Securities Fraud. Material misrepresentation Unfairness as fraud Opinion as fraud Failure to correct/update as fraud. (last updated 17 Apr 12). Securities Fraud Action. Rule 10b-5 Transaction (“in connection with purchase or sale of securities”)
Unfairness as fraud
Opinion as fraud
Failure to correct/update as fraud
(last updated 17 Apr 12)
It shall be unlawful …To 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, …
Why not seek appraisal?
It shall be unlawful for any person, directly or indirectly,
in connection with the purchase or sale of any security.
Justice Byron White
Section 10 -- Manipulative and Deceptive Devices
It shall be unlawful for any person, …-
(b) To use or employ, in connection with the purchase or sale of any security … any manipulative or deceptive device or contrivance in contravention of [SEC] rules …
Justice Byron White
“ in the opinion of the Board of Directors, the merger price is high value for the shares … fair price.”
… Shareholders know that directors usually have knowledge and expertness far exceeding the normal investor’s resources … [and] will think it important …
… statements of belief are factual in two senses:  directors … hold the belief stated … and  statements about the subject matter of belief expressed.
… disbelief, standing alone, is insufficient to satisfy element of fact. … Whether price “fair” depended on provable facts about actual/potential operations … in accordance with recognized methods of valuation.
Justice David Souter
Company disclosed in Annual Report:
Company should have disclosed:
When Company did disclose:
“We do not have a system of continuous disclosure”
“A statement need be corrected only if it was incorrect when made …”
“Updating documents has its place … but only when selling stock.”
duty to update when “information alive in market”
SOX 409 – new Form 8-K
Judge Frank Easterbrook
MD&A (Item 303)
Annual 10-K must reveal
Any known trends or uncertainties that have had or that the registrant reasonably expects will have a material favorable or unfavorable impact on net sales or revenues or income from continuing operations …
(c) Safe harbor
(1) In generalin any private action arising under this title that is based on an untrue statement of a material fact or omission of a material fact necessary to make the statement not misleading, a person referred to in subsection (a) of this section shall not be liable with respect to any forward-looking statement, whether written or oral, if and to the extent that—
(A) the forward-looking statement is--
(i) identified as a forward-looking statement, and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward looking statement; ..
Many factors could affect the company's actual results, causing results to differ materially, from those expressed in any such forward-looking statements. These factors include, but are not limited to, interest rates; technological advances in the medical field; economic conditions; demand and market acceptance; risks for new and existing products, technologies and health care services; the impact of competitive products and pricing; manufacturing capacity; new plant start-ups; global regulatory, trade and tax policies; regulatory, legal or other developments relating to the company's Series A, AF, and AX dialyzers; continued price competition; product development risks, including technological diffiulties; ability to enforce patents; actions of regulatory bodies and other government authorities; reimbursement policies of government agencies; commercialization factors; results of product testing; and other factors described elsewhere in this report or in the company's other filings with the Securities and Exchange Commission.
“… when markets are informationally efficient, it is impossible to segment information as plaintiffs propose…”
“Yet Baxter’s language may fall short. [Baxter may have known more than identified as potential risks.] Baxter [argues full truth had reached the market] – hard to understand the sharp drop in the price of its stock. …”
Plaintiffs get discovery – but of what?
Judge Frank Easterbrook