Macquarie Infrastructure Corp. v. Moab Partners, L.P.

Macquarie Infrastructure Corporation (Macquarie) (defendant) operated storage containers for liquids. A significant portion of Macquarie’s clients stored No. 6 fuel oil, a high-sulfur fuel oil that was primarily used by ships. In 2016, an international organization adopted a new low-sulfur standard to be used for ship fuel oil beginning in 2020. No. 6 fuel oil did not meet this new standard, which meant demand for it was likely to decrease significantly. Because this was a known trend or uncertainty that was likely to impact Macquarie’s financial performance, Securities and Exchange Commission (SEC) Regulation S-K Item 303 required that Macquarie disclose this information. However, for the next two years, Macquarie said nothing about the changed international standard in any of its public documents or disclosures. In 2018, Macquarie announced that its storage business had declined due to a decline in the market for No. 6 fuel oil. After the announcement, Macquarie’s stock price fell 41 percent. Investor Moab Partners, L.P. (plaintiff) sued Macquarie, alleging that Macquarie had violated Rule 10b-5 by concealing this mandatory disclosure from investors. The district court dismissed the complaint for failing to state a claim. The United States Court of Appeals for the Second Circuit ruled that Macquarie’s violation of its Item 303 duty to disclose the information was enough to state a valid violation of Rule 10b-5. The United States Supreme Court granted certiorari.