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Ganino v. Citizens Util. Co.

In action under Securities Exchange Act, steadiness of defendant's stock price and amount of misstatements in absolute terms and as percentages of total net income not sufficient to establish that misrepresentations were immaterial as a matter of law.

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The full case caption appears at the end of this opinion.

The plaintiffs-appellants appeal from a final judgment of the United States District Court for the District of Connecticut (Warren W. Eginton, Senior Judge), grantingthe defendants-appellees’ motion to dismiss the Second Amended Complaint (the “Complaint”) for failure to state a claim under Sections 10(b) [FOOTNOTE 1] and 20(a) [FOOTNOTE 2] of theSecurities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. �� 78j(b) & 78t(a), and Rule 10b-5[FOOTNOTE 3] promulgated thereunder, 17 C.F.R. � 240.10b-5. Thedistrict court held: (1) the misrepresentations regarding certain payments amounting to 1.7% of total annual revenue were immaterial as a matter of law; (2) the lackof share price movement following the release of corrective information was evidence of immateriality; and (3) the Complaint was defective as to one or more of theother elements of a Rule 10b-5 suit. For the reasons that follow, we reverse in part, vacate in part, and remand with instructions.

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