Rock Products

APR 2018

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

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www.rockproducts.com ROCK products • April 2018 • 57 LAW develop "a reputation for attracting and countenancing worthless strike suits." While it is tempting to conclude that these decisions will result in the demise of the "transaction tax," logic suggests that will not be the case. Plaintiff firms do not go away, they adapt. And in this case, early indications are that adaptations will include: •  Dropping claims of a breach of fiduciary duty by board members and focusing exclusively on alleged disclosure deficiencies under the federal securities laws, thereby assuring access to potentially less skeptical federal judges, or in some cases, prompting SEC enforcement actions before SEC administrative law judges who are not bound by state or federal common law. • Bringing claims, when possible, in other states that have explicitly rejected the reasoning in the Delaware case, an option recently reinforced by the U.S. Supreme Court in a decision finding that state courts can continue to hear certain securities class actions brought under federal law. • Focusing on smaller transactions where it might be easier to identify material deficiencies in disclosure. In addition, as the SEC issues new pronouncements on disclo- sure topics, the issues covered are likely to become a popular basis for claims of inadequate disclosure. As an example, the SEC's articulated focus in 2016 on the inappropriate use of non-GAAP financial measures in public company disclosure was soon followed by the inclusion of claims in stockholder complaints that use of such non-GAAP financial measures in proxies was both material and misleading. SEC Guidance Recognizing the issue it had created, in late 2017 the SEC issued guidance limiting its objection to the disclosure of non-GAAP financial information when that disclosure merely reflects information provided to a company's financial advi- sor to facilitate the work of that advisor. The lesson from all of this is that every transaction in which a public company sells all or a meaningful portion of its business should be approached as though it will give rise to litigation. The processes and procedures that courts have historically reviewed and respected should be carefully followed. Disclosure should be accurate and complete. The announce- ment of every transaction should be preceded by appropriate litigation preparation. While litigation may nonetheless result, at least the company will be well positioned to resolve it quickly and the "transaction tax" will be minimized. Public companies should however find solace in the long-standing requirement that plaintiffs plead fraud alle- gations with specificity – a requirement that has proven to be a formidable opponent to the plaintiff 's bar, particularly in federal courts where plaintiffs must also establish fraud- ulent intent. MINING MARKETPLACE Resource Center RESOURCES.MININGMARKETPLACE.COM Download free case studies, white papers, presentations, business forecasts, and much more. All content designed to help mining, aggregates, concrete, and cement industry professionals do business better. Helping You Build Career Success

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