The Supreme Court handed a partial victory to Salesforce in a case surrounding its communications product Slack Technologies by limiting the ability of shareholders to sue over misleading statements.
The justices unanimously set aside a lower court ruling that allowed a shareholder suit to move ahead. Republican-appointed Justice Neil Gorsuch authored the majority opinion, writing that federal securities law allows lawsuits over company registration statements only by people who hold shares issued under those statements.
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Justices took their first look at direct listings since the Securities and Exchange Commission authorized the practice in 2018. A direct listing represents an alternative to a transitional initial public offering, or IPO. The direct listing process allows companies to go public without selling shares through an IPO, allowing early investors to sell their registered and unregistered shares on a public exchange.
The suit in consideration was from Fiyyaz Pirani, alleging Slack's 2019 registration statement did not reveal the extent to which it would have to give credits to customers for service disruptions and claims the company violates Sections 11 and 12 of the Securities Act of 1933. The company was acquired by Salesforce in 2021 for $27.7 billion.
Pirani argued Slack made misleading statements about service outages and, additionally, the competition it faced from Teams, Microsoft's rival software.
Salesforce contended the plaintiff lacked legal standing to bring the case under the 1933 law because he can't show he purchased registered shares. The Supreme Court ruling leaves open the possibility Pirani can prove that at least some of the 250,000 shares he says he purchased were registered.
At least half of the 283 million shares that became available for sale as part of Slack's direct listing were exempt from registration under the SEC's 2018 rules. When Slack's stock price dropped, Pirani sued.
Language in the Securities Act allows lawsuits over registration statements by "any person acquiring such security." Gorsuch wrote that phrase "requires a plaintiff to plead and prove that he purchased shares traceable to the allegedly defective registration statement."
The justices left one aspect of the suit untouched, asking the U.S. Court of Appeals for the 9th Circuit to revisit its decision that allowed Pirani to move forward on a separate provision of the securities law covering prospectuses and oral communications.
On Thursday, the Supreme Court also dealt a blow to a labor union seeking to ward off a lawsuit alleging members caused at least $100,000 in damages when they engaged in a strike while leaving wet cement to spoil inside their trucks. The decision was 8-1 and authored by conservative Justice Amy Coney Barrett.
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In a separate case, it also unanimously revived a lawsuit claiming SuperValu and Safeway overcharged government healthcare programs for prescription drugs by hundreds of millions of dollars.
The Supreme Court still has 27 more cases to rule on ahead of the end of June, including major decisions on the fate of affirmative action, Biden's costly student debt relief plan, and a challenge that pits religious freedoms against Colorado's anti-discrimination law.