Implications for Rule 10b-5 and Defense Strategy
Owens v. FirstEnergy Corp. No. 23-3940 (6th Cir. 2025)

by Bilal Shah & Jimmy McCutcheon

Executive summary

In its landmark ruling in Owens, et al. v. FirstEnergy Corp., et al. (“FirstEnergy”),[1] the U.S. Court of Appeals for the Sixth Circuit vacated the district court’s class‑certification order,[2] clarifying a new standard for certifying a class in securities class actions. The court held that (1) the Affiliated Ute[3] presumption applies only to cases primarily about omissions, not “mixed” cases involving both misrepresentations and omissions; and (2) district courts are instructed to conduct a rigorous, claim‑by‑claim analysis of plaintiffs’ damages methodology under Comcast,[4] with attention to differences between Exchange Act and Securities Act damages. The opinion formalizes a two‑step and four‑factor framework to identify whether a mixed case is primarily omissions-based. The provided framework implements a higher hurdle for plaintiffs to invoke Affiliated Ute in Rule 10b‑5 cases and re‑centers Basic[5] price‑impact disputes at class certification. This is important as Affiliated Ute does not require proof of reliance in omissions cases, whereas Basic requires proof of price impact from misrepresentations as the basis for presumption of reliance.

Background and procedural history

The litigation stems from the Ohio House Bill 6 public‑corruption scandal, in which, during an approximately three-year period, FirstEnergy allegedly routed approximately $60 million to political actors to secure legislative benefits. The scheme became public in July 2020 with the arrest and indictment of key figures and precipitated numerous securities suits.

Plaintiffs’ consolidated complaint was filed in February 2021, which alleged five counts of securities violations – two under the Securities Exchange Act of 1934 (“Exchange Act”) and three under the Securities Act of 1933 (“Securities Act”) – against FirstEnergy and other defendants.[6] Specifically, plaintiffs sought remedies under sections 11, 12(a)(2), and 15 of the Securities Act, and sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5.[7]

Plaintiffs argued that Defendants made a series of materially false and misleading statements and omitted material information from public disclosures. These disclosures allegedly would have affected investors’ decisions on trading Defendants’ securities and bonds. Plaintiffs claimed this artificially inflated FirstEnergy’s stock price and the price of multiple new offerings during the Class Period. Specifically, Plaintiffs alleged that Defendants mischaracterized their political activity as “legally permissible”. They further alleged that Defendants failed to disclose their fraudulent scheme in the registration statements for their new offerings.[8]

The district court denied Defendants’ motions to dismiss in March 2022 and certified the class on March 30, 2023, opining that the case was primarily omissions based, and that Affiliated Ute – a more lenient reliance presumption standard set by the Supreme Court – applied. The district court also concluded that predominance exists with respect to Exchange Act damages for the same reasons as predominance is satisfied with respect to Plaintiffs’ Securities Act claims.[9]

An interlocutory appeal regarding the class certification was lodged with the Sixth Circuit. The court addressed two questions under the Exchange Act claim by Plaintiffs. First, when can a plaintiff class be accorded a presumption of reliance under the Supreme Court’s decision in Affiliated Ute in a case that alleges both omissions and misrepresentations? Second, under the Supreme Court’s decision in Comcast, when has a district court conducted a “rigorous analysis” of whether a plaintiff class has established that “damages are susceptible of measurement across the entire class”?[10]

On August 13, 2025, the Sixth Circuit held that the class certification order was defective on both grounds and remanded for further consideration under the standards and framework set out in its opinion.

The Sixth Circuit’s ruling and its impact

A. Reliance: a two‑step and four‑factor test that narrows Affiliated Ute

Step 1: Classify each claim as an omission or a misrepresentation. The court expressly holds that half‑truths and generic, aspirational corporate statements are misrepresentations, not omissions.

Step 2: Characterize the overall case as primarily omission‑based or not. The court identifies four factors (the “Four Factors”):

1. the alleged omissions are just the inverse of the alleged misstatements;
2. reliance can be proved by pointing to an alleged misrepresentation and tying the misrepresentation to an injury;
3. the thrust of the claims is misrepresentation‑based; or
4. the alleged omissions have no standalone impact apart from the alleged misrepresentations.

If any of the above Four Factors are present, Affiliated Ute does not apply and the case proceeds (if at all) under Basic.

