AND · 15usc78j:reliance
Private plaintiff must connect the deceptive statement to the investment decision, subject to applicable rebuttable presumptions. Xia Bi addresses direct reliance in EB-5 investments; do not universalize that factual route into a rule excluding fraud-on-the-market reliance.
Exact element source
any manipulative or deceptive device or contrivanceSource:
docroot/ir/usc/title15.jsonl#title15_sec78j; Unicode character offsets [907:958] (end exclusive); SHA-256 8ceaded2a57e5b49e22a4766033c8899ebfd730667700a031b8db7f80ea91e32.Routes and case patterns
| Route | Definition | Merits instance blocks | Distinct merits cases | Examples (up to 3 cases per count group) |
|---|---|---|---|---|
| direct-reliance provisional; provisional (1 case) | Whether the plaintiff actually relied on the misstatement. | 1 Satisfied 0; not satisfied 1; excluded context 1 | 1 | Xia Bi v. McAuliffe — 927 F.3d 177 (2019) · United States Court of Appeals for the Fourth Circuit · 2019 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) · applied/merits · counted Xia Bi v. McAuliffe — 927 F.3d 177 (2019) · United States Court of Appeals for the Fourth Circuit · 2019 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) · applied/alternative · not counted |
| fraud-on-the-market provisional; provisional (1 case) | Whether the presumption of reliance applies or is rebutted. | 0 Satisfied 0; not satisfied 0; excluded context 1 | 0 | Used only in non-merits blocks (1). Excluded context examples:Amgen Inc. v. Connecticut Retirement Plans & Trust Funds — 568 U.S. 455 (2013) · Supreme Court of the United States · 2013 — not reached · basis not recorded (15usc78j: author: Astra2 · not independently reviewed) · rule-announced/procedural · not counted |
| secondary-actor provisional; provisional (1 case) | Whether investors relied on the undisclosed conduct of a party who made no public statement (Stoneridge). | 1 Satisfied 0; not satisfied 1; excluded context 0 | 1 | Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. — 552 U.S. 148 (2008) · Supreme Court of the United States · 2008 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) · applied/merits · counted |
How courts decided this element
| Case | Element | Holding and scope | Pattern | Exact source quotations |
|---|---|---|---|---|
| Xia Bi v. McAuliffe — 927 F.3d 177 (2019) · United States Court of Appeals for the Fourth Circuit · 2019 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) | Private investor transaction causation | not Excluded from merits counts applied / alternative basis: pleaded; party: 27 Chinese investors; theory: even assuming exposure was pleaded; subject: party=27 Chinese investors; theory=even assuming exposure was pleaded Independent even-if ground: the offering papers contradicted the media representations and warned of startup risk. Scope alternative prevents counting this second basis as another merits instance. | direct/unread-offering-documents | But plaintiffs make clear in their complaint that they signed the subscription documents "without reviewing any version."Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [25048:25169] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.There is no allegation in the complaint that they made any effort to translate the documents into their native language, or even asked any English-speaking attorney or investment advisor to review the documents for them.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [25295:25515] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.It was unjustifiable to make such an investment in reliance on stray media statements without so much as translating or even reviewing the subscription documents before signing them.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [26278:26460] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014. |
| Xia Bi v. McAuliffe — 927 F.3d 177 (2019) · United States Court of Appeals for the Fourth Circuit · 2019 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) | Private investor transaction causation | not Counted merits instance applied / merits basis: pleaded; party: 27 Chinese investors; count: federal securities fraud; subject: party=27 Chinese investors; count=federal securities fraud Investments were alleged, but no investor-specific account connected a statement, its receipt, and a purchase decision. This direct reliance decision does not displace fraud-on-the-market presumptions in other settings. | direct/unspecified-investor-exposure | We accept as true the following facts, which come from plaintiffs' amended complaint. Plaintiffs-Appellants are a group of twenty-seven Chinese citizens who invested $ 500,000 each in a partnership that loaned their money to GreenTech Automotive. GreenTech, founded in 2008, was a Mississippi corporation that wanted to enter the hybrid and electric vehicle markets. Initially, GreenTech planned to produce the "MyCar," a vehicle that would travel at low speeds and thus be subject to lower levels of regulatory scrutiny.