Justice Sonia Sotomayor

On April 12, 2023, in a short, unanimous opinion written by Justice Sonja Sotomayor, the U.S. Supreme Court held that a failure to disclose information required under Item 303 of Regulation S-K is, standing alone, not an actionable omission under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Supreme Court said that in the absence of affirmative statement that is rendered misleading by the omission, an Item 303 violation alone is not sufficient to state a claim under Rule 10b-5. As the Supreme Court opinion put it in summarizing its decision, “pure omissions are not actionable under Rule 10b–5.” The Court’s opinion in Macquarie Infrastructure Corp. v. Moab Partners L.P. can be found here.


Macquarie Infrastructure Corporation (MIC) operates several global infrastructure businesses, one of which is International-Matex Tank Terminals (IMTT). As much as 40% of IMTT’s business involved storing “6-Oil,” a high-sulfur fuel. In October 2008, the International Maritime Organization (IMO) announced new regulations that, effective January 2020, would eliminate the use of 6-Oil in global shipping.

The underling complaint alleges that before the effective date of new IMO regulations, MIC materially misled investors about the impact of the eventual elimination of 6-Oil. The plaintiffs allege that company concealed from investors the company’s exposure to IMO’s impact. The “truth” emerged, the plaintiffs allege, in February 2018, when the company announced it was cutting its quarterly dividend to reflect IMTT’s declining performance, which resulted in part from a number of customers terminating 6-Oil contracts.

In a consolidated and amended complaint, the plaintiffs presented six difference securities law claims based on MIC’s alleged misrepresentations and omissions regarding IMTT’s 6-Oil exposure. The amended complaint contains allegation based both on Securities Act of 1933 and the Securities Act of 1934. In their ’34 claims under Section 10(b) and Rule 10b-5, the plaintiffs alleged that defendants’ “half-truths” and failure to disclose material information required by Item 303 deceived investors.

The defendants moved to dismiss the amended complaint. The district court granted the defendants’ motion to dismiss. In particular, the district court held that the plaintiffs had failed to allege a violation of Item 303 or that the omission was material. The Second Circuit reversed in part the district court’s ruling, holding with respect to the Item 303 claim that, under the Second Circuit’s own authority, an omission of information required by Item 303, standing alone, and even in the absence of an affirmative statement that the omission rendered misleading, could be actionable under Rule 10b-5.

The defendants sought a writ of certiorari from U.S. Supreme Court, arguing that the Second Circuit’s holding about Item 303 omissions conflicted with contrary holdings by the Ninth Circuit, which has held that Item 303 does not create a duty to disclose under Section 10(b). The Ninth, Eleventh, and Third Circuits have held that “pure omissions cases” are not actionable. The U.S. Supreme Court granted the writ of certiorari.

Item 303 of Reg. S-K states in pertinent part that in its periodic reports to the SEC, a company is to “[d]escribe any known trends or uncertainties that have had or that the registrant reasonably expects will have a materially favorable or unfavorable impact” on the company.

The April 12, 2024, Opinion

In a brief opinion written by Justice Sonia Sotomayor for a unanimous nine-judge panel, the U.S. Supreme Court reversed the Second Circuit, holding that an omission of information required by Item 303 does not by itself give rise to liability under Section 10(b), at least in the absence of any affirmative statement that the omission rendered misleading.

Rule 10b-5 prohibits omitting a material fact necessary “to make the statements made . . . not misleading.” The question the court addressed in this case is whether this prohibition extends to “pure omissions” – a pure omission occurs when “a speaker says nothing, in circumstances that do not give any special significance to that silence.” (The Court contrasted “pure omissions” with “half-truths” – representations that are “accurate as far as the truth goes, but that omit critical qualifying information.”) Rule 10b–5(b) reaches half-truths, not pure omissions, because the rule requires identifying affirmative assertions (i.e., “statements made”) before determining if other facts are needed to make those statements “not misleading.”

It is a long-established securities law principle that silence, absent a duty to disclose, is not misleading under Rule 10b–5.  A duty to disclose, however, does not automatically render silence misleading under Rule 10b–5.  The failure to disclose information required by Item 303 can support a Rule 10b–5 claim only if the omission renders affirmative statements made misleading.

The Court rejected the plaintiff’s argument that pure omissions (that is, silence) should give rise to liability, noting that the plaintiff’s argument would read the words “statements made” out of Rule 10b-5. The Court also rejected the plaintiff’s argument that denying liability for pure omissions would give reporting companies immunity any time they fraudulently omit information the SEC or Congress requires them to disclose. The Court said investors are still free to bring claims for half-truths and the SEC is still free to bring enforcement actions for violations of its rules.


This case had the potential to be significant holding that could affect many liability actions under the U.S. securities laws; if the Court had ruled in favor the plaintiffs and held that pure omissions cases were actionable, it could have significantly affected many cases and indeed could have perhaps encouraged many more cases to be filed. The implications of the case, had the court ruled in the plaintiffs’ favor, could have been particularly significant SEC’s significant recent changes to Reg. S-K, including for example with respect to cyber security disclosure.

As it has turned out, however, with the Court rejecting the possibilities that the plaintiffs urged the court to take up, the case likely will have a more modest impact. At a practical level, the court’s opinion rejecting plaintiffs’ attempt to rely on Item 303 is unlikely to reduce the number of securities cases filed. While plaintiffs’ lawyers frequently include Item 303 omission allegations in securities complaints, their complaints rarely allege only Item 303 omissions (indeed, the complaint in this case alleged multiple violations of which the alleged Item 303 omissions were only one).

The likeliest impact is that the decision in this case will cause plaintiffs’ lawyers to alter the way they plead Item 303 allegations – plaintiffs’ lawyers are likely to replead Item 303 omissions cases as “misleading statement” cases. During oral argument in this case, Justice Kagan pointed out that if a reporting company’s MD&A “lists three trends, but it doesn’t list a fourth that’s actually much more consequential” that “cuts in the opposite direction,” a securities plaintiff may have satisfied its Rule 10b-5 pleading requirement even without relying on Item 303.

It should be noted that this case is far from over. The plaintiff’s Item 303 allegations were only one set of allegations raised in the complaint. In a final footnote, Justice Sotomayor noted that in the course of the Supreme Court’s consideration of this case, the parties had spilled “much ink” in disputing whether the case before the Court was about half-truth allegations as well as about pure omissions allegations. In the footnote, Justice Sotomayor emphasized that the Court was only addressing the pure omissions issue, and that it expresses no opinion as to issues that were not raised, such as what constitutes “statement made” when a statement is alleged to be misleading as a half-truth.

For those who may be wondering what exactly a “half-truth” might be and how it might differ from a “pure omission,” Justice Sotomayor provides an example in her opinion: “the difference between a pure omission and a half-truth is the difference between a child not telling his parents he ate a whole cake and telling them he had dessert.”