01-1473, 01-1477 Gallagher, et al. v. Abbott Laboratories

Listen to this article

“What sinks plaintiffs’ position is their inability to identify any false statement-or for that matter any truthful statement made misleading by the omission of news about the fda’s demands.

“Much of plaintiffs’ argument reads as if firms have an absolute duty to disclose all information material to stock prices as soon as news comes into their possession. Yet that is not the way the securities laws work. We do not have a system of continuous disclosure. Instead firms are entitled to keep silent (about good news as well as bad news) unless positive law creates a duty to disclose… Until the Securities Act of 1933 there was no federal regulation of corporate disclosure. The 1933 Act requires firms to reveal information only when they issue securities, and the duty is owed only to persons who buy from the issuer or an underwriter distributing on its behalf; every other transaction is exempt under sec.4, 15 U.S.C. sec.77d. (No member of either class contends that he purchased securities from Abbott, or an underwriter on Abbott’s behalf, between March 17 and November 2.) Section 13 of the Securities Exchange Act of 1934, 15 U.S.C. sec.78m, adds that the SEC may require issuers to file annual and other periodic reports – with the emphasis on periodic rather than continuous. Section 13 and the implementing regulations contemplate that these reports will be snapshots of the corporation’s status on or near the filing date, with updates due not when something ‘material’ happens, but on the next prescribed filing date.”

Affirmed.

Appeals from the United States District Court for the Northern District of Illinois, Moran, J., Easterbrook, J.