Halliburton: Do Plaintiffs Have a Fix in Affiliated Ute?
Lane Powell Shareholder Claire Loebs Davis authored a February 13 Law360 article titled “Halliburton: Do Plaintiffs Have a Fix in Affiliated Ute?” In the article, Davis discussed the Security Exchange Commission’s Rule 10b-5(b) that is summarized as creating a cause of action for “false or misleading statements and omissions of material fact necessary to make statements made not misleading.” She discussed this rule as it relates to the possible consequences of the U.S. Supreme Court’s upcoming ruling in Halliburton Co. v. Erica P. John Fund, Inc (“Halliburton”). Some defense attorneys and legal commentators have put forward a theory that suggests plaintiffs’ attorneys could cast their claims as alleging only material omissions, rather than false or misleading statements, which would take advantage of the Supreme Court’s ruling in Affiliated Ute Citizens v. United States (“Affiliated Ute”). Davis states that the Affiliated Ute theory does not offer a straightforward solution for plaintiffs’ lawyers if the Halliburton court takes away the fraud-on-the-market presumption.
Thus, plaintiffs cannot simply recast their securities fraud allegations as “omissions,” as many commentators have suggested, and cause the parties to have to “litigate whether the crux of a case concerns affirmative misstatements, pure omissions, or both.” Plaintiffs may only state a claim under 10b-5(b) based on an affirmative misstatement — whether that affirmative statement was misleading because of what it said, or because of what it did not say.