “separate legal categories.” In re Vivendi, S.A. Securities Litigation, 838 F.3d 223, 259 (2d Cir. 2016).
In addition, the court of appeals below correctly observed that the presumption “would be of little value if defendants could overcome it by simply producing some evidence of a lack of price impact,” Pet. App. 75a (internal quotation marks omitted). Accordingly, the Court should continue to maintain the framework it established in Basic and reaffirmed recently in Halliburton II.
Finally, although evidence about the content and context of alleged misstatements, including characterizations purporting to show their so-called “general” or “generic” nature, may be relevant to whether there was price impact, such evidence is not conclusive. Judges thus should not be permitted to rely exclusively on such self-serving characterizations to “intuit” whether the alleged misstatements could or could not have had any price impact. Rather, it is essential that courts engage in fulsome analyses of the evidentiary record in order to determine the actual effect of the alleged fraud on the stock’s price.
Indeed, as the Court has recognized, “market efficiency is not a yes-or-no proposition,” and therefore “a public, material misrepresentation might not affect a stock’s price even in a generally efficient market.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 279 (2014) (“Halliburton II”). The inverse is also equally true; namely, that alleged misstatements that could be characterized or appear in a vacuum to be “general” or “generic” may impact price.
On December 20, 2023, Cohen Milstein filed an amicus curiae brief in support of respondents/plaintiffs with the United States Supreme Court on behalf of former commissioners and senior officials of the U.S. Securities and Exchange Commission who served under both Republican and Democratic presidents and went on to serve as leaders in industry and academia. Collectively, they have decades of experience in administering and enforcing the securities laws. Together, amici have a longstanding interest in the integrity of public markets and the deterrence of, and legal remedies for, materially misleading statements and omissions.
At issue is whether the U.S. Court of Appeals for the 2nd Circuit erred in holding that a failure to make a disclosure required under Item 303 of SEC Regulation S-K can support a private claim under Section 10(b) of the Securities Exchange Act of 1934, even in the absence of an otherwise misleading statement.
The amici argue violating Item 303 or other disclosure requirements can predicate a Rule 10b-5 claim and, therefore, the Court should affirm.
On March 6, 2023, Cohen Milstein’s Laura Posner and Carol V. Gilden; Columbia Law School’s John C. Coffee, Jr. and Joshua Mitts; and Labaton Sucharow’s Ira A. Schochet submitted a brief for amici curiae, distinguished law and business professors in support of respondent, before the Supreme Court.
Amici & Purpose of the Brief
Amici are law and business professors who focus their teaching and scholarship on federal securities law, the financial markets and accounting. They submit this brief to clarify the contours of the modern securities market for the Court’s benefit, and to explain how modern computing power and well established and accepted accounting methodologies make it feasible to trace shares, using the detailed, time-stamped transactional records that broker-dealers, exchanges, and the Financial Industry Regulatory Authority (“FINRA”) are required to maintain and which are obtainable through subpoenas in discovery. Amici also submit to explain how Petitioners’ position would effectively bar investors from tracing their shares, not only in direct listings but in all contexts that Congress intended for Section 11 to apply, thereby resulting in for Section 11 to apply, thereby resulting in a significant loss of investor protection.
Summary of Argument
We submit this amicus brief because we are concerned that this Court may be influenced by a myth: namely, that it is impossible to “trace” shares for purposes of establishing standing under Section 11 of the Securities Act of 1933.
Although many courts and practitioners may have sincerely believed that this barrier was insurmountable, their belief was at best “folk wisdom.” Even if it was reasonable once upon a time, this “impossibility myth” is now demonstrably false, as modern computing power makes it feasible to trace shares, using the detailed, time-stamped transactional records that broker-dealers, exchanges, and the Financial Industry Regulatory Authority (“FINRA”) are required to maintain (and are subject to subpoena in discovery).
Worse yet, the tracing requirement can be (and apparently is being) manipulated by companies, at the advice of skilled practitioners, to deliberately commingle registered and unregistered securities seeking to block tracing and thereby nullify Section 11. This should be unacceptable. If permitted, this tactic could bar Section 11 actions in both the initial public offering and seasoned offering contexts, thereby effectively precluding Section 11 litigation across the board.
Nonetheless, we do not challenge the legitimacy of the tracing requirement and believe that Judge Henry Friendly was correct in Barnes v. Osofsky in holding that Section 11 should apply only to the shares registered under the registration statement. In effect, we agree with Judge Friendly, but believe his approach needs to be updated in light of technological progress that can make tracing feasible and cost-efficient.
Nor do we argue that a statistical estimate of the likelihood that shares sold by plaintiffs were registered is an adequate substitute for proving actual tracing. Rather, we much more modestly assert that, as Petitioner’s own expert acknowledged in parallel litigation, it is possible to use accounting methods like first in-first out (FIFO) or last in-first out (LIFO) to identify in discovery the chain of title by which securities flow from one account to another. The best answer is to enable tracing (not assume its impossibility) through a modern procedure reflective of the technology available today.
