“Primarily Omissions” Re-Defined: Sixth Circuit’s Two-Step Test for Affiliated Ute and Rigorous Comcast Damages Review in Diane Owens v. FirstEnergy

1. Introduction

The United States Court of Appeals for the Sixth Circuit’s opinion in Diane Owens v. FirstEnergy Corporation, Nos. 23-3940/3943/3945/3946/3947 (13 Aug 2025), reshapes two pivotal class-action doctrines in federal securities litigation:

• Reliance Presumptions – When, if ever, may a mixed “omissions + misstatements” case invoke the Affiliated Ute presumption instead of the classic Basic fraud-on-the-market theory?
• Class-Wide Damages – How rigorously must district courts police the Comcast requirement that damages be “susceptible of measurement across the entire class” under the Exchange Act?

Confronting a corruption-laden securities class action stemming from FirstEnergy’s $60-million Ohio bribery scheme and the passage of House Bill 6, the panel (Boggs, Clay, Gibbons JJ.) vacated class certification and announced:

“A mixed case earns the powerful medicine of Affiliated Ute only if none of four enumerated factors show that misstatements dominate. Courts must apply a two-step framework and treat half-truths and corporate puffery as misrepresentations.”

In parallel, the court faulted the district judge for importing the Securities Act’s statutory formula into the Exchange Act context without the “rigorous analysis” that Comcast demands.

2. Summary of the Judgment

• The district court had certified a Rule 23(b)(3) class of FirstEnergy equity and bond purchasers (2017-2020) and granted plaintiffs the Affiliated Ute presumption of reliance.
• The Sixth Circuit reversed in part:
  • Adopted a two-step, four-factor test to decide whether a mixed allegations case is “primarily omissions-based.” Because all four factors pointed to misstatements, Basic, not Affiliated Ute, governs.
  • Held the damages analysis defective: the district court skipped the required Comcast “rigorous analysis” for Exchange Act claims and merely borrowed its reasoning for Securities Act claims.
• The case is remanded for:
  • Re-consideration of class certification under the Basic framework.
  • A fresh, granular assessment of class-wide damages methodology tailored to Exchange Act loss-causation principles.

3. Analysis

3.1 Precedents Cited and Their Roles

1. Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972)
   Originated the rebuttable presumption of reliance for “primarily” nondisclosure cases where proving reliance on a silence would be “unnecessarily unrealistic.”
2. Basic Inc. v. Levinson, 485 U.S. 224 (1988)
   Endorsed the fraud-on-the-market theory (FOTM) for open-market misrepresentations, copyrighting the separate Basic presumption of reliance.
3. Comcast Corp. v. Behrend, 569 U.S. 27 (2013)
   Requires a “rigorous analysis” showing damages are measurable class-wide and tethered to the certified theory of liability.
4. Goldman Sachs v. Arkansas Teachers, 594 U.S. 113 (2021)
   Characterised “generic” corporate statements as misstatements for FOTM purposes and allowed price-impact rebuttal evidence.
5. Numerous circuit cases (e.g., Waggoner, Johnston, Volkswagen Clean Diesel) developed competing tests for mixed claims and informed the Sixth Circuit’s harmonised four-factor synthesis.

3.2 The Court’s Legal Reasoning

1. Step 1 – Classify Each Allegation
   • Half-truths and puffery (“we act with integrity”) are statements, not omissions.
   • The court painstakingly binned 13 categories of alleged misconduct and found every one to involve “something said.”
2. Step 2 – Apply Four Factors
   A mixed case is still “primarily misstatements” if any factor is true:
   • (i) alleged omissions are just the inverse of the misstatements;
   • (ii) reliance can actually be proven via identified statements;
   • (iii) misstatements form the bulk and thrust of the pleadings;
   • (iv) omissions add no independent, stand-alone impact.
   All four applied here; hence Affiliated Ute was out of bounds.
3. Comcast Error
   The district court had equated Securities Act damages (mechanically set by §11/§12 formulas) with Exchange Act damages (which require proof of loss causation and market-price impact). That leap, without expert scrutiny, violated Comcast.

3.3 Anticipated Impact

• National Guidance – The Sixth Circuit becomes the first to crystallise a uniform, explicit four-factor test. Other circuits wrestling with half-truth–heavy pleadings (e.g., ESG or “greenwashing” suits) now have a ready template.
• Pleading & Certification Strategy – Plaintiffs will need to plead truly silent omissions (e.g., fiduciary duties, insider transactions) to access Affiliated Ute. Merely styling half-truths as omissions will invite dismissal or certification denials.
• Damages Methodology – District courts may no longer shortcut Exchange Act damages by piggybacking on Securities Act analysis; separate econometric proof is mandatory.
• Compliance & Disclosure – Public companies should expect renewed focus on aspirational codes of conduct; yet the judgment confirms these are “statements” with FOTM exposure.

4. Complex Concepts Simplified

• Half-Truth – Saying something technically correct but leaving out key context. Example: “I had dessert” can hide “I ate the entire cake.” The court treats half-truths as misstatements.
• Affiliated Ute Presumption – Short-cuts the need to show each investor actually relied on undisclosed information when the defendant stayed silent despite a duty to speak.
• Basic Presumption – In an efficient market, investors rely on the stock price, which embodies all public statements; if those are false, reliance is presumed.
• Loss Causation – Plaintiffs must link the drop in stock price to the revelation of the fraud, not to general market forces.
• Comcast Rigorous Analysis – At certification, the court must be convinced that damages can be measured for every class member using a model that matches the theory of liability.

5. Conclusion

Diane Owens v. FirstEnergy supplies two critical clarifications:

1. Reliance Doctrine – A plaintiff in the Sixth Circuit must now clear a structured two-step, four-factor hurdle to invoke Affiliated Ute. Half-truths, puffery, and corporate polices are misstatements, funnelling most mixed allegations to the Basic path.
2. Damages Predominance – Courts must segregate Exchange Act damages analysis from Securities Act mechanics and scrutinise plaintiffs’ econometric models under Comcast.

Beyond FirstEnergy’s billion-dollar scandal, the ruling recalibrates the balance between plