SODHA, ET AL. V. GOLUBOWSKI, ET AL.
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Case Summary
Disposition
Affirmed in Part
The Ninth Circuit reviewed the dismissal of investors’ Securities Act claims arising from Robinhood’s 2021 IPO. It vacated the dismissal of theories based on Section 11’s misleading-omission prong and Item 303 because the district court applied the First Circuit’s ‘extreme-departure’ test; adopting the Second Circuit view, the panel held that issuers must disclose all material interim information. It affirmed dismissal of claims premised on Item 105 risk-factor disclosures.
Circuit Split Identified
Legal Issue
Whether Sections 11 and 12 of the Securities Act impose a duty to disclose interim financial information whenever the information is material, or only when the interim results constitute an ‘extreme departure’ from prior periods.
Circuit Positions
Duty to disclose interim financial information exists whenever the omitted information is material; no additional ‘extreme-departure’ threshold.
Issuer must disclose interim results only when they reflect an ‘extreme departure’ from historical trends.
Conflict Summary
The Second and Ninth Circuits hold that, when a prior disclosure is rendered misleading by subsequent events, the duty to disclose coalesces with the ordinary materiality standard; the First Circuit applies an additional ‘extreme departure’ threshold, requiring disclosure only if interim results deviate dramatically from historical performance.