Grier v. Finjan Holdings, Inc.

Proof of scienter is not required to prove Section 14(e) claims under the Securities Exchange Act of 1934, 15 U.S.C. § 78n(e). Varjabedian v. Emulex Corp., 888 F.3d 399, 407 (9th Cir. 2018).

Petitioner appealed after the dismissal of their securities fraud claim against Defendant for allegedly providing shareholders with revenue predictions and valuations that Defendant knew to be false in order to sell the company’s shares for a lower price. Petitioner assigned error to the lower court’s use of the strong inference standard for subjective falsity. Petitioner argued the lower court should have used the reasonable inference standard for the subjective falsity argument. In response, Defendant argued that the strong inference standard was appropriate, but even if it was not, Petitioner’s claims did not meet the reasonable inference standard. Proof of scienter is not required to prove Section 14(e) claims under the Securities Exchange Act of 1934, 15 U.S.C. § 78n(e). Varjabedian v. Emulex Corp., 888 F.3d 399, 407 (9th Cir. 2018). The Court reasoned that they had previously settled that the heightened strong inference standard did not apply to Section 14(e) claims in Varjabedian, so the district court should have used the reasonable inference standard. However, the Court found that the Petitioner did not even meet the reasonable inference standard, so the dismissal was proper. Affirmed.