Pirani v. Slack Technologies, Inc.

Background

Defendants moved to certify portions of the court’s April 21, 2020 order for interlocutory appeal. An interlocutory appeal is an appeal before the district court case is finished. The portions at issue held that Fiyyaz Pirani had adequately pleaded standing under Sections 11 and 12(a)(2) of the Securities Act of 1933, even though he did not, and could not, allege that he bought shares registered under and traceable to Slack’s registration statement.

The earlier order addressed Slack’s direct listing, in which registered and unregistered shares became publicly tradeable at the same time. The court had concluded that, in this setting, an investor could satisfy the Securities Act’s reference to “such security” by acquiring a security of the same nature as the security issued under the registration statement. The court applied the same reasoning to standing under Section 12(a)(2).

Certification standard

Under 28 U.S.C. § 1292(b), a district court may certify an order for interlocutory appeal if it expressly finds that: (1) the order presents a controlling question of law; (2) there is substantial ground for disagreement about the answer; and (3) an immediate appeal may materially advance the end of the litigation. The court stated that this procedure is reserved for exceptional situations in which an appeal could avoid lengthy and expensive litigation.

The defendants argued that all three requirements were met. The court agreed. It found that the standing question was a controlling legal issue, and rejected the argument that the question was an unsuitable mixture of fact and law. The court said the relevant facts about Pirani’s purchases in the direct listing and his inability to trace the shares were undisputed, making the issue one the Ninth Circuit could decide without extensive review of the record.

The court also found substantial grounds for disagreement. It noted that no other court had addressed how Section 11 applies to a direct listing and that the earlier order’s broader interpretation of “such security” broke new ground. Finally, the court found that appellate review would promote efficiency: if the Ninth Circuit agreed with defendants that Pirani lacked standing, the case would be dismissed and the parties would avoid further litigation expenses.

Ruling

Judge Susan Illston granted defendants’ motion to certify the April 21, 2020 order for interlocutory appeal under 28 U.S.C. § 1292(b). She certified the portions of that order finding that the plaintiffs had standing to sue under Sections 11 and 12(a)(2) of the Securities Act of 1933. The order did not state that the Ninth Circuit had accepted the appeal. The court vacated the scheduled hearing on the motion, scheduled an initial case-management conference for August 14, 2020, and stated that it would vacate that conference and stay the action if the Ninth Circuit accepted the interlocutory appeal.