The Janus decision holds that for purposes of primary securities fraud liability under Section 10(b) and Rule 10b-5, the “maker” of a statement is the person or entity with “ultimate authority” over the statement. Practicioners have begun to debate over the significance of that holding, including in two recent New York Law Journal columns.
(1) In “Janus Capital and Underwriter Liability Under Section 10(b) and Rule 10b-5” (July 12 – subscrip. req’d), the authors note that pre-Janus there were conflicting lower court decisions over whether underwriters could have primary liability for misstatements in offering documents. The Janus decision, however, “undercut[s] any private right of action as against underwriters” because “the ultimate decision as to whether an offering will proceed, whether to disseminate an offering document, and what the offering document will say rest with the issuer.”
(2) In “U.S. Supreme Court and Securities Litigation” (July 21 – regist. req’d), Professor John Coffee argues that the “ultimate authority” standard may not be as sweeping as it seems. The Janus decision also notes that “in the ordinary case, attribution within a statement or implicit from surrounding circumstances is strong evidence that a statement is made by, and only by, the party to whom it is attributed.” According to Coffee, this language suggests that “implicit attribution” is sufficient to find someone has primary liability for a false statement. Relying on this part of Janus creates another conundrum, however, because it “suggest[s] that the attributed statement creates liability ‘only’ for the person quoted and not the issuer that may knowingly incorporate his false statement.”