Recent Ninth Circuit Opinion Finds Failure of Company to Push Back on an SEC Comment as Evidence of Defendant's State of Mind for Purposes of Section 12(a)(2) Liability

In monitoring recently issued court opinions touching on securities law, we came across one that was particularly interesting because of its potential practical implications in the context of companies responding to SEC comment letters. Any company that has received an SEC staff comment letter related to its disclosures understands that there could be any number of reasons for the company’s decision on how to respond to a given SEC comment. However, the Ninth Circuit’s recent panel opinion in Pino v. Cardone Capital, LLC, suggests that a company’s lack of pushback to an SEC comment may be evidence of the company’s state of mind for purposes of evaluating potential liability under Section 12(a)(2) of the Securities Act.