Case: 21-60626 Document: 486 Page: 1 Date Filed: 05/08/2024
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`
`BOYDEN GRAY PLLC
`801 17TH STREET NW, SUITE 350
`WASHINGTON, DC 20006
`(202) 955-0620
`
`May 8, 2024
`
`
`
`Honorable Lyle W. Cayce
`Clerk of the Court
`U.S. Court of Appeals for the Fifth Circuit
`600 S. Maestri Place
`
`
`
`New Orleans, LA 70130
`Re: Rule 28(j) Letter in Alliance for Fair Board Recruitment v.
`Securities and Exchange Commission, No. 21-60626
`Mr. Cayce:
`In Macquarie Infrastructure Corp. v. Moab Partners, L.P., 601 U.S.
`257 (2024) (Ex.A), the Supreme Court recently held that silence alone is
`not actionable as “misleading” under Rule 10b-5(b). Ex.A.1, 4–5, 7.
`Macquarie illustrates the coercive effect of Nasdaq’s board diversity rule,
`which requires issuers to meet race and sex quotas, or else publish an
`“explanation” for their failure to do so. AFBR.EnBanc.Br.3.
`Without Nasdaq’s rule, listed companies would have no affirmative
`obligation under the federal securities laws to make disclosures about the
`race and sex demographics of their boards—and Macquarie now confirms
`that companies can avoid liability by refusing to speak on those issues.
`Nasdaq’s rule, however, forces companies to publish explanatory
`statements—but only if the companies dare fall short of the prescribed
`diversity quotas. In other words, the rule ensures that companies that do
`not satisfy the quotas—and only those companies—face heightened
`litigation risk from having to make affirmative, explanatory disclosures.
`Companies that satisfy the quotas, however, need not provide any
`explanation and thus can take advantage of Macquarie’s safe harbor for
`silence.
`This is entirely by design. The rational response is for boards and
`shareholders to meet the quotas (and minimize their companies’
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`Case: 21-60626 Document: 486 Page: 2 Date Filed: 05/08/2024
`Page 2
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`securities-litigation risk) by making board decisions based on race and
`sex, and thus avoid having to make affirmative statements to explain
`their “failure.” This confirms, yet again, that the diversity rule inevitably
`encourages race- and sex-based discrimination that otherwise would not
`have occurred, as Petitioner argues (and Nasdaq has admitted all along).
`AFBR.EnBanc.Br.12–14.
`
`Respectfully,
`/S/ JONATHAN BERRY
`Counsel of Record for Petitioner
`Alliance for Fair Board Recruitment
`BOYDEN GRAY PLLC
`801 17th Street NW, Suite 350
`Washington, DC 20006
`(202) 955-0620
`jberry@boydengray.com
`
`cc: All Counsel
`
`BOYDEN GRAY PLLC
`801 17TH STREET NW, SUITE 350 ∙ WASHINGTON, DC 20006
`
`
`
`

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`Case: 21-60626 Document: 486 Page: 3 Date Filed: 05/08/2024
`Case: 21-60626
`Document:486
`Page:3 Date Filed: 05/08/2024
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`Ex. A
`Ex. A
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`Case: 21-60626 Document: 486 Page: 4 Date Filed: 05/08/2024
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` Cite as: 601 U. S. ____ (2024)
`
`Opinion of the Court
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`1
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` NOTICE: This opinion is subject to formal revision before publication in the
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` United States Reports. Readers are requested to notify the Reporter of
` Decisions, Supreme Court of the United States, Washington, D. C. 20543,
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` pio@supremecourt.gov, of any typographical or other formal errors.
`
`SUPREME COURT OF THE UNITED STATES
`
`_________________
`
` No. 22–1165
`_________________
` MACQUARIE INFRASTRUCTURE CORPORATION, ET AL.,
`
`
` PETITIONERS v. MOAB PARTNERS, L. P., ET AL.
`ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
`
`APPEALS FOR THE SECOND CIRCUIT
`[April 12, 2024]
` JUSTICE SOTOMAYOR delivered the opinion of the Court.
