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The second analysis relevant to materiality goes beyond the association in principle of SCF with Shariah and its call to violence and asks whether there is enough evidence of an association in fact. In other words, is the connection between Shariah and terror and violence theoretical or is there admissible evidence of a relationship in fact. This analysis might be framed in the question: is the nexus between Shariah and terror and violence so contingent or speculative that it would render any theoretical association between Shariah and violence or the “call to violence” immaterial? This is another way of analyzing the argument often made against any association between Shariah or Islam and violence. In the context of Shariah, the argument is made that Shariah can be interpreted in peaceful ways or in violent ways and that those Shariah authorities who interpret Shariah violently and in ways that would shock the conscience of a reasonable U.S. investor (or in a lesser way, that might be simply material to the investor) are the extremists and represent such a small percentage of the recognized Shariah authorities that it would render any such theoretical or conceptual link between Shariah and violence against non-Muslims and non-Shariah-compliant Muslims so tenuous and attenuated as to be immaterial to a reasonable investor. In short, this is an argument that accepts that violence is associated in principle with Shariah,[187] but argues that the association in fact is trivial (or at least less than material) because it is not representative of Shariah as espoused by the vast majority of contemporary Shariah authorities.

While Coughlin’s investigation and documentation would demonstrate this argument to be lacking evidentiary credibility, the analysis in a courtroom would likely turn on an examination of the facts and the law. As the Court opined in TSC Industries, “[t]he issue of materiality may be characterized as a mixed question of law and fact, involving as it does the application of a legal standard to a particular set of facts.”[188] In addition to a simple factual showing that Islamic terrorists base their raison d’être for violence on the dictates of Shariah as expressed by the classical Shariah authorities and some contemporary ones, the fact question as presented might also be addressed by introducing evidence establishing what the contemporary Shariah authorities consider the purposes and authorized methods of Shariah to be. This question might be presented to a jury by introducing evidence (i) of the rulings of the contemporary Shariah authorities, (ii) of the rulings of classical Shariah authorities upon which the contemporary authorities have relied, and (iii) of Shariah in actu, which would include the brief on those Muslim-dominated regimes generally recognized as following Shariah, including their Shariah-based criminal codes and punishments and their track record for violations of the basic norms of the Law of Nations and human decency.[189]

The legal, in contrast to the purely factual, question presented by this second analysis will not be different in kind from the first analytical approach, which the reader recalls as the association in principle between Shariah, its call to violence, and SCF. In both, one must determine if the law requires disclosure of qualitatively material facts as opposed to strictly quantitatively material facts. Quantitative materiality requires companies only to disclose hard, empirical facts such as financial data and any criminal convictions of management personnel. Qualitative materiality requires a fuller disclosure of a whole range of behaviors that might be considered unethical or even illegal but which have not yet resulted in an actual conviction.[190]

While qualitative materiality is frowned upon by the courts and commentators because it renders the duty to disclose open to wholesale uncertainty about what must be disclosed in the first instance, the problem of disclosure for the Shariah-compliant financial institution is not circumscribed by this concern. Disclosure remains a significant legal issue for the company looking to promote its SCF business (or simply to disclose publicly the involvement in SCF) because of the difference between whether a duty to disclose exists in the first instance and what must be disclosed to make a partial disclosure not misleading to the reasonable investor.[191] Thus, to the extent a SCF business actively promotes its SCF business or includes SCF within the risk factors in its SEC filings, this disclosure opens the door to a full and accurate disclosure of all facts which a reasonable investor would find material. It hardly seems in doubt that a post-9/11 investor, in contemplating an investment in something represented as Shariah-compliant, would consider material any factual link between Shariah and the call for violence against non-Muslims and non-Shariah-compliant Muslims, or more specifically against the U.S. or U.S. interests abroad. Indeed, it would be improbable that a post 9-11 investor would not want to know what Shariah says about the Law of Jihad and the use of Shariah by Islamic terrorists even if the reporting company made no disclosure or representation about being Shariah-compliant. The fact of Shariah compliance would likely be sufficiently material for the duty of disclosure to exist independently of any partial representation.[192]

The confusion at a procedural level for the legal advisor attempting to weigh the materiality issue within the overall analysis of liability exposure might be the existence of counter factual claims suggesting that Shariah has a peaceful face in addition to its connection to Islamic terror. But these “counter-facts” would simply create a fact question. This suggests that a well-pled complaint alleging a sufficient nexus between SCF, Shariah, terror, and violence, would survive a motion for summary judgment. This seems especially true given the effectiveness of Shariah-inspired terrorists to convert calls for violence based upon Shariah into actual violence. Moreover, as this memorandum examines below the specific Shariah authorities and their organizational structures, the factual nexus between SCF, terror, and violence will become much clearer.

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