Tenth Circuit Dismisses Securities Fraud Claim for Failure to Disclose Merger Discussions

On May 11, 2018, in Employees’ Ret. Sys. of the State of Rhode Island v. The Williams Companies, a panel of the Tenth Circuit Court of Appeals affirmed the dismissal of securities fraud claims against a company that allegedly failed to disclose merger discussions regarding one of two potential combinations. The Court ruled that because Williams made no statement about the prospect of merging with any company other than WPZ (a company in which Williams owned a majority stake), Williams was under no duty to disclose the discussions with ETE (a competing energy company) to make the statements it made regarding WPZ not misleading. The Court also found that the discussions with ETE were not material since the plaintiffs failed to prove that the discussions would have had a substantial impact on units of any of the three companies. Finally, the Court concluded that the complaint failed to allege that Williams acted with the requisite scienter.