Featured Chrome Extensions:

Casey IRACs are produced by an AI that analyzes the opinion’s content to construct its analysis. While we strive for accuracy, the output may not be flawless. For a complete and precise understanding, please refer to the linked opinions above.

Keywords

liabilityclass action
plaintiffappealrespondent

Related Cases

South Carolina Nat. Bank v. Stone, 139 F.R.D. 325, Fed. Sec. L. Rep. P 96,228
View Case »
Vallabharpurapu v. Burger King Corp., 276 F.R.D. 611, 80 Fed.R.Serv.3d 1506
View Case »
Oetting v. Norton, 795 F.3d 886
View Case »
Nandorf, Inc. v. CNA Ins. Companies, 134 Ill.App.3d 134, 479 N.E.2d 988, 88 Ill.Dec. 968
View Case »
General Motors Corp. v. City of New York, 501 F.2d 639, 18 Fed.R.Serv.2d 1085, 1974-2 Trade Cases P 75,139
View Case »
Justia Law Link
LexisNexis Link
Westlaw Link
CourtListener Link
Oyez Link

Janus Capital Group, Inc. v. First Derivative Traders, 564 U.S. 135, 131 S.Ct. 2296, 180 L.Ed.2d 166, 79 USLW 4466, Fed. Sec. L. Rep. P 96,327, 11 Cal. Daily Op. Serv. 7203, 2011 Daily Journal D.A.R. 8634, 22 Fla. L. Weekly Fed. S 1124

Facts

Shareholders of Janus Capital Group filed a class action alleging that the firm and its subsidiary negotiated arrangements allowing market timing in mutual funds, contrary to statements made in the funds' prospectuses. The District Court dismissed the complaint, but the Fourth Circuit reversed, asserting that the companies made misleading statements. The Supreme Court was asked to determine whether Janus Capital Management could be held liable for these statements under SEC Rule 10b–5.

Respondent First Derivative Traders (First Derivative) represents a class of plaintiffs who owned JCG stock as of September 3, 2003. Its complaint asserts claims against JCG and JCM for violations of Rule 10b–5 and § 10(b) of the Securities Exchange Act of 1934.

Issue

Can Janus Capital Management be held liable in a private action under SEC Rule 10b–5 for false statements included in the prospectuses of Janus Investment Fund?

The specific legal question before us is whether Janus Management can be held responsible under the Rule for having 'ma[d]e' certain false statements about the Janus Fund's activities.

Rule

Under SEC Rule 10b–5, a person or entity can only be held liable for making false statements if they have ultimate authority over the content of those statements.

For Rule 10b–5 purposes, the maker of a statement is the person or entity with ultimate authority over the statement, including its content and whether and how to communicate it.

Analysis

The Supreme Court analyzed the relationship between Janus Capital Management and Janus Investment Fund, concluding that only the Fund had the ultimate authority over the prospectuses' content. Since Janus Capital Management did not 'make' the statements as defined by the Rule, it could not be held liable. The Court emphasized that merely assisting in the preparation of statements does not equate to making them.

The statements in the Janus Investment Fund prospectuses were made by Janus Investment Fund, not by JCM.

Conclusion

The Supreme Court reversed the Fourth Circuit's decision, ruling that Janus Capital Management could not be held liable under Rule 10b–5 because it did not make the false statements in the prospectuses.

Accordingly, First Derivative has not stated a claim against JCM under Rule 10b–5.

Who won?

Janus Capital Group, Inc. and Janus Capital Management LLC prevailed because the Supreme Court determined they did not make the false statements in question, thus absolving them of liability under Rule 10b–5.

The judgment of the United States Court of Appeals for the Fourth Circuit is reversed.

You must be