Macquarie Infrastructure Corp. v. Moab Partners, L.P.

Questions presented

SCOTUS records, cert granted 29 Sep 2023

Section l0(b) of the Securities Exchange Act of 1934 prohibits deception in connection with the purchase or sale of securities. To that end, SEC Rule l0b-5 declares it unlawful to make an untrue statement or omit a material fact "necessary" to make an affirmative statement "not misleading." 17 C.F.R. § 240.10b-5(b). A violation of this requirement can give rise to a private claim-a judicially implied private right of action that this Court has construed narrowly. Item 303 of SEC Regulation S-K calls for additional disclosures under a different standard. Item 303 is an administrative rule that requires a company to disclose known trends or uncertainties that are likely to have a material impact on its financial position, regardless of whether the company had made any statements that would otherwise be misleading. Against this backdrop, this case presents the following question: Whether the Second Circuit erred in holding-in conflict with the Third, Ninth, and Eleventh Circuits- that a failure to make a disclosure required under Item 303 can support a private claim under Section l0(b), even in the absence of an otherwise- misleading statement.

Opinion summary

Etalia.ai summary of the majority opinion

The US Supreme Court case involved Macquarie Infrastructure Corp. and Moab Partners, L.P., focusing on allegations of securities fraud under the Securities Exchange Act of 1934. The central issue was whether Macquarie had misled investors by failing to disclose material information that could have influenced investment decisions. Moab Partners argued that Macquarie's omissions regarding its financial health and operational challenges constituted a violation of federal securities laws, leading to significant investor losses when the truth emerged. The court examined whether the alleged omissions were indeed material and if they met the standard for scienter—intent or knowledge of wrongdoing required in such cases. Ultimately, the court ruled in favor of Macquarie Infrastructure Corp., finding insufficient evidence to prove intentional deception or reckless disregard for truthfulness necessary for establishing liability under Rule 10b-5.