The U.S. Supreme Court has granted certiorari in the case of Macquarie Infrastructure Corp. v. Moab Partners, L.P, a decision that was announced on September 29, 2023. The case arises out of a decision by the Second Circuit to revive an investor lawsuit, which alleges Section 10(b) and Rule 10b-5 violations on the basis of a failure to make disclosures required under Item 303 of the Security and Exchange Commission’s (SEC) Regulation S-K. The details regarding the certiorari were highlighted in a recently published article by JD Supra.
The granting of this certiorari by the Supreme Court is noteworthy, primarily because of the central question that this case represents, specifically regarding the breadth of corporate liability under the securities laws.
The plaintiffs, represented by Moab Partners, L.P, allege that Macquarie Infrastructure Corp. did not fulfill necessary disclosures as required under Item 303 of the SEC’s Regulation S-K. To put it in context, Item 303 mandates specific disclosures which are of significance to shareholders and the public.
A key aspect of the lawsuit hinges on Section 10(b) and Rule 10b-5. Briefly, Section 10(b) of the Securities Exchange Act of 1934 makes it illegal to purposefully deceive people in connection with the purchase or sale of any security. Rule 10b-5, adopted by the SEC, provides a more detailed framework for enforcement action in cases of fraudulent activities.
The contention between the parties in this suit, and indeed the question that the Supreme Court decision will potentially resolve, is whether the SEC’s Rule triggers liability under Section 10(b) for a company’s failure to fulfill the mandated financial disclosures.
With the Supreme Court’s decision to grant certiorari, this case represents an instance where securities laws might see far-reaching fine-tuning in the way they operate, particularly in terms of determining the extent of corporate liability.
As the world waits on the Supreme Court’s judgment, the verdict could have profound implications, not only for Macquarie Infrastructure Corp. v. Moab Partners, L.P, but for countless other corporations and law firms that find themselves grappling with similar issues.