In re Ford Motor Co. Securities Litigation

Shareholders (plaintiffs) in the Ford Motor Company (Ford) (defendant) sued Ford, alleging that Ford made materially false or misleading statements. Specifically, the shareholders claimed that Ford violated § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission (SEC) Rule 10b-5 promulgated thereunder by falsely or misleadingly touting Ford’s commitment to quality, safety, and good corporate citizenship while failing to disclose that Ford sold a defective product (Explorer vehicles equipped with ATX tires). Thus, for example, the shareholders contended that Ford’s claims that “quality comes first” at Ford, “Ford is a worldwide leader in automotive safety,” Ford wanted “to be clear leaders in corporate citizenship,” and Ford was “going to lead in corporate social responsibility” were false or misleading. The shareholders further alleged that Ford’s positive financial results were false or misleading because Ford did not disclose that those results were due to sales of a defective product and that Ford would incur significant costs when the product defect became publicly known. However, the shareholders did not assert that Ford’s disclosed financial results were themselves inaccurate when made. Ford moved to dismiss the shareholders’ complaint. The district court granted Ford’s motion. The shareholders appealed.