(Bloomberg) -- US Supreme Court justices hinted at a narrow ruling in a case involving Salesforce Inc.’s Slack unit as they considered restricting shareholder suits over company statements issued as part of a direct listing.
Two potentially pivotal justices, Brett Kavanaugh and Neil Gorsuch, voiced interest in kicking part of the case back to a federal appeals court rather than issuing a definitive ruling.
The justices are considering a suit by Fiyyaz Pirani, who contends a 2019 Slack registration statement failed to disclose the extent to which the company would have to provide credits to customers over service disruptions. Salesforce acquired Slack in 2021.
Salesforce contends Pirani lacks legal standing to sue under Sections 11 and 12 of the 1933 Securities Act because he bought unregistered shares, rather than the shares registered under the allegedly misleading statement. A federal appeals court let the suit go forward.
Kavanaugh and Gorsuch both suggested they might side with Slack on Section 11 but return the case to the appeals court to revisit Section 12. Kavanaugh said he was “worried about making a mistake” given that neither the lower courts nor the Securities and Exchange Commission had extensively analyzed the Section 12 issue.
Section 11 centers on misleading registration statements, while Section 12 concerns prospectuses and oral communications.
Slack’s registration statement covered 118 million of the 283 million shares that became eligible for sale on the market. The other 165 million shares were exempt from registration under an SEC rule.
The case is Slack Technologies v. Pirani, 22-200.
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