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Key Points

• The 9th Circuit, disagreeing again with the 2nd, 3rd, 5th, 6th, and 11th Circuits, reaffirmed that claims under Section 14(e) of the Exchange Act do not require a showing of scienter.
• In the 9th Circuit’s view, because claims under Section 14(e) for misrepresentations in connection with tender offers require mere negligence, they are not subject to the PSLRA’s Section 4(b)(2) requiring a “strong inference” of scienter. This is true even if a plaintiff in a particular Section 14(e) case proceeds on the theory that a defendant gave a subjectively false opinion.
• In holding that the plaintiff nonetheless failed to state a claim, the 9th Circuit also reinforced that Rule 8’s lower pleading standard is not easily met.

Background

Grier v. Finjan Holdings, Inc. centers around a 2020 transaction in which asset manager Fortress Investment Group LLC acquired all shares of a publicly-traded cybersecurity company, Finjan Holdings, Inc., for a purchase price of $1.55 per share.

Two years before, in March 2018, Finjan’s board initiated a “strategic review process,” which included exploring opportunities to sell the company. Over the next several months, Finjan and an investment bank it had retained contacted various potential buyers, including Fortress as well as another company (described in the complaint and opinion as “Party B”). While Finjan allegedly initially received offers as high as $5.10 per share, negotiations stalled when Finjan’s stock price...

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