On August 19, 2024, the United States Court of Appeals for the Second Circuit dismissed, on remand from the United States Supreme Court, putative class action claims brought under Section 10(b) of the Securities Exchange Act of 1934 because they were based on a "pure omissions" theory. Moab Partners, L.P., v. Macquarie Infrastructure Corp., No. 21-2524, 2024 WL 3867669 (2d Cir. Aug. 19, 2024). As addressed in our prior post, the Supreme Court held that, contrary to prior authority in the Second Circuit, Section 10(b) and Rule 10b-5 promulgated thereunder do not impose an affirmative duty to disclose information but rather only require information to be disclosed if necessary to make other statements clear and complete.
The case involves whether a company operating a portfolio of infrastructure‑related businesses needed to disclose that a proposed regulation by a United Nations agency would negatively impact the company's subsidiary by restricting the use of a particular fuel oil. Plaintiffs contended that disclosure was required under Item 303 of Regulation S-K (the "pure omissions" theory) and also that disclosure was required after the company chose to make general statements regarding "changes in government regulations" and "capital expenditures" related to repurposing oil tanks (the "half-truths" theory). The Second Circuit originally held that the allegation based on a "pure omissions" theory could support a claim under Rule 10b-5, and it also declined to dismiss certain other Exchange Act claims—including those based on the "half-truths" theory—and claims under the Securities Act of 1933.
On remand from the Supreme Court, the Second Circuit invited the parties to submit supplemental briefing and then dismissed the Rule 10b-5 claim brought under the "pure omissions" theory, while concluding that the Supreme Court's decision did not otherwise disturb the prior decision holding that plaintiffs had adequately alleged their various other claims.
Moab Partners, L.P., v. Macquarie Infrastructure Corp
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