Last week, the U.S. Supreme Court heard oral argument in the legal case in which the claimants are challenging the constitutionality of President Trump’s tariffs. While we await the Court’s decision in the case, the tariffs remain in place, with consequences both for the global economy and for individual businesses. In the latest example of the ways in which these consequences can translate into tariff-related securities litigation, a plaintiff shareholder has sued used car retailer CarMax, alleging that the company tried to portray the quarterly sales surge that preceded the tariffs’ impact as being due to longer-term company advantages rather than tariff-motivated consumer behavior. A copy of the new CarMax complaint can be found here.

Background

CarMax is a national used car retailer. In June 2025, in releasing its fiscal first quarter 2026 results, the company characterized a spike in its unit sales during the quarter as being due to “the strengths of our earnings growth model, which is underpinned by our best-in-class omni channel experience, the diversity of our business and our sharp focus on execution.” The company described these factors as differentiators that will position the company to “continue to drive sales, gain market share, and deliver significant year-over-year earning growth for years to come.” The company’s statements also acknowledged the impact on sales from tariff anticipation.

On September 25, 2025, the company released its fiscal second quarter 2026 earnings report, saying that it had been a “challenging quarter.” Among other things, the company reported a decline in retail unit sales and comparable store unit sales. In commenting on the results, the company’s CEO acknowledged that the company had seen “an uptick in sales in March and April due to tariff speculation.” According to the subsequently filed securities lawsuit, the company’s share price declined over 20% on the news.

The Lawsuit

On November 3, 2025, a plaintiff shareholder filed a securities class action lawsuit in the District of Maryland against the company and certain of its executives. The complaint purports to be filed on behalf of investors who purchased the company’s securities between June 20, 2025 (when the company released its fiscal first quarter results) and September 25, 2025 (when the company released its fiscal second quarter results).

The complaint alleges that during the class period, the defendants “recklessly overstated CarMax’s prospects.” In reality, the complaint alleges, the defendants “were in no position to assure that there would be positive results for ‘years to come.’”  The Defendants, the complaint alleges, “knew or should have known” that “CarMax’s Q1 results were positive because of consumer speculation about tariffs (which motivated many to buy cars), and not a sign that CarMax’s business was positioned to deliver ‘significant year-over-year earnings growth for years to come.’”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the plaintiff class.

Discussion

The Trump Administration’s broadly comprehensive tariffs have had and are having myriad impacts on the global business environment. Among other things, the tariffs are, in at least some instances, affecting consumer behavior, a development that could be positive for some companies, even if just in the short run. The basic allegation in this lawsuit is that the defendants tried to characterize the short-run boost in unit sales resulting from consumer speculation about tariffs as indicative of the company’s supposed longer-term competitive advantages.

The bottom line is that the plaintiff alleges that the defendants misrepresented the impact the tariffs were having on the company’s sales. To that extent at least, this case surely is tariff-related.

This case is not the first securities lawsuit to be filed in relation to the current Presidential administration’s tariffs. As discussed here, in late August a plaintiff shareholder filed a securities lawsuit against the industrial materials company Dow, Inc., alleging that the defendants had soft-pedaled the tariffs likely impact on the company’s financial results.

Nor are the tariff-related claims limited just to securities lawsuits. As discussed here, in July 2025, the Trump Administration DOJ filed a False Claims Act case against a South Carolina company alleging that the company underreported the value of imported goods in an effort to evade tariffs imposed during the first Trump Administration.

As these securities suits and enforcement actions suggest, the potential tariff-related business impacts include, among other things, the risk of tariff-related claims. Nor does this risk go away even if the claimants prevail in the current in the current U.S. Supreme Court tariff case.

The current U.S. Supreme Court case relates only to the tariffs imposed in reliance on the International Emergency Economic Powers Act (IEEPA). Not all of the tariffs President Trump has imposed this year have been enacted in reliance on IEEPA. According to a source quoted in a recent Wall Street Journal article (here), only about $90 billion of the $195 billion the U.S. has collected in tariffs this year are attributable to tariffs imposed pursuant to IEEPA; the other amounts were collected on tariffs imposed in reliance on other sources of authority.

In other words, regardless of the outcome of the current U.S. Supreme Court case, there will still be a plethora of tariffs that businesses will have to contend with.

It seems likely that in the months ahead, as companies report disappointing financial results due to the impact of the tariffs, plaintiffs’ lawyers armed with the benefit of hindsight will comb through the companies’ prior statements, scrutinizing the companies’ statements (or omissions) about the impact the tariffs are or will be having on the company’s financial results. Even if what the plaintiffs’ lawyers come up with is an alleged attempt to try to characterize a tariff-related short-term boost in sales as representing some company advantage rather than tariff-induced buying behavior.

One final note. This lawsuit was filed on November 3, 2025. On November 6, 2025, the company released its preliminary outlook on its fiscal third quarter 2026 financial results. Among other things, the company announced that it anticipated that it would be reporting a decline in both retail unit sales and in same store unit sales for the quarter. The company also announced that its CEO was stepping down, and that the company had appointed an interim CEO.

This news from the company certainly casts interesting light on whether at the end of the company’s fiscal first quarter the company was “positioned to deliver significant year-over-year earnings growth for years to come.”