State Teachers Retirement Board v. Fluor Corp.

Fluor Corporation (defendant) was a construction company invited to bid for a $1 billion construction project for the South African Coal, Oil and Gas Corporation Limited (SASOL). In February 1975, SASOL informed Fluor that Fluor would be awarded the project, called SASOL II. SASOL imposed a confidentiality requirement prohibiting public disclosure of the contract until March 10, 1975. However, rumors of Fluor’s involvement with SASOL II began spreading in early March, causing Fluor’s stock price and trading volume to rise. Fluor learned of the rumors on March 4, when trading volume had increased, but the stock price had not yet changed significantly. By March 6, the trading volume and stock price had increased substantially. Analysts had contacted Fluor between March 4 and March 6 to ask about the rumors, but Fluor neither commented on the rumors’ truth nor made any material misrepresentations about the rumors’ substance. On March 6, Fluor contacted the New York Stock Exchange (the Exchange) to suggest that the SASOL II contract could be causing the increased market activity. The Exchange proposed suspending trading of Fluor’s stock, and Fluor agreed. On March 7, the Exchange halted trading pending the SASOL II announcement on March 10. Between March 3 and March 6, pension fund State Teachers Retirement Board (State Teachers) (plaintiff) had sold 288,257 shares of Fluor stock. State Teachers sued Fluor in federal court for securities fraud in violation of § 10(b) of the Securities Exchange Act of 1934. State Teachers alleged that Fluor had a duty to disclose the SASOL II contract during the week of March 3, when the rumors had begun to circulate. State Teachers also asserted that Fluor had violated section A2 of the Exchange’s Company Manual, which provided that companies should be prepared to immediately announce important corporate developments if unusual market activity occurred prior to the company’s planned announcement. The district court granted summary judgment for Fluor, holding that Fluor had no duty to disclose the SASOL II information and that there was no federal right of action for a violation of the Company Manual. State Teachers appealed.