Securities and Exchange Commission v. Rio Tinto PLC

Background

The Securities and Exchange Commission brought claims against Rio Tinto PLC, Rio Tinto Limited, Thomas Albanese, and Guy Robert Elliott under the Securities Act of 1933, the Securities Exchange Act of 1934, and related rules. In March 2019, the court granted in part and denied in part the defendants’ motion to dismiss. The SEC later sought reconsideration under Federal Rule of Civil Procedure 59(e) and Local Civil Rule 6.3. In March 2021, the court denied that motion.

The SEC then moved to certify one issue from the March 2021 order for interlocutory appeal. An interlocutory appeal is an appeal before the district court case has ended. The SEC alternatively asked the court to enter partial final judgment. The issue concerned the scope of scheme liability under Rule 10b-5(a) and (c) and Section 17(a)(1) and (3), including whether alleged misstatements alone could support those claims. The court’s March 2021 order had held that misstatements alone could not trigger scheme liability and had dismissed several SEC claims.

Legal standard

Under 28 U.S.C. § 1292(b), a district court may certify an order for interlocutory appeal if three conditions are met: the order involves a controlling question of law, there is substantial ground for disagreement about that question, and an immediate appeal may materially advance the end of the litigation. Interlocutory appeals are generally disfavored and are reserved for exceptional circumstances.

Court’s analysis

The court found a controlling legal question because reversing the March 2021 order could significantly affect how the case proceeded and could restore several dismissed claims. The court also found substantial disagreement about the issue. It noted that courts had differed on whether some misstatements could be actionable under Rule 10b-5(a) and (c), and that the Second Circuit had not squarely addressed the scope of the Supreme Court’s decision in Lorenzo v. SEC.

The court further found that an immediate appeal could materially advance the litigation. If the Second Circuit reversed the March 2021 order and found additional allegations actionable, the parties could resolve all actionable claims in one trial rather than risk a second trial after an appeal following the first trial. The court also stated that appellate guidance could reduce legal uncertainty and affect the parties’ settlement positions.

Disposition

The court granted the SEC’s motion for certification of an interlocutory appeal, denied the motion as to entry of partial final judgment, and certified the March 2021 order for interlocutory appeal. The SEC had ten days from entry of this order to apply to the Second Circuit for permission to proceed with the appeal. The Clerk of Court was directed to terminate the motion at ECF No. 218.