Item 303

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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.Continue Reading U.S. Supreme Court: Item 303 Omissions Alone Not Actionable

Sarah Eichenberger
Jonathan Rotenberg

As I noted in a post at the time, last Fall, the U.S. Supreme Court in the Macquarie Infrastructure Corporation v. Moab Partners, L.P. case agreed to take up the question of whether whether the failure to make disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. In January, the Court heard oral argument in the case. In the following guest post, Sarah Eichenberger and Jonathan Rotenberg, Partners in the Securities Litigation practice at the Katten law firm, discuss the questions the Justices as asked the oral argument and assess the possible outcomes of the case, as well as the potential significance of the outcomes. I would like to thank Sarah and Jonathan for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah and Jonathan’s article.Continue Reading Guest Post: Supreme Court Considers Whether Pure Omissions Can Support Section 10(b) Liability

The U.S. Supreme Court has agreed to take up a case in which the court will be asked to address the recurring question of whether the failure to make disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. The Court apparently agreed to take up the case due to a split between the Circuits on the question of whether or not an Item 303 violation can be actionable. Because allegations based on alleged Item 303 violations are a frequent feature of securities class action complaints, the Court’s ruling in the case could potentially be significant. A copy of the Court’s September 29, 2023, order granting the petitioners’ petition for a writ of certiorari in the cases, Macquarie Infrastructure Corporation v. Moab Partners, L.P., can be found here.Continue Reading Supreme Court to Consider Whether Item 303 Violations are Actionable under Section 10(b)

A federal district judge has denied the defendants’ motion to dismiss in a securities class action lawsuit arising out of an electric utility’s eight-year involvement in a domestic bribery scheme. The court’s ruling has several interesting features relating to the securities litigation exposures from domestic corruption. Northern District of Illinois Judge Virginia M. Kendall’s April 21, 2021 opinion in the Exelon Corporation securities suit can be found here. An April 28, 2021 memo about the ruling from the Shearman & Sterling law firm can be found here.
Continue Reading Dismissal Denied in Domestic Corruption-Related Securities Suit

As I noted at the beginning of the U.S. Supreme Court’s current term in my summary of securities cases on the Court’s docket, one of the three key securities cases the court was to consider this term was Leidos, Inc. v. Indiana Public Retirement Systems. As discussed in greater detail here, this case, which was to be argued on November 6, 2017, was to address the recurring question of whether the failure to make disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. However, as a result of developments in the case, the case is now in “abeyance,” oral argument in the case has taken off the calendar, and the case ultimately may be removed from the court’s docket altogether.
Continue Reading Item 303 Disclosure Duty Case Off Supreme Court’s Docket Due to Reported Settlement

In a post earlier this month, I summarized the three securities law cases that the U.S. Supreme Court will hear its current term. Among the three cases on the Court’s docket is Leidos, Inc. v. Indiana Public Retirement System. As discussed in greater detail here, in Leidos, the Court will address the question whether or not the alleged failure to make a disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. In an interesting September 26, 2017 article entitled “Ask Me No Questions and I Will Tell You No Lies: The Insignificance of Leidos Before the United States Supreme Court” (here), Stanford Law Professor Joseph Grundfest argues that the Leidos case is “not a big deal” and is a “nothing-burger,” because, he contends, regardless of which way the Court comes out in the case, the outcome will make little practical difference.
Continue Reading Supreme Court Docket: Is the Leidos Case a “Nothing Burger”?

For almost the entire time that there have even been federal securities laws, the U.S. Supreme Court only rarely and infrequently agreed to take up cases arising securities cases. Until recently, years would pass between the times that securities cases appeared on the Supreme Court’s docket. For some reason, beginning around the middle of the last decade, the Court has become increasingly willing to take up securities cases. The U.S. Supreme Court’s 2017-2018 term, which commences on Monday, is no exception to this recent trend. There are three important securities cases on the Court’s docket for the upcoming term, and these cases could have, both individually and collectively, a significant impact on many securities law cases and on securities litigation in general.
Continue Reading Three Key Securities Law Cases on Supreme Court’s Docket as Term Begins

supreme courtThe U.S. Supreme Court has agreed to take up a case that will address a recurring issue that has arisen in the securities class action litigation arena – that is, whether or not the alleged failure to make a disclosure required by Item 303 of Reg. S-K is an actionable omission under Section 10(b) and Rule 10b-5. A circuit split has emerged on this issue, with the Second Circuit holding that Item 303 does create an actionable duty of disclosure, while the Ninth and Third Circuits have held that it does not. The Court’s grant of the writ of certiorari in the case of Leidos, Inc. v. Indiana Public Retirement System will afford the Court an opportunity to resolve the circuit split and to address the question of whether Item 303 creates an actionable disclosure duty. The U.S. Supreme Court’s March 27, 2017 order granting the writ of certiorari can be found here.
Continue Reading U.S. Supreme Court to Decide Whether Item 303 Creates Actionable Disclosure Duty