`Securities and Exchange Commission (SEC) Rule 10b–
`
`5(b) makes it unlawful to omit material facts in connection
`with buying or selling securities when that omission ren-
`ders “statements made” misleading. Separately, Item 303
`of SEC Regulation S–K requires companies to disclose cer-
`tain information in periodic filings with the SEC. The ques-
`tion in this case is whether the failure to disclose infor-
`mation required by Item 303 can support a private action
`
`under Rule 10b–5(b), even if the failure does not render any
`“statements made” misleading. The Court holds that it can-
`not. Pure omissions are not actionable under Rule 10b–
`5(b).
`
`
`
`I
`A
`
`
`Section 10(b) of the Securities Exchange Act of 1934
`makes it “unlawful for any person . . . [t]o use or employ, in
`connection with the purchase or sale of any security . . . [,]
`any manipulative or deceptive device or contrivance in con-
`
`travention of such rules and regulations as the [SEC] may
`prescribe.” 48 Stat. 891, 15 U. S. C. §78j(b). Rule 10b–5
`
`
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`

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`Case: 21-60626 Document: 486 Page: 5 Date Filed: 05/08/2024
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`2
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`
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`
` MACQUARIE INFRASTRUCTURE CORP. v.
`MOAB PARTNERS, L. P.
`Opinion of the Court
`implements this prohibition and makes it unlawful for is-
`suers of registered securities to “make any untrue state-
`
`ment of a material fact or to omit to state a material fact
`necessary in order to make the statements made, in the
`
`light of the circumstances under which they were made, not
`
`misleading.” 17 CFR §240.10b–5(b) (2022). This Court “has
`found a right of action implied in the words of [§10(b)] and
`its implementing regulation.” Stoneridge Investment Part-
`
`
`ners, LLC v. Scientific-Atlanta, Inc., 552 U. S. 148, 157
`(2008).
`
`Section 13(a) of the Exchange Act requires issuers to file
`
`periodic
`See 15 U. S. C.
`informational statements.
`§§78m(a)(1), 78l(b)(1). These statements include the “Man-
`agement’s Discussion and Analysis of Financial Conditions
`
`and Results of Operation” (MD&A), in which companies
`must “[f]urnish the information required by Item 303 of
`
`Regulation S–K.” See SEC Form 10–K; SEC Form 10–Q.
`Item 303, in turn, requires companies to “[d]escribe any
`known trends or uncertainties that have had or that are
`reasonably likely to have a material favorable or unfavora-
`ble impact on net sales or revenues or income from contin-
`uing operations.” 17 CFR §229.303(b)(2)(ii) (2022).
`B
`
`Macquarie Infrastructure Corporation owns infrastruc-
`ture-related businesses, including a subsidiary that oper-
`ates large “bulk liquid storage terminals” within the United
`States. These terminals handle and store liquid commodi-
`ties, such as petroleum, biofuels, chemicals, and oil prod-
`ucts. One liquid commodity stored in these terminals is No.
`
`
`6 fuel oil, a high-sulfur fuel oil that is a byproduct of the
`refining process. In 2016, the United Nations’ Interna-
`
`tional Maritime Organization formally adopted IMO 2020,
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`a regulation that capped the sulfur content of fuel oil used
`
`in shipping at 0.5% by the beginning of 2020. No. 6 fuel oil
`typically has a sulfur content closer to 3%. In the ensuing
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`Case: 21-60626 Document: 486 Page: 6 Date Filed: 05/08/2024
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` Cite as: 601 U. S. ____ (2024)
`
`Opinion of the Court
`years, Macquarie did not discuss IMO 2020 in its public of-
`fering documents. In February 2018, however, Macquarie
`announced that the amount of storage capacity contracted
`for use by its subsidiary’s customers had dropped in part
`
`because of the structural decline in the No. 6 fuel oil mar-
`ket. Macquarie’s stock price fell around 41%.
`
`Moab Partners, L. P. sued Macquarie and various officer
`
`defendants, alleging, among other things, a violation of
`§10(b) and Rule 10b–5. The crux of Moab’s argument was
`that Macquarie’s public statements “were false and mis-
`leading” because it “concealed from investors that [its sub-
`sidiary’s] single largest product . . . was No. 6 fuel oil,”
`which “faced a near-cataclysmic ban on the bulk of its
`worldwide use through IMO 2020.” City of Riviera Beach
`Gen. Employees Retirement System v. Macquarie Infra-
`structure Corp., 2021 WL 4084572, *6 (SDNY, Sept. 7, 2021)
`(internal quotation marks omitted). In Moab’s view, Mac-
`quarie had “‘a duty to disclose’ the extent to which [its sub-
`sidiary’s] storage capacity was devoted to No. 6 fuel oil,”
`ibid., but instead, Macquarie “violated disclosure obliga-
`tions under Item 303,” id., at *10, and therefore violated
`§10(b) and Rule 10b–5. The District Court dismissed
`Moab’s complaint, concluding in relevant part that Moab
`
`had not “actually plead[ed] an uncertainty that should have
`
`been disclosed” or “in what SEC filing or filings Defendants
`were supposed to disclose it.” Ibid.
`
`
`The Second Circuit reversed. The court reasoned that
`there are “two circumstances which impose a duty on a cor-
`
`poration to disclose omitted facts.” 2022 WL 17815767, *1
`(Dec. 20, 2022). First, a duty arises when there is “‘a stat-
`ute or regulation requiring disclosure,’ . . . such as Ite[m]
`303.” Ibid. (quoting Stratte-McClure v. Morgan Stanley,
`776 F. 3d 94, 101 (CA2 2015)). Second, “[e]ven when there
`
`is no existing independent duty to disclose information,
`once a company speaks on an issue or topic, there is a duty
`to tell the whole truth.” 2022 WL 17815767, *1 (internal
`
`3
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`Case: 21-60626 Document: 486 Page: 7 Date Filed: 05/08/2024
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`4
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`
`
`
` MACQUARIE INFRASTRUCTURE CORP. v.
`MOAB PARTNERS, L. P.
`Opinion of the Court
`quotation marks omitted). “Crediting [Moab’s] allegations
`
`as true, IMO 2020’s significant restriction of No. 6 fuel oil
`use was known to [Macquarie] and reasonably likely to
`
`have material effects on [Macquarie’s] financial condition
`or results of operation.” Id., at *3. Because Moab had “ad-
`equately alleged a ‘known trend[] or uncertaint[y]’ that
`
`gave rise to a duty to disclose under Item 303,” id., at *2
`(alterations in original), the court applied its binding prec-
`edent to conclude that Macquarie’s Item 303 violation alone
`could sustain Moab’s §10(b) and Rule 10b–5 claim. See ibid.
`(“The failure to make a material disclosure required by
`Item 303 can serve as the basis . . . for a claim under Section
`10(b)”).
`
`The courts of appeals disagree on whether a failure to
`make a disclosure required by Item 303 can support a pri-
`vate claim under §10(b) and Rule 10b–5(b) in the absence
`of an otherwise-misleading statement.1 This Court granted
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`certiorari to resolve that disagreement. 600 U. S. ___
`(2023).
`
`
`
`
`
`
`II
`
`
`Rule 10b–5(b) makes it unlawful “[t]o make any untrue
`statement of a material fact or to omit to state a material
`
`fact necessary in order to make the statements made, in the
`
`light of the circumstances under which they were made, not
`misleading.” 17 CFR §240.10b–5(b). This Rule accom-
`plishes two things. It prohibits “any untrue statement of a
`
`material fact”—i.e., false statements or lies. Ibid. It also
`——————
` 1Compare Stratte-McClure v. Morgan Stanley, 776 F. 3d 94, 101 (CA2
`
`
`2015) (“Item 303’s affirmative duty to disclose in Form 10–Qs can serve
`
`as the basis for a securities fraud claim under Section 10(b)”), with In re
`
`Nvidia, 768 F. 3d 1046, 1056 (CA9 2014) (“Item 303 does not create a
`
`duty to disclose for purposes of Section 10(b) and Rule 10b–5”); see also
`
`Oran v. Stafford, 226 F. 3d 275, 288 (CA3 2000) (“[T]he ‘demonstration
`
`
`of a violation of the disclosure requirements of Item 303 does not lead
`inevitably to the conclusion that such disclosure would be required under
`Rule 10b–5. Such a duty to disclose must be separately shown’ ”).