Applying this framework, the court concluded FirstEnergy is “all about misrepresentations,” including numerous half‑truths and generic governance statements, and as such,  Affiliated Ute did not apply.[11] The court’s discussion relies on the Supreme Court’s reasoning in Macquarie Infrastructure Corp. v. Moab Partners, L.P., which distinguishes pure omissions from half‑truths and holds that pure omissions are not cognizable under Section 10(b).[12] This framework further narrows the circumstances in which Affiliated Ute applies in mixed cases.

B. Damages: Comcast rigor, claim‑by‑claim across different statutes

To obtain class certification, plaintiffs must demonstrate that damages can be measured on a class-wide basis; otherwise, individualized damages inquiries would predominate over common issues and defeat certification. The Sixth Circuit held that the district court failed to conduct a rigorous analysis of Plaintiffs’ Exchange Act damages model under Comcast and erred by effectively borrowing Plaintiffs’ Securities Act damages analysis. Comcast requires that plaintiffs’ proposed model be capable of class‑wide measurement and be tied to the liability theory. The statutory formula under Section 11[13] is distinct from open‑ended 10b‑5 damages subject to loss‑causation constraints.

FirstEnergy warns against rubber‑stamping damages models and underscores the requirement of separate models, measured on a class-wide basis, for Securities Act and Exchange Act claims at class certification.[14]

Implications of FirstEnergy for Rule 10b-5 and beyond

1. Affiliated Ute may now be harder to invoke in the Sixth Circuit. Itis reserved for cases centered on omissions. Plaintiffs cannot manufacture omissions by relabeling half‑truths or generic statements as such. Rather, such statements are treated as misrepresentations, which defaults the case to Basic and Goldman[15] price‑impact analyses.
2. Price‑impact fights intensify at class certification. With Affiliated Ute likely inaccessible in most mixed cases, the action shifts to Basic. Defendants can rebut by showing a lack of price impact.
3. Claim‑by‑claim damages scrutiny is mandatory. Comcast requires a fit between theory and model. FirstEnergy directs that Exchange Act models be scrutinized independently from Securities Act models. Predominance cannot be assumed.
4. Persuasive authority beyond the Sixth Circuit. The opinion harmonizes with Waggoner (2d Cir.)[16] and Volkswagen (9th Cir.)[17] in limiting Affiliated Ute to true omissions. This signals wider appellate convergence.
5. The ruling is not limited to 10b‑5. The court’s damages‑rigor message applies across statutes. When plaintiffs bundle Securities Act and Exchange Act claims, courts shall vet separate damages methodologies and predominance showings for each claim set.

Practical opportunities for defense teams

A. Reliance theory mapping (pre‑certification)

• Code every allegation as omission or misrepresentation. Treat half‑truths and generic or aspirational statements as misrepresentations for Step 1. Then apply the Four Factors for Step 2 to determine if Affiliated Ute is applicable.
• Where Basic governs, plan a price‑impact rebuttal using event‑study analysis. Argue genericity where appropriate under Goldman. Conduct confounding and stale news analyses and assess if the totality of the price impact can be explained by confounding news/and or materialization of risks that had already been disclosed. Defendants bear the burden to show no price impact by a preponderance.

B. Damages model audit

• Ensure a separate analysis and response to each of the Exchange Act and Securities Act models:
  • Exchange Act claims require a model that matches the liability theory. Identify specific corrective events, isolate firm‑specific price drops, and address loss causation. Resist cross‑walking a Securities Act framework to Exchange Act claims.
  • For Securities Act claims, confirm the model implements the statutory formula. Ensure it handles offering‑date price, value at suit, and resale inputs as § 77k(e) requires.

C. Expert work product to support/oppose predominance

• Address market efficiency and Basic prerequisites, including publicity, efficiency, and timing. Use Halliburton II[18] and Goldman guidance. Include robustness checks and sensitivity analyses.
• Conduct statement‑by‑statement materiality gating. Although merits adjacent, this analysis can inform a Goldman price‑impact assessment for generic or aspirational language.

D. Strategy outside the Sixth Circuit

• Emphasize appellate convergence in limiting Affiliated Ute (2d and 9th Circuits). Use this to argue persuasive authority in other forums.

