The Tenth Circuit Court of Appeals published its opinion in Slater v. A.G. Edwards & Sons, Inc. on Tuesday, July 9, 2013.
Thornburg Mortgage, Inc. was an originator and purchaser of home loans and was affected by the 2007-2009 financial crisis. Cut off from its usual sources of financing, Thornburg attempted to raise new capital through a series of stock offerings in 2007 and early 2008. But as the mortgage market continued to sour, Thornburg’s problems mounted and the value of its stock declined. Investors in those offerings then brought a class action suit against Thornburg’s underwriters, alleging violations of § 11 of the Securities Act based on omissions and misrepresentations in the offering documents. The district court dismissed the claims against the underwriters on the grounds that there were no omissions or misrepresentations in the offering documents and, even if there were, they were not material.
Liability under § 11 of the Securities Act only attaches for “omissions of facts that are required as part of a registration statement or those necessary to make the statement not misleading.” The Tenth Circuit held the complained of statements were not misleading so there was no need to consider whether they were material. The court also held that Thornburg had no duty to disclose other items so their omission did not provide a basis for liability. The court affirmed the dismissal of all plaintiffs’ claims.