Paul Kisslinger Joins News Podcast to Discuss Major Securities Case at Supreme Court

Washington, D.C. (March 4, 2024) – Washington, D.C. Partner and Chair of Lewis Brisbois’ SEC Enforcement & Litigation Practice Paul W. Kisslinger recently joined "The World and Everything In It" podcast to discuss a pending U.S. Supreme Court case that is poised to have a significant impact on the securities fraud litigation landscape. 

Mr. Kisslinger appeared on the podcast’s “Legal Docket” segment to weigh in on Macquarie Infrastructure Corp. v. Moab Partners LP, in which the Supreme Court has been asked to resolve a circuit split over whether the failure to disclose information required in the management discussion and analysis (MD&A) portion of a company's public filings — such as the annual 10K and quarterly 10Q forms — may be actionable in a private securities fraud lawsuit under Section 10(b) of the Securities Exchange Act.

In exchanges with podcast co-host Jenny Rough, Mr. Kisslinger explained that MD&As are important public company disclosures, meant to be a "plain and clear narrative” of where the company is and where it’s going, by “explaining trends in the marketplace, what they see upcoming on the horizon, and how things could impact their businesses.”

"So [for example], if you're Amazon, you're going to tell the public [in the company’s MD&A], that 'COVID is really hurting our business because it's backing up [our] shipping,'" he explained. 

In Macquarie, plaintiff Moab Partners has argued that it should be allowed to proceed with its lawsuit, which alleges that Macquarie failed to predict and disclose that a regulation that capped the sulfur content of fuel oil would have a material negative impact on the company's oil storage business. 

While a New York federal court dismissed Moab's complaint in its entirety, the Second Circuit reversed and held that Moab had alleged an actionable omission by Macquarie that was sufficient to trigger its duty to disclose under Item 303 of U.S. Securities and Exchange Commission Regulation S-K, which governs MD&A disclosures.

Section 10b-5 of the Securities Exchange Act prohibits a company from making "any untrue statement of a material fact" or failing "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." Ms. Rough characterized the latter category of actionable conduct under the statute as "half-truths." 

The podcast featured excerpts from last month’s Supreme Court oral arguments, in which the justices grappled with whether Macquarie's conduct is actionable under Section 10b-5. 

Whether or not Moab Partners' lawsuit can move forward will depend on whether the justices apply a broad test or a narrow one, Ms. Rough observed. Summarizing Mr. Kisslinger's comments on the subject, she said that a "narrow test could allow companies to deceptively dance around disclosures, like what is allegedly happening here, but a broad ruling could lead to disclosures that could take up a bookshelf and never be read. A tight narrative is what's most helpful to the public, and not filings containing endless warnings."

Mr. Kisslinger suggested there must be a limiting principle to how much information should be included in an MD&A. 

If a wide view of the MD&A disclosure obligations is taken, a company conceivably must report, "[e]very trend under the sun, anything — inflation, unemployment, an ESG report — that could affect [its] bottom line. There could be another pandemic 10 years down the road, so how far do you have to take this?" he said. 

Mr. Kisslinger is chair of the firm’s SEC Enforcement & Litigation Practice, co-chair of the firm's Securities Class Action Defense Practice, and member of the Government Investigation & White Collar, Complex Business & Commercial Litigation, and Securities Litigation & FINRA Practices. He has extensive experience in the private and public sectors successfully guiding clients through the choppy waters of regulatory enforcement actions brought by securities and other financial services regulators, internal and external investigations, and legislative inquiries.

Listen to the full podcast here.

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