The US Supreme Court agreed to hear an appeal by
The justices said they will review a federal appeals court decision allowing a suit by Fiyyaz Pirani, who contends a 2019 Slack registration statement failed to disclose extent to which the company would have to provide credits to customers over service disruptions. Salesforce acquired Slack in 2021.
Salesforce argues that Pirani lacks legal standing to sue under Sections 11 and 12 of the 1933 Securities Act because he bought unregistered shares, rather than the shares registered under the allegedly misleading statement.
In seeking to overturn the ruling by the San Francisco-based 9th US Circuit Court of Appeals, Salesforce and its allies say courts traditionally require investors to “trace” their shares to the allegedly misleading registration statement.
The 9th Circuit ruling “will engender widespread uncertainty in capital markets because of the potential for dramatically more expansive Section 11 liability,” the US Chamber of Commerce and the Securities Industry and Financial Markets Association argued in support of the appeal.
The
In a brief supporting Pirani, 11 institutional investors said Salesforce and its allies are seeking to create a loophole that would let companies circumvent important safeguards.
“Allowing public offerings of securities without the risk of liability if investors are not provided the complete and accurate disclosures required under the act would chill investment, harming both the capital markets and investors,” the institutional investors argued.
Slack’s registration statement covered 118 million of the 283 million shares that became eligible for sale on the market. The other 165 million shares were exempt from registration under an SEC rule.
The case is Slack Technologies v. Pirani, 22-200.
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