September 29, 2017

The U.S. Supreme Court's docket includes three cases that could go some way toward redefining the legal framework for the securities industry, including one that could change the way companies disclose potentially damaging information, another on lawsuit venues, and a third on whistleblower protections.

While none of those cases is expected to lead to blockbuster rulings, each could shape the way that companies, investors and regulators interact with each other. And one, Digital Realty Trust Inc. v. Somers, could lead to courts giving less deference to federal regulators' interpretations of statutes than they've enjoyed for decades if the newest member of the court, Justice Neil Gorsuch, is able to persuade his colleagues to make an expansive ruling.

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Leidos Inc. v. Indiana Public Retirement System

The Leidos case is expected to resolve a circuit split over when companies are required to disclose all "known trends and uncertainties" to investors.

The case, which the Supreme Court agreed to hear in March, asks when companies are required to report those uncertainties under Item 303 of the SEC's Regulation S-K. The Second Circuit ruled that a failure to comply with that part of the regulation can, under certain circumstances, give rise to claims under Section 10(b), an anti-fraud regulation.

The Ninth Circuit has ruled differently, engendering a split that the high court will weigh in on.

Attorneys for the plaintiffs bar say that a ruling for Leidos could eliminate a key tool in their kit when pursuing private securities fraud claims.

"Obviously it would mean that investors would have one less weapon in their arsenal," said Daniel Sommers, a partner with Cohen Milstein Sellers & Toll PLLC.