Also known as: safe harbor · safe-harbor rule · safe-harbor · safe harbour rule
Written by attorneys · grounded in primary & secondary sources — see below
A rule that shields a party from liability or penalty when the party complies with specified conditions or procedures. Compliance supplies a complete defense or exemption even if the underlying conduct would otherwise violate the governing standard.
Solomon Silver, defense counsel in a high-profile trial, held a press conference describing evidence he planned to introduce. The state bar charged him under a publicity rule containing a vague safe harbor for statements made without elaboration. The court dismissed the charge because the safe harbor language failed to give fair notice of what elaboration was prohibited.
Simon Stern received material nonpublic information from a corporate insider and disclosed it to the SEC before trading. Because the disclosure satisfied the conditions of the safe harbor described in the Dirks footnote, Stern avoided liability under Rule 10b-5 even though he later sold the stock.
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Skyline Construction employees used a file-sharing service operated by Sentinel Security to distribute copyrighted blueprints. The service provider invoked the safe harbor for technologies capable of substantial noninfringing uses. The court held the provider not liable for contributory infringement.
Sydney Santos purchased shares after corporate officers made optimistic earnings projections. When the projections proved false, Santos sued under the securities laws. The company relied on the safe harbor for forward-looking statements accompanied by meaningful cautionary language, defeating the scienter allegation at the pleading stage.
Stonehaven Properties sold a vehicle whose paint defect caused minor economic loss. A jury awarded substantial punitive damages. The company invoked the safe harbor limiting punitive awards to a single-digit multiple of compensatory damages. The court reduced the award to satisfy the constitutional guidepost.
Sebastian Santos bought stock in a company whose public statements later proved misleading. Santos invoked the fraud-on-the-market presumption to prove reliance. The issuer failed to rebut the presumption with evidence that the statements did not affect the market price, so the safe harbor for price impact did not apply.
No. Safe harbor rules are not exclusive. Failure to comply does not raise a presumption that the underlying exemption or defense is unavailable, and pre-rule case law remains relevant.
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A vague safe harbor violates the First Amendment when it fails to give fair notice of prohibited conduct and creates a risk of discriminatory enforcement against largely political speech.
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Yes. Reasonable reliance on an official written statement from the responsible agency supplies a defense even if a court later invalidates the statement.
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…quoted ante , at 661, n. 21. This position is in apparent conflict with the statement in its brief that speaks favorably of a safe harbor rule under which an investor satisfies his obligation to disclose by reporting the information to the Commission and then waiting a set period before trading. Brief for Respondent 43-44. The…