Connection to recent Supreme Court doctrine

• Macquarie (2024): Half-truths are misrepresentations under Rule 10b‑5(b). FirstEnergy operationalizes the boundary between omissions and misrepresentations at class certification by categorizing half‑truths and corporate puffery as misrepresentations. This approach steers most mixed cases into Basic rather than Affiliated Ute.
• Goldman (2021): Courts must consider the generic nature of statements when assessing price impact at certification. Defendants carry the burden of persuasion. FirstEnergy may amplify Goldman‑style disputes in the Sixth Circuit.
• Comcast (2013): Courts must conduct a rigorous predominance analysis of damages, aligning the model with the liability theory. FirstEnergy corrects the error of applying Securities Act damages logic to Exchange Act damages and requires a rigorous analysis of the models.

Broader impact in securities litigation and beyond

• Rule 10b‑5 cases: Plaintiffs may face a higher hurdle to use Affiliated Ute, particularly in mixed cases. Defense teams might assume Basic will control and be prepared with price‑impact analyses and challenges to generic statements.
• Securities Act claims (Sections 11/12): Courts shall not assume predominance based on the presence of a statutory formula. They must test plaintiffs’ application of the formula and ensure the model does not mask individualized issues such as traceability and negative causation.
• Outside of securities litigation: While Comcast arose in antitrust, FirstEnergy reaffirms that its rigorous‑analysis requirement is trans‑substantive when measuring damages on a class-wide basis. This signals closer scrutiny of damages models in other complex class actions.

How litigation consulting adds value post-FirstEnergy

1. Reliance matrix and claim taxonomy: Build a statement‑by‑statement map. Include omission vs misrepresentation, “half‑truth” flags, and genericity scoring. Align the map with the FirstEnergy two‑step and Four‑Factor framework to support a motion denying use of Affiliated Ute.
2. Event‑study price‑impact workups: Test alleged misstatements and corrective disclosures in an event study analysis. Analyze generic statements per Goldman. Develop no‑impact and disaggregation evidence for a Basic rebuttal.
3. Build Comcast‑compliant damages models:
   • Exchange Act: Build an inflation‑ribbon consistent with plaintiffs’ theory. Isolate firm‑specific returns. Address loss causation. Run a sensitivity test against confounding news.
   • Section 11: Implement § 77k(e) formula. Document assumptions for value at suit or resale. Test negative causation scenarios.
4. Expert reports and tutorials: Provide demonstratives that explain why Affiliated Ute is inapplicable in a given case. Show how the proposed damages model fits, or does not fit, the Comcast requirements.

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This publication was prepared by Bilal Shah and Jimmy McCutcheon of Secretariat for general information and distribution and is not intended to address the specific circumstances of any individual or entity. Although we endeavor to provide precise and timely information, there can be no guarantee that such information is accurate and complete as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. While the data used in this report stems from publicly available sources and are attributed throughout the publication, any analysis and views expressed are those of Bilal Shah and Jimmy McCutcheon of Secretariat alone.

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[1] Owens v. FirstEnergy Corp., No. 23-3940 (6th Cir. Aug. 13, 2025). Henceforth, “Appeals Order”.
[2] In re FirstEnergy Corp. Sec. Litig., Nos. 2:20-cv-3785 & 2:20-cv-4287, 2023 WL 2709373 (S.D. Ohio Mar. 30, 2023). Henceforth, “Class Cert. Order”.
[3] Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972).
[4] Comcast Corp. v. Behrend, 569 U.S. 27, 35 (2013).
[5] Basic Inc. v. Levinson, 485 U.S. 224, 247 (1988).
[6] Appeals Order, p. 7.
[7] Class Cert. Order. ¶23.
[8] Class Cert. Order.
[9] Class Cert. Order.
[10] Appeals Order, p. 2.
[11] Appeals Order, p. 33.
[12] 601 U.S. 257, 260–62 (2024).
[13] See 15 U.S.C. § 77k(e).
[14] Appeals Order, pp. 37-39.
[15] Goldman Sachs Grp., Inc. v. Ark. Tchr. Ret. Sys., 594 U.S. 113, 119 (2021).
[16] Waggoner v. Barclays PLC, 875 F.3d 79, 85 (2d Cir. 2017).
[17] In re Volkswagen “Clean Diesel” Mktg., Sales Pracs. & Prods. Liab. Litig., 2 F.4th 1199, 1204 (9th Cir. 2021).
[18] To invoke Basic, plaintiffs must establish: “(1) that the alleged misrepresentations were publicly known, (2) that they were material, (3) that the stock traded in an efficient market, and (4) that the plaintiff traded the stock between the time the misrepresentations were made and when the truth was revealed.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U.S. 258, 268 (2014).