Thank you for sharing!

Your article was successfully shared with the contacts you provided.
(L to R) Jay Dubow, Robert Hickok and Julian Weiss of Troutman Pepper (Photo: Courtesy Photo) (L to R) Jay Dubow, Robert Hickok and Julian Weiss of Troutman Pepper (Photo: Courtesy Photo)

When a public company discloses bad news, often its stock price declines and shareholders’ investments similarly decline. In some cases, shareholders will seek to recoup that loss by suing the corporation and its officers and directors under Section 10(b) of the Securities Exchange Act (Exchange Act). This law, and SEC Rule 10b-5 which was promulgated thereunder, allow claims against corporations and their officers and directors for making materially misleading statements about the company. This protects shareholders from corporate officers telling half-truths or lying to influence their investment decisions. Multiple issues arise, however, when the claims are based on allegedly misleading statements projecting the future success of the company.

Recently, the Third Circuit was faced with this problem. Shareholders sued based on statements a company made about its prospective business that did not turn out as expected. In a nonprecedential opinion, the court held that such claims should be dismissed absent other allegations that the company knew its claims were unsupported at the time it made the statements. See, In re Newell Brands, Inc. Securities Litigation, No. 20-1292, 2020 U.S. App. LEXIS 37461 (3d Cir. Dec. 1, 2020). The fact that a company makes hopeful statements about its future which do not pan out is insufficient standing alone to state a Section 10(b) claim.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

Law Firms Mentioned

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

Pennsylvania eDiscoveryBook

Designed to help attorneys practicing in PA, NJ and DW keep up with the changing rules and technologies in eDiscovery; special attention given to emerging eDiscovery is...

Get More Information

America's Claims Executive Virtual Leadership Forum & Expo 2021Event

ACE Virtual Leadership Forum & Expo is the annual conference for Senior Claims Executives in Insurance organizations.

Get More Information

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.