Corporate Governance

Nacchio and the Supreme Court: The Cert Petition (A Prediction)

By J. Robert Brown

Predicting what will happen to a cert petition is not always easy.  This case has a couple of things going for it.  Maureen Mahoney is well known to the justices and anything she authors will likely get a serious examination.  Likewise, the advocacy of Judge McConnell on the Tenth Circuit, a smart and conservative judge, will likewise cause some on the Court to pause over the case.  The closeness of the en banc (it was, after all, a 5-4 decision) also helps.  Finally, the case involves Rule 10b-5 and the Supreme Court expressed a willingness in Stoneridge to put an end to any more expansion of the antifraud provision.  The Court could decide that this case presents another opportunity to implement that agenda.

Weighing in against the granting of certiorari is that the case really doesn't raise particularly important legal issues.  It mostly turns on the facts.  The real question is not about the standard of materialty for internal projections but whether Nacchio had in his possession facts that indicated his projections to the market no longer had a reasonable basis.   A jury found that he did.  While it is possible to argue the facts either way (that the information was too uncertain, that the percentage of the shortfall was not enough to cross the materiality threshold), the jury found otherwise.  For the Supreme Court to come out in Nacchio's favor, it will have to find that the information known to Nacchio was immaterial as a matter of law.  This is unlikely.

Our prediction:  Cert denied.

Full post as published by The Race to the Bottom on March 30, 2009 (boomark / email).