Janus Capital Group, Inc. v. First Derivative Traders
564 U.S. 135
| SCOTUS | 2011Background
- JCG publicly funds Janus Investment Fund; JCM serves as its investment adviser and administrator while entities are legally separate.
- Prospectuses for Janus Fund claimed no market timing and stated policies to curb timing; statements attributed to the Fund, not JCM.
- New York AG alleged in 2003 that JCG/JCM secretly allowed market timing, triggering investor withdrawals and fund value decline.
- First Derivative sued for Rule 10b-5 and §10(b) claiming misstatements were made to induce investment and inflate stock price; asserted control-liability.
- District Court dismissed; Fourth Circuit reversed, holding potential misstatements could be attributed to JCG/JCM through their roles.
- Supreme Court granted certiorari to decide whether JCM could be liable under Rule 10b-5 for statements in the Fund’s prospectuses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who made the statements in the prospectuses? | First Derivative: JCM contributed to drafting; thus made statements. | JCM did not make; Janus Investment Fund made the statements. | JCM did not make the statements; Fund made them. |
| Does hosting prospectuses on a website make the host liable as the maker? | Hosting could be treated as making statements. | Hosting alone does not prove making; attribution remains with Fund. | Hosting on JCM’s site does not make JCM the maker. |
Key Cases Cited
- Central Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U.S. 164 (1994) (limits aiding-and-abetting liability in private 10b-5 actions)
- Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148 (2008) (limits liability for undisclosed acts not necessarily relied upon by investors)
- Herman & MacLean v. Huddleston, 459 U.S. 375 (1983) (primary liability of corporate officers who participate in preparing statements)
- Basic Inc. v. Levinson, 485 U.S. 224 (1988) (distinguishes public vs. private liability and reliance considerations)
- Anixter v. Home-Stake Production Co., 77 F.3d 1215 (10th Cir. 1996) (outside consultants may bear primary liability in some contexts)