Before we get to the actual topic of this post, a quick follow-up to the previous one: the Deseret News reports that President Trump has interviewed Senator Mike Lee, so the possibility of a FRAND-friendly Supreme Court Justice is real (though other candidates have been interviewed as well).
Last week, an interesting class action complaint was brought against Qualcomm in the Northern District of California by a group of consumers, with the class being defined broadly enough to include any U.S. smartphone buyer. I've run a couple of online searches and found that there's a whole bunch of other class lawsuits pending against Qualcomm, and they're all about Broadcom's acquisition of Qualcomm, which couldn't materialize after a presidential veto.
Many complaints were filed by small firms, but I've also found some complaints that were filed by firms with a strong track recordin securities litigation. Here's a particularly well-crafted complaint by the Pomerantz firm, which a United States District Judge called "some of the best lawyers in the United States, if not in the world" and which recently achieved the largest securities class action settlement in a decade as Petrobras coughed up $3 billion (this post continues below the document):
18 06 26 Jadhav Complaint by Florian Mueller on Scribd
I've also uploaded another complaint filed in the Southern District of California and a March complaint filed with the Delaware Chancery Court to Scribd. The Delaware complaint argued that Qualcomm's directors made an end-run around Delaware corporate law by seeking a presidential veto against a vote on the composition of Qualcomm's board.
Qualcomm's directors and officers now have to defend themselves against accusations that they "defrauded" the market by not disclosing their company's secret request that the Committee on Foreign Investment in the United States (CFIUS) preclude Broadcom from acquiring Qualcomm (and, on the way to that destination, getting deal-friendly board members voted in). Failure to disclose material information of this kind can constitute securities fraud and give rise to insider-trading claims.
One doesn't have to be an expert in securities law to understand that Qualcomm's request for a presidential veto was very significant. However, the fact that something very significant wasn't disclosed isn't necessarily sufficient. As a patent litigation watcher I obviously find it inconsistent that a company would publish an infographic to announce and promote a patent infringement complaint, but would remain silent about its volunary request that the CFIUS initiate an investigation into Broadcom's unsolicited takeover bid. But that's just a personal opinion.
Qualcomm hasn't filed its answer to the complaints yet. It has merely sought an extension, especially since a number of parallel actions need to be consolidated.
The most interesting legal question will be whether Qualcomm's leadership--which was undoubtedly pursuing an agenda of entrenchment--had a stronger obligation to protect the confidentiality of its CFIUS request (in the interest of the United States) than to inform actual or prospective shareholders.
The website of the Department of the Treasury says the following:
"Confidentiality
In reviewing a transaction, CFIUS considers national security matters and commercially sensitive information provided by the parties. By law, information filed with CFIUS is subject to strong confidentiality requirements that prohibit disclosure to the public. Accordingly, CFIUS does not disclose whether parties to any transaction have filed notices with CFIUS, nor does CFIUS disclose the results of any review. When a transaction is referred to the President, however, the decision of the President is announced publicly."
None of that says that Qualcomm couldn't have told shareholders of the mere fact that it made a request for a CFIUS review (aiming to obtain, as Qualcomm did, a presidential veto). However, courts may still prioritize the national security interests of the United States over the obligation of publicly-traded companies to disclose certain material information.
In the further process, the parties will have to find apposite cases. Also, the United States' federal government might support Qualcomm on this one in case the Trump Administration feels that companies secretly raising national security concerns should not have to fear shareholder lawsuits.
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