McCormick v. Fund American Companies

William McCormick (plaintiff) was an officer of a subsidiary of Fund American Companies (defendant). When McCormick left the subsidiary, he owned 500,000 shares in Fund American. In January 1990, Fund American began discussions with Allianz, a German insurance company, about the possibility of Allianz purchasing a minority stake in the subsidiary. In May 1990, Fund American told McCormick that it was in talks with an undisclosed company to possibly sell part of the subsidiary, and that the sale might raise Fund American’s stock prices. McCormick sold all his shares back to Fund American for $8 million, at $38 per share. Several months after the buyout, Allianz purchased the subsidiary for $3.3 billion, raising the price of Fund American stock to $50 per share. McCormick filed a lawsuit in federal district court, alleging that Fund American had violated § 10(b) of the Securities Exchange Act and other securities-fraud provisions by making material omissions and representations related to its purchase of his stock. To support his claims, McCormick identified eight omissions and seven misrepresentations that he believed were material. The omissions and misrepresentations involved Fund American’s nondisclosure of Allianz’s identity and the likelihood of the acquisition. Fund American filed a motion for summary judgment, arguing that none of the alleged misrepresentations or omissions were material. The district court granted summary judgment for Fund American. McCormick appealed.