White Collar & Government Investigations Blog

Olshan litigation partner John Moon and Chair of Litigation Lori Marks-Esterman authored an article in Bloomberg Law (subscription required) entitled “Supreme Court SEC Disclosure Ruling Confusing for Courts, Markets.” In the article, John and Lori outline the implications of the SCOTUS ruling in Macquarie Infrastructure Corp. v. Moab Partners. The Court ruled that misleading “half-truths” in an MD&A are unlawful, but “pure omissions” of material information are not subject to shareholder suit. This ruling creates uncertain waters for public companies and investors to navigate. "The Supreme Court has diminished the critical Item 303 disclosures by immunizing noncompliance from private lawsuits,” they write. “In Macquarie, the court held that an issuer’s omission of a known material trend—despite the statutory and regulatory obligation to disclose it—can’t alone support a private claim for securities fraud under Section 10(b) and Rule 10b-5, the Exchange Act’s most sweeping anti-fraud tools." John and Lori explain, “Issuers who entirely omit a known trend or risk will be sheltered from private lawsuits. But the court was clear that private parties could still bring claims based on ‘misleading half-truths.’ Proving whether an Item 303 violation was a pure omission or a half-truth will vex courts in the years to come."