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [253:774] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.But there are no specific allegations that any individual plaintiff encountered any of those alleged misstatements in promotional materials or on Greentech's website.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [5711:5877] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.Federal law similarly requires that an investor "justifiably relied" on particular misstatements in an action under Rule 10b-5.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [17833:17960] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.Plaintiffs' complaint fails to adequately plead justifiable reliance, instead relying only on general and conclusory allegations.Source: docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [20965:21094] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014. |
| Stoneridge Investment Partners, LLC v. Scientific-Atlanta, Inc. — 552 U.S. 148 (2008) · Supreme Court of the United States · 2008 — not · pleaded (15usc78j: author: Astra2 · not independently reviewed) | Private investor transaction causation | not Counted merits instance applied / merits basis: pleaded; party: Scientific-Atlanta and Motorola; subject: party=Scientific-Atlanta and Motorola The sham transactions plausibly enabled Charter's misstatement, but investors relied on Charter's statements; supplier acts were neither public nor subject to a disclosure duty. Reliance cannot be inferred merely from foreseeable effects on the issuer's financial report. | undisclosed-roundtrip-transactions | Respondents supplied Charter with the digital cable converter (set-top) boxes that Charter furnished to its customers. Charter arranged to overpay respondents $20 for each set-top box it purchased until the end of the year, with the understanding that respondents would return the overpayment by purchasing advertising from Charter. The transactions, it is alleged, had no economic substance; but, because Charter would then record the advertising purchases as revenue and capitalize its purchase of the set top boxes, in violation of generally accepted accounting principles, the transactions would enable Charter to fool its auditor into approving a financial statement showing it met projected revenue and operating cashflow numbers. Respondents agreed to the arrangement.Source: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [2682:3457] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75.To return the additional money from the set top box sales, Scientific-Atlanta and Motorola signed contracts with Charter to purchase advertising time for a price higher than fair value. The new set-top box agreements were backdated to make it appear that they were negotiated a month before the advertising agreements. The backdating was important to convey the impression that the negotiations were unconnected, a point Arthur Andersen considered necessary for separate treatment of the transactions. Charter recorded the advertising payments to inflate revenue and operating cash-flow by approximately $17 million. The inflated number was shown on financial statements filed with the Securities and Exchange Commission (SEC) and reported to the public.Source: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [4245:4999] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75.Respondents had no role in preparing or disseminating Charter’s financial statements. And their own financial statements booked the transactions as a wash, under generally accepted accounting principles. It is alleged respondents knew or were in reckless disregard of Charter’s intention to use the transactions to inflate its revenues and knew the resulting financial statements issued by Charter would be relied upon by research analysts and investors.Source: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [5000:5454] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75.Reliance by the plaintiff upon the defendant’s deceptive acts is an essential element of the § 10(b) private cause of actSource: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [12196:12317] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75.Neither presumption applies here. Respondents had no duty to disclose; and their deceptive acts were not communicated to the public.Source: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [13253:13385] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75.In all events we conclude respondents’ deceptive acts, which were not disclosed to the investing public, are too remote to satisfy the requirement of reliance.Source: docroot/ir/caselaw/us_552.jsonl#/us/552/0148-01; Unicode character offsets [16214:16373] (end exclusive); SHA-256 854d7d302812e017c170afe5ca783eb9bff59da2a6e8cb45147e391cf8970a75. |