Given the attempts by some to expand the tracing requirement so that it can block all Section 11 actions (as discussed below), we particularly fear that any decision in this case that uses the traditional, outdated language of tracing (or assumes its impossibility) will incentivize practices that deliberately seek to “commingle” some modest amount of unregistered securities with a much larger pool of registered securities in order to contaminate that larger pool. This approach, if tolerated, could bar standing across the board and imply the death of Section 11 litigation. Such an outcome would result in a significant loss in investor protection.
Accordingly, if this Court is dissatisfied with the decision of the Ninth Circuit below, it still would be premature and ill-advised to simply overturn that decision and order dismissal. Given the prevailing confusion over the feasibility of tracing, the better and traditional rule would be to remand the case to give plaintiffs an opportunity to demonstrate that they can trace the actual passage of the securities, using existing records, time-dated tracing, and conventional accounting rules.
Such a showing should not only enable respondents to demonstrate their own standing as the holders of registered shares, but also would chart a clear path for securities litigation for the future. Any other outcome will preserve a myth that invites exploitation and will eventually embarrass courts in the future.
Ultimately, if a standing issue can be simply resolved (and not cynically exploited), it benefits all to resolve it efficiently so that the parties can proceed at low cost to the real merits of the case.
In August 2021, the Government of Mexico brought a landmark case against Smith & Wesson Brands and other major U.S. gun manufacturers. The complaint alleged that Mexico and its citizens have been “victimized by a deadly flood of military-style and other particularly lethal guns that flows from the U.S. across the border, into criminal hands in Mexico” and that this harm was the “foreseeable result” of defendants’ actions and business practices. The Government of Mexico contended that this conduct violated state tort law and consumer protection statutes.
After the district court dismissed Mexico’s complaint in September 2022, Mexico appealed this decision to the United States Court of Appeals for the First Circuit. At that time, Cohen Milstein filed an amicus curiae brief in support of Mexico’s appeal before the First Circuit on behalf of senior law enforcement officers and national experts on transnational crime.
On January 26, 2024, the First Circuit reversed the lower court’s dismissal, agreeing with Mexico that its claims should proceed. However, Smith & Wesson subsequently petitioned the Supreme Court of the United States to review the First Circuit’s decision. The Court granted certiorari. On January 17, 2025, Cohen Milstein filed a second amicus curiae brief – this time before the Supreme Court – on behalf of an expanded list of amici.
The Supreme Court will hear arguments on March 4, 2025. The two following questions will be addressed:
- Whether the production and sale of firearms in the United States amounts to “aiding and abetting” illegal firearms trafficking because firearms companies allegedly know that some of their products are unlawfully trafficked.
- Whether the production and sale of firearms in the United States is the proximate cause of alleged injuries to the Mexican government stemming from violence committed by drug cartels in Mexico; and
Background of Amici & Their Argument
Amici are life-long law enforcement officers and national experts on transnational crime. They include the former head of the Mexico office of the Bureau of Alcohol, Tobacco, Firearms & Explosives; the only Senate-confirmed commissioner of U.S. Customs and Border Protection; the former chief of the U.S. Capitol Police, the former chief of the Aurora Police Department and the Miami Beach Police Department; the former assistant chief of the Seattle Police Department; and the current co-director of the Policy, Security Technology, and Private Security Research and Policy Institute.
In their many years of service to the United States, Amici were responsible for understanding, identifying, and preventing crime perpetrated by transnational criminal organizations. As a result, they have an interest in this case because U.S. gun manufacturers’ practices empower transnational criminal organizations, causing tremendous violence and harm on both sides of the border, including intimidating and murdering Mexican law enforcement officers and fueling the American fentanyl epidemic.
U.S. gun manufacturers’ sales and manufacturing practices arm the transnational criminal organizations engaged in a deadly war over lucrative drug trafficking routes. Access to American-made firearms flowing across the U.S.- Mexico border at ever-increasing rates empowers these cartels. In turn, they use their power to unleash havoc in Mexico and the United States.
This status quo is not inevitable. U.S. gun manufacturers have long been aware that their practices put weapons in the hands of smugglers who traffic those weapons across the border to Mexican cartels. Given the unending supply of individuals who are either willing or forced to engage in trafficking, attempting to halt the supply of weapons at the border is not a solution. As a result, U.S. gun manufacturers are the point at which the flow of firearms into the illegal market must be stemmed. But these manufacturers have steadfastly maintained their dangerous sales and manufacturing practices despite decades of evidence and requests to change their ways.
U.S. gun manufacturers’ conduct has devastating effects on both sides of the border. Mexican cartels use their growing arsenal to terrorize the Mexican people, gain the upper hand against law enforcement, and dominate drug manufacturing and trafficking. With the firearms, Mexican cartels have taken over as the primary producer of fentanyl, a synthetic opioid that is now the leading cause of overdose deaths in the U.S. The ties between American guns, Mexican cartel power, and the fentanyl epidemic are clear and well-documented; indeed, numerous U.S. government agencies have identified American guns as a key catalyst of fentanyl trafficking by Mexican cartels. These ties strike at the heart of this case—a reality that Amici urged the Supreme Court to consider in reviewing the decision below.