The Ninth Circuit Court of Appeals on Monday dismissed an investor class action against Slack Technologies Inc., expanding on a 2023 U.S. Supreme Court ruling that questioned whether the plaintiffs could trace their stock purchases back to Slack’s direct listing.

A three-judge panel ruled that none of the investors’ claims were legally viable due to the way Slack went public, leaving plaintiff Fiyyaz Pirani without a path forward.

Supreme Court and Ninth Circuit Rulings

The U.S. Supreme Court had previously ruled that Slack’s direct listing structure complicated claims under Section 11 of the Securities Act of 1933, making it difficult for Pirani to prove that he bought newly issued shares rather than existing investor-held stock.

On Monday, the Ninth Circuit went further, ruling that Pirani’s Section 12 claims under the same law also failed. The court concluded that none of Pirani’s shares could be traced directly to Slack, since a direct listing allows both new and existing shareholders to sell shares simultaneously.

"Because the plaintiff previously conceded that he could not make the required showing of traceability, all of his claims failed," the Ninth Circuit wrote in its opinion, authored by Circuit Judge Eric Miller.

Background of the Case

Pirani accused Slack of misleading investors by failing to disclose potential financial liabilities tied to a service outage that occurred about a week after the company’s 2019 direct listing on the NYSE.

However, Slack argued that its direct listing structure made traditional securities claims inapplicable, as the plaintiff couldn’t prove whether he purchased shares issued by Slack itself or shares sold by early investors.

Legal Teams and Next Steps

The Ninth Circuit panel included Circuit Judge Sidney Thomas and Judge Jane Restani of the U.S. Court of International Trade, alongside Judge Miller.

Representation:

• Fiyyaz Pirani is represented by Russell & Woofter LLC and Bragar Eagel & Squire PC.
• Slack Technologies is represented by Gibson Dunn & Crutcher LLP.

This ruling marks a significant win for companies utilizing direct listings, reinforcing the traceability hurdle that investors must overcome in similar securities lawsuits.