`
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`Case: 21-60626 Document: 486 Page: 8 Date Filed: 05/08/2024
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`5
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` Cite as: 601 U. S. ____ (2024)
`
`Opinion of the Court
`
`prohibits omitting a material fact necessary “to make the
`
` statements made . . . not misleading.” Ibid. This case turns
`
`on whether this second prohibition bars only half-truths or
`instead extends to pure omissions.
`
`A pure omission occurs when a speaker says nothing, in
`
`
`circumstances that do not give any particular meaning to
`that silence. Take the simplest example. If a company fails
`entirely to file an MD&A, then the omission of particular
`information required in the MD&A has no special signifi-
`cance because no information was disclosed. Half-truths,
`
`on the other hand, are “representations that state the truth
`
`only so far as it goes, while omitting critical qualifying in-
`formation.” Universal Health Services, Inc. v. United States
`
`ex rel. Escobar, 579 U. S. 176, 188 (2016); see also Om-
`nicare, Inc. v. Laborers Dist. Council Constr. Industry Pen-
`sion Fund, 575 U. S. 175, 192 (2015) (“[L]iteral accuracy is
`
`not enough: An issuer must as well desist from misleading
`investors by saying one thing and holding back another”).
`
`“A classic example of an actionable half-truth in contract
`law is the seller who reveals that there may be two new
`roads near a property he is selling, but fails to disclose that
`
` a third potential road might bisect the property.” Universal
`
` Health Services, 579 U. S., at 188–189. In other words, 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.
`
`
`Rule 10b–5(b) does not proscribe pure omissions. The
`Rule prohibits omitting material facts necessary to make
`
`
`the “statements made . . . not misleading.” Put differently,
`
`it requires disclosure of information necessary to ensure
`that statements already made are clear and complete (i.e.,
`that the dessert was, in fact, a whole cake). This Rule there-
`fore covers half-truths, not pure omissions. Logically and
`by its plain text, the Rule requires identifying affirmative
`assertions (i.e., “statements made”) before determining if
`
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`Case: 21-60626 Document: 486 Page: 9 Date Filed: 05/08/2024
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`
`
` MACQUARIE INFRASTRUCTURE CORP. v.
`MOAB PARTNERS, L. P.
`Opinion of the Court
`other facts are needed to make those statements “not mis-
`leading.” See, e.g., 6 Oxford English Dictionary 857 (1933)
`(def. 3) (defining “statement” as a “written or oral commu-
`nication setting forth facts, arguments, demands, or the
`like”); Webster’s New International Dictionary 2461 (2d ed.
`
`
`1942) (defining “statement” as the “[a]ct of stating, reciting,
`or presenting, orally or on paper”). It once again “bears em-
`phasis that §10(b) and Rule 10b–5(b) do not create an af-
`
`firmative duty to disclose any and all material information.
`Disclosure is required under these provisions only when
`
`necessary ‘to make . . . statements made, in the light of the
`circumstances under which they were made, not mislead-
`
`ing.’” Matrixx Initiatives, Inc. v. Siracusano, 563 U. S. 27,
`44 (2011) (quoting Rule 10b–5(b)).
`
`Statutory context confirms what the text plainly pro-
`
`vides. Congress imposed liability for pure omissions in
`§11(a) of the Securities Act of 1933. Section 11(a) prohibits
`any registration statement that “contain[s] an untrue state-
`
`ment of a material fact or omit[s] to state a material fact
`required to be stated therein or necessary to make the
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`statements therein not misleading.” 15 U. S. C. §77k(a).
`By its terms, in addition to proscribing lies and half-truths,
`this section also creates liability for failure to speak on a
`subject at all. See Omnicare, 575 U. S., at 186, n. 3 (“Sec-
`
`tion 11’s omissions clause also applies when an issuer fails
`
`to make mandated disclosures—those ‘required to be
`
`stated’—in a registration statement”). There is no similar
`language in §10(b) or Rule 10b–5(b). Cf. Ernst & Ernst v.
