Supreme Court Declines to Hear Two Pension Fund Cases

Lower court rulings involving an automotive, mineworkers’ pensions maintained.

The US Supreme Court has declined to hear two cases involving pension funds: Toshiba Corp. v. Automotive Industries Pension Trust Fund, and First Solar Inc. v. Mineworkers’ Pension Scheme.

Toshiba Corp. v. Automotive Industries Pension Trust Fund centers on two conflicting rulings over whether the Securities Exchange Act applies, without exception, whenever a securities fraud claim is based on a transaction in the US.  The US Court of Appeals for the 9th Circuit has ruled that the Act applies without exception, even if it mainly involves foreign conduct. However, the US Court of Appeals for the 2nd Circuit has ruled that the act does not apply in certain circumstances.

The 9th Circuit, unlike the 2nd Circuit, held that the US Securities Exchange Act always applies to a securities fraud claim involving a domestic securities transaction, even if the claim is against a foreign issuer that did not participate in the transaction, has not entered the US securities markets, has committed the alleged fraud abroad, and is subject to ongoing oversight by foreign securities regulators.

When the Supreme Court asked for its views earlier this year, the US government recommended that the petition be denied, and told the high court that the lower court’s decision, which left open the possibility that the case could go forward, was correct, and that because there has not yet been a final judgment in the case it might not be necessary for the Supreme Court to weigh in.

The Supreme Court also declined to hear a case involving when stock loss causation lawsuits can be brought in First Solar Inc. v. Mineworkers’ Pension Scheme. At issue is whether a plaintiff may establish loss causation based on a decline in the market price of a security when the event or disclosure that triggered the decline did not reveal the fraud on which the plaintiff’s claim is based.

In 2012, investors sued First Solar, Inc., an Arizona-based company that makes solar-panel modules, alleging that it failed to disclose defects in its solar panels, and then misrepresented the effect of those defects. Under the Supreme Court’s cases, a plaintiff in a securities fraud case must show that the defendant’s fraud caused him to lose money. First Solar asked the court to decide whether the investors can make this showing when the event or disclosure that caused stock prices to go down did not itself reveal any fraud.

When the court sought out views on this case, the government also told the justices that the ruling by the US Court of Appeals for the 9th Circuit, which allows the case to move forward, is correct and does not conflict with the decisions of any other courts of appeals.


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