Greenwashing and Section 11: Why Current Securities Laws Are Ill-Equipped to Handle Environmental Claims

Section 11 of the Securities Act of 1933 imposes liability on issuers of securities for statements that are found to be materially misleading, which are statements containing the type of information a reasonable investor would find significant when making an investment decision. In conjunction with the rising salience of climate issues and concern about “greenwashing,” there has been a push by some investors to bring section 11 claims based on the professed, but ultimately unsuccessful, commitments of companies to combat climate change. However, these claims are unlikely to be successful in combatting greenwashing, as sustainability issues are not normally the sort of information that courts presume investors consider material. In this Contribution, Christopher Menendez (‘23) argues that section 11 is ill-suited to address climate-based misstatements and encourages the adoption of rules the Securities and Exchange Commission has recently proposed to more effectively cover climate disclosures.

Applicability of the PSLRA Automatic Discovery Stay in State Courts

The Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 77z-1(b)(1), provides that discovery should be automatically stayed in Securities Act actions at the motion to dismiss stage. Though Securities Act claims may be brought in either state or federal courts, courts are divided over whether the PSLRA discovery stay applies in both state and federal court or solely applies in federal court. This Contribution argues that the PSLRA discovery-stay provision should apply in any action under the Securities Act, regardless of venue.

Gatekeepers or Not Gatekeepers? A Simple, Coherent Approach to Assigning Underwriter Liability to Financial Advisors in Direct Listings

Section 11 of the Securities Act imposes liability for damage caused by untrue or misleading information in Resale Registration Statements on underwriters. The exact scope of the statutory definition of underwriter, particularly its category of “participants,” is subject to a circuit split. Thus, whether financial advisors in direct listings are liable is an open question. In this Contribution, Graham Ellis (’22) argues that the courts should not adopt a categorical rule of inclusion or exclusion related to financial advisor underwriter status, but instead, should formulate an ad hoc analysis that emphasizes Congress’s initial purpose of assigning liability to ‘gatekeepers’ in securities transactions. This test should inquire into whether the financial advisor to the transaction acted as a conduit between the issuing company and the investing public, and whether the financial advisor publicly vouched for the accuracy of the registration statement.

Determining the Scope of Primary Liability in Securities Fraud Litigation

For decades, the private right of action for securities fraud has been narrowed, both by Congress and in the courts. In this Contribution, Charles Bloom (’21) considers the extent to which the Supreme Court’s most recent decision in a securities fraud case reverses that trend. Ultimately, this Contribution will argue that the Court has permissibly expanded private liability for securities fraud, closing certain loopholes created by its earlier precedents.

Necessary or Sufficient? The Applicability of the Exchange Act to Domestic Securities Transactions Under Morrison v. National Australia Bank Ltd.

Do Section 10(b) the Exchange Act and SEC Rule 10b-5 apply to securities transactions entered into in the United States where the security is not sold on a national exchange and is valued based on the price of a different security not sold within the United States? In this Contribution, William Bristow (’21) discusses the implications of Morrison v. National Australia Bank Ltd., where the Supreme Court held that the Exchange Act does not apply extraterritorially and thus only applies to domestic securities transactions. This Contribution argues that Morrison’s “transactional test” establishes a sufficient condition for the application of the Exchange Act, not a necessary condition.

The Future of Dead-Hand Proxy Puts in Delaware: Alive and Well or Dead on Arrival?

Does a board of directors' power to direct a corporation allow it to tie its own hands in the course of negotiating debt agreements? In this Contribution, Caitlin Millat ('18) analyzes the problem of dead-hand proxy puts under Delaware law, considering whether these provisions are ever allowed, and if they are, under what standard of scrutiny they should be reviewed. This contribution argues that dead-hand proxy put provisions should be evaluated under the business judgment rule, not the Unocal enhanced scrutiny standard.

Challenging USACafes Liability of a Fiduciary Entity’s Controllers

Should a board of directors of a parent company owe fiduciary duties not just to its shareholders, but also to the shareholders of companies involved in limited partnerships with one of its subsidiaries? In this Contribution, Natalie Noble (’18) discusses the implications of In re USACafes, L.P. Litigation, in which the Delaware Chancery Court held that the board of directors of a corporation engaged in a limited partnership owe fiduciary duties to the limited partnership and the limited partners. This Contribution argues that the USACafes doctrine should be abandoned because it discourages freedom of contract, dissuades investors from financing new enterprises, and contravenes bedrock doctrines of corporate law.