Leidos, Inc. v. Indiana Public Retirement System

Whether Item 303 of SEC Regulation S-K sets forth an affirmative duty to disclose that is actionable under Section 10(b) of the Securities Exchange Act of 1934?

Respondents sued Petitioner, a large technology company, for securities fraud under Section 10(b) of the Securities Exchange Act of 1934, alleging Petitioner failed to disclose information related to federal criminal charges filed against Petitioner’s employees for overbilling clients, and that omission violated Item 303 of SEC Regulation S– K, 17 C.F.R. § 229.303(a)(3)(ii). The federal district court granted Petitioner’s motion to dismiss for Respondent's failure to state a claim, on the basis that any amendments to the Complaint would be futile. The Second Circuit reversed the district court’s order, holding that the claims were well-pleaded and not futile. Relying on its decision made months earlier in Stratte‐McClure v. Morgan Stanley, 776 F.3d 94, 101 (2d Cir. 2015), the Second Circuit determined that Item 303 sets forth requirements to disclose “known trends or uncertainties,” and Respondent's complaint adequately alleged that Petitioner failed to do so. The United States Supreme Court granted certiorari to resolve Petitioner’s claim that Stratte-McClure conflicts with the Ninth Circuit’s opinion in In re NVIDIA Corp. Securities Litigation, 768 F.3d 1046 (9th Cir. 2014). Petitioner asks the Court to reverse the Second Circuit because it is based on wrong interpretation of Supreme Court precedent and creates a new duty that is not imposed under the statute.