In Anderson v. Spirit Aerosystems Holdings, Inc., the Tenth Circuit incorrectly held that investors failed to establish a cogent, compelling inference of scienter sufficient to prove that Spirit AeroSystems (Spirit) violated Section 10(b) of the Securities Exchange Act of 1934 and the Securities and Exchange Commission’s Rule 10b-5. The majority opinion focuses on four Spirit executives’ forward-looking statements about the company’s projected ability to meet cost targets, but the majority seems to ignore the falsity of those same executives’ statements about then-present facts, arbitrarily eliminating part of the plaintiff investors’ claim. Although Section 10(b) analysis concerns two categories of statements, “those projecting future performance, and those reflecting past performance,” the Tenth Circuit’s decision drastically narrows the scope of this inquiry, allowing company executives to escape 10(b) liability for inaccurately depicting a project’s factual past performance. The two categories “differ markedly for purposes of a securities fraud claim,” so the court should have preserved the investors’ remedy and concluded that the investors did establish a cogent and compelling inference of scienter for the false statements about the then-current status of a project, as these independently pass the test.
Robert C. Uhl, Securities Regulation—Tenth Circuit Allows Lying Executives to Escape Section 10(b) Liability, Leaving Investors Remediless, 82 J. Air L. & Com. 241 (2017)