On Jan. 4, 2019, the U.S. Supreme Court granted certiorari in the matter, Emulex v. Varjabedian. A ruling by the Supreme Court will likely resolve a circuit split regarding the pleading standard for claims brought under Section 14(e) of the Securities Exchange Act of 1934 that was created by the U.S. Court of Appeals for the Ninth Circuit's decision in April 2018. In that decision, the Ninth Circuit departed from five other circuits, including the Third Circuit, and held that plaintiffs seeking to recover under Section 14(e) of the Exchange Act for alleged material misstatements or omissions in tender-offer filings must only prove negligence and not scienter.

Additionally, the Supreme Court could determine as a threshold matter whether a private right of action even exists under Section 14(e). If the Supreme Court decides that there is no private right of action under Section 14(e), then the issue regarding the state of mind required for Section 14(e) claims will become irrelevant.

Section 14(e) prohibits false statements and material omissions made in connection with a tender offer. Emulex arose from the merger of two technology companies—Emulex and Avago Technologies. On Feb. 25, 2015, the two companies issued a joint press release announcing that they had entered into a merger agreement. A subsidiary of Avago initiated a tender offer for Emulex's outstanding stock on April 7, 2015, pursuant to the merger agreement and offered to pay $8 per share. This price represented a 26.4 percent premium on Emulex's stock price one day before the merger had been announced. On the same day that the tender offer was initiated, Emulex filed a 48-page recommendation statement with the SEC that listed reasons for approving the merger and included a fairness opinion that Emulex had received from its financial adviser.