Cooley Team Secures Victory for Qualcomm in Securities Class Action

San Diego – February 11, 2022 – Cooley secured a victory for its longtime client Qualcomm, a San Diego-based technology company that specializes in semiconductors, in a securities class action that was filed by Broadcom in the US District Court for the Southern District of California. Partners Steven Strauss, Koji Fukumura and Peter Adams and associates Stephen Richards and Julie Veroff led the Cooley team representing Qualcomm. Fukumura argued both in district court and the US Court of Appeals for the Ninth Circuit appeal.

In 2017, Singapore-based Broadcom made an unsolicited offer to buy Qualcomm, which quickly rejected the offer because it undervalued the company and came with too much regulatory risk. Broadcom mounted a proxy fight to replace the entire Qualcomm board at an upcoming shareholder meeting. Consistent with its public stance on regulatory risk, Qualcomm asked the Committee on Foreign Investment in the United States in January 2018 to review Broadcom’s effort to seize control of the board.

Broadcom filed a putative securities fraud class action in June 2018, contending that Qualcomm’s statements about its willingness to negotiate with Broadcom and the regulatory risk involved in any potential deal were materially false or misleading because Qualcomm did not disclose that it had asked CFIUS to investigate Broadcom’s attempt to take over Qualcomm’s board.

Cooley filed a motion to dismiss, which was granted in March 2020. The judge held that Broadcom had failed to adequately plead two essential elements of a securities fraud claim. A second amended complaint was dismissed with prejudice by a second judge. Cooley continued to defend Qualcomm on appeal, where the team achieved a complete victory.

The Ninth Circuit confirmed that a lawful and appropriate notice to CFIUS cannot be transformed into securities fraud absent any sufficient pleading of falsity, scienter or loss causation. In so doing, the appellate court made clear that a company can simultaneously negotiate a deal in good faith and harbor genuine regulatory concerns about any ultimate deal reached by the parties.

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