Latest Case: Grigsby v. BofI Holding, Inc. (Securities Law)

What Is a Seizure, and What Is a Holding? The Court Hears Argument in Torres v. Madrid

SHERRY F. COLB

Cornell law professor Sherry F. Colb comments on two particular aspects of a case in which the U.S. Supreme Court heard oral argument last month, Torres v. Madrid. First, Colb discusses the distinction, for Fourth Amendment purposes, between touching someone directly with one’s hands and touching someone indirectly using an inanimate object. Second, she explains the difference between holding and dicta in a court opinion. Using these two points as illustrations, Colb shows how flexible the Constitution can be, lending itself to very different interpretations.

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Grigsby v. BofI Holding, Inc.

Docket: 19-55042

Opinion Date: November 3, 2020

Judge: Morgan Christen

Areas of Law: Securities Law

Plaintiffs, who represent a putative shareholder class, filed suit alleging that BofI and its senior executives violated sections 10(b) and 20(a) of the Securities Exchange Act by denying that BofI was the subject of a money laundering investigation. The complaint also alleged that BofI falsely stated that a whistleblower's separate allegations that BofI made undisclosed loans to criminals were "disconnected from the reality of BofI's highly compliant and top-performing business." The panel held that plaintiffs may rely on a corrective disclosure derived from a Freedom of Information Act (FOIA) response by plausibly alleging that the FOIA information had not been previously disclosed. If a plaintiff relies on information obtained via a FOIA request, the pleading burden to allege loss causation is no different from the pleading burden for other types of corrective disclosures. Therefore, the panel reversed the district court's loss causation ruling to the extent it deemed information obtained via a FOIA request to be publicly available prior to its disclosure. The panel also held that the district court correctly ruled that the Seeking Alpha article at issue did not constitute a corrective disclosure, in part because it was written by an anonymous short-seller with no expertise beyond that of a typical market participant who based the article solely on information found in public sources. Accordingly, the panel affirmed in part, reversed in part, and remanded.