`Hochfelder, 425 U. S. 185, 208 (1976) (“The express recog-
`nition of a cause of action premised on negligent behavior
`
`in §11 stands in sharp contrast to the language of §10(b)”).
`Neither Congress in §10(b) nor the SEC in Rule 10b–5(b)
`mirrored §11(a) to create liability for pure omissions. That
`omission (unlike a pure omission) is telling. Cf. Blue Chip
`
`
`Stamps v. Manor Drug Stores, 421 U. S. 723, 734 (1975)
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`Case: 21-60626 Document: 486 Page: 10 Date Filed: 05/08/2024
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`7
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` Cite as: 601 U. S. ____ (2024)
`
`Opinion of the Court
`(“When Congress wished to provide a remedy . . . it had lit-
`
`tle trouble in doing so expressly”).
`
`“Silence, absent a duty to disclose, is not misleading un-
`
`
`der Rule 10b–5.” Basic Inc. v. Levinson, 485 U. S. 224, 239,
`n. 17 (1988). Even a duty to disclose, however, does not au-
`tomatically render silence misleading under Rule 10b–5(b).
`Today, this Court confirms that the failure to disclose infor-
`
`mation required by Item 303 can support a Rule 10b–5(b)
`claim only if the omission renders affirmative statements
`made misleading.
`
`Moab and the United States suggest that a plaintiff does
`not need to plead any statements rendered misleading by a
`pure omission because reasonable investors know that Item
`303 requires an MD&A to disclose all known trends and un-
`
`
`certainties. That argument fails, however, because it reads
`the words “statements made” out of Rule 10b–5(b) and
`shifts the focus of that Rule and §10(b) from fraud to disclo-
`sure. See Chiarella v. United States, 445 U. S. 222, 234–
`235 (1980) (“Section 10(b) is aptly described as a catchall
`
`provision, but what it catches must be fraud”). It would also
`render §11(a)’s pure omission clause superfluous by making
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`every omission of a fact “required to be stated” a misleading
`
`half-truth.
`
`Moab also contends that without private liability for pure
`omissions under Rule 10b–5(b), there will be “broad im-
`munity any time an issuer fraudulently omits information
`Congress and the SEC require it to disclose.” Brief for Re-
`spondent Moab Partners, L. P. 1. That is not so. For one
`
`thing, private parties remain free to bring claims based on
`Item 303 violations that create misleading half-truths. For
`
`another, the SEC retains authority to prosecute violations
`of its own regulations. The Exchange Act requires that is-
`suers file reports “in accordance with such rules and regu-
`
`lations as the Commission may prescribe,” 15 U. S. C.
`
`§78m(a), and the SEC can investigate “whether any person
`
`has violated . . . any provision of [the Exchange Act], [or]
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`Case: 21-60626 Document: 486 Page: 11 Date Filed: 05/08/2024
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`8
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`
`MACQUARIE INFRASTRUCTURE CORP. v.
`
`MOAB PARTNERS, L. P.
`Opinion of the Court
`the rules and regulations thereunder,” §78u(a)(1), including
`
`Item 303.2
`
`*
`*
`*
`Pure omissions are not actionable under Rule 10b–5(b).
`
`
`The judgment of the Court of Appeals for the Second Circuit
`is vacated, and the case is remanded for further proceedings
`
`consistent with this opinion.
`
`It is so ordered.
`
`
`
`——————
` 2Moab and the United States spill much ink fighting the question pre-
`
`
` sented, insisting that this case is about half-truths rather than pure
`
` omissions. The Court granted certiorari to address the Second Circuit’s
`
` pure omission analysis, not its half-truth analysis. See Pet. for Cert. i
`
`(“Whether . . . a failure to make a disclosure required under Item 303 can
`support a private claim under Section 10(b), even in the absence of an
`
`otherwise-misleading statement” (emphasis added)); see also 2022 WL
`17815767, *1 (Dec. 20, 2022) (distinguishing between these “two circum-
`stances”). The Court does not opine on issues that are either tangential
`
`to the question presented or were not passed upon below, including what
`constitutes “statements made,” when a statement is misleading as a half-
`
`
`truth, or whether Rules 10b–5(a) and 10b–5(c) support liability for pure
`omissions.
`
`
`
`