9th Circuit Tosses Investor Lawsuit Alleging Improper Lobbying of CFIUS to Block Takeover

The U.S. Court of Appeals for the Ninth Circuit affirmed a California district court ruling dismissing a case brought by investors in U.S. semiconductor developer Qualcomm over an alleged scheme by the American company to illegally block Singapore firm Broadcom's bid to take over Qualcomm. Investors had argued Qualcomm had improperly lobbied lawmakers and the Committee on Foreign Investment in the U.S. to block the acquisition.

Broadcom had in 2017 offered to acquire Qualcomm for a 30% premium over Qualcomm's share price at the time. Qualcomm rejected the offer. Broadcom persisted, writing to Qualcomm shareholders and pleading with them to vote to replace the board of directors. Around that time, CFIUS stepped in, holding that Broadcom's acquisition of Qualcomm represented a threat to national security. The effort ended in 2018 when President Donald Trump blocked Broadcom's bid for the American semiconductor giant.

Qualcomm investors sued in the U.S. District Court for the Southern District of California, arguing that Qualcomm engaged in a "secret scheme" to lobby lawmakers and CFIUS to block Broadcom's acquisition of the company. The case was dismissed. Following an appeal, the Ninth Circuit said that the district court made the right call. For starters, the appellate court disagreed with the investors' argument that Qualcomm downplayed the risk of oversight by CFIUS, as Qualcomm expressed legitimate concerns over CFIUS's perception of the deal. "Negotiating in good faith is not necessarily incompatible with having sincere regulatory, antitrust, and national security concerns," the court said.

The appellate court further said that the case could not proceed, since the investors did not adequately make claims as to Qualcomm's intent or any economic loss stemming from the company's wrongdoing. The court held that the investors failed to allege facts "from which a reasonable person could draw equally plausible opposing inferences of Qualcomm's intent" and that they "failed to adequately plead loss causation."