| Amgen Inc. v. Connecticut Retirement Plans & Trust Funds — 568 U.S. 455 (2013) · Supreme Court of the United States · 2013 — not reached (15usc78j: author: Astra2 · not independently reviewed) | Private investor transaction causation | not_reached Excluded from merits counts rule-announced / procedural theory: materiality attack on fraud-on-market presumption; subject: theory=materiality attack on fraud-on-market presumption The rebuttal at issue was an attack on materiality; the decision postpones that proof. Conceded efficiency/publicity is not a conceded finding of actual reliance for every investor. | certification/truth-on-market-rebuttal | Amgen has conceded the efficiency of the market for the securities at issue and has not contested the public character of the allegedly fraudulent statements on which Connecticut Retirement’s complaint is based.Source: docroot/ir/caselaw/us_568.jsonl#/us/568/0455-01; Unicode character offsets [864:1075] (end exclusive); SHA-256 783f30433ff15ff24f247eae80001fb18e8448da4e9093fee6531e6584fb8a8b.Amgen responded to this allegation by presenting public documents—including the committee’s meeting agenda, which was published in the Federal Register more than a month before the meeting—stating that safety concerns associated with Amgen’s drug would be discussed at the meeting.Source: docroot/ir/caselaw/us_568.jsonl#/us/568/0455-01; Unicode character offsets [40494:40775] (end exclusive); SHA-256 783f30433ff15ff24f247eae80001fb18e8448da4e9093fee6531e6584fb8a8b.If the alleged misrepresentations and omissions are ultimately found immaterial, the fraud-on-the-market presumption of classwide reliance will collapse.Source: docroot/ir/caselaw/us_568.jsonl#/us/568/0455-01; Unicode character offsets [41813:41966] (end exclusive); SHA-256 783f30433ff15ff24f247eae80001fb18e8448da4e9093fee6531e6584fb8a8b.The District Court thus correctly reserved consideration of Amgen’s rebuttal evidence for summary judgment or trial.Source: docroot/ir/caselaw/us_568.jsonl#/us/568/0455-01; Unicode character offsets [42947:43063] (end exclusive); SHA-256 783f30433ff15ff24f247eae80001fb18e8448da4e9093fee6531e6584fb8a8b. |
Court interpretations
interpretation
Federal law similarly requires that an investor "justifiably relied" on particular misstatements in an action under Rule 10b-5.
Xia Bi v. McAuliffe — 927 F.3d 177 (2019) · United States Court of Appeals for the Fourth Circuit · 2019 (15usc78j: author: Astra2 · not independently reviewed)
Federal law similarly requires that an investor "justifiably relied" on particular misstatements in an action under Rule 10b-5.Source:
docroot/ir/caselaw/f3d_927.jsonl#/f3d/927/0177-01; Unicode character offsets [17833:17960] (end exclusive); SHA-256 eb5a1012c116a662efd3d60680f34148884a918bf8c5a992ebc21edab2bdb014.Private plaintiff must connect the deceptive statement to the investment decision, subject to applicable rebuttable presumptions. Xia Bi addresses direct reliance in EB-5 investments; do not universalize that factual route into a rule excluding fraud-on-the-market reliance.
interpretation
(4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as “transaction causation,” see Basic, supra, at 248-249 (nonconclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence);
Dura Pharmaceuticals, Inc. v. Broudo — 544 U.S. 336 (2005) · Supreme Court of the United States · 2005 (15usc78j: author: Astra2 · not independently reviewed)
(4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as “transaction causation,” see Basic, supra, at 248-249 (nonconclusively presuming that the price of a publicly traded share reflects a material misrepresentation and that plaintiffs have relied upon that misrepresentation as long as they would not have bought the share in its absence);Source:
docroot/ir/caselaw/us_544.jsonl#/us/544/0336-01; Unicode character offsets [5760:6153] (end exclusive); SHA-256 d3babb1f78e697e8ce54ae719d486a42c4f4c9380530b739819d197987015075.Private plaintiff must connect the deceptive statement to the investment decision, subject to applicable rebuttable presumptions. Xia Bi addresses direct reliance in EB-5 investments; do not universalize that factual route into a rule excluding fraud-on-the-market reliance.