Supreme Court Update

November 17, 2017

Last month, we previewed what looked to be a momentous term for the Supreme Court, highlighting three cases in particular. Recently, the Court granted permission for the Solicitor General to participate in oral argument in two of those cases: the whistleblower case Digital Realty Trust, Inc. v. Somers, and the Securities Act of 1933 (“Securities Act”) case Cyan, Inc. v. Beaver County Employees’ Retirement Fund.

The government’s amicus briefs show that the government is putting its support behind the whistleblowers and investors, though the support for the investors in Cyan is form over substance where, while agreeing with investors’ application of the Securities Litigation Uniform Standards Act (“SLUSA”), the government nonetheless notes that the ultimate result of removal sought by the petitioner can be achieved through other means.

In Digital Realty, the government asserted that the anti-retaliation provision for whistleblowers in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 protects whistleblowers making reports to the Securities and Exchange Commission (“SEC”), as well as those who report internally within their companies. The petitioner, Digital Realty, on the other hand, argued whistleblowers are only protected if they complain to the SEC.

Similarly, in Cyan, the government agreed with investors that SLUSA does not limit state courts’ jurisdiction over Securities Act claims. The government noted, however, that SLUSA authorizes removal of claims to federal court under a different provision of the law. The government argued that this other removal provision would give defendants the same protection the Cyan petitioners are seeking.

Oral argument for both matters is scheduled for November 28.

Of the three securities cases that we were keeping an eye on to see if the Court would take them up this term, the Court declined to hear two: Holtz v. JP Morgan Chase & Co. and Goldberg v. Bank of America Corp., the two SLUSA-related matters. The third, Lucia v. SEC, its petition is still under consideration. The case presents the question of whether the SEC’s administrative judges function as inferior officers that need to be appointed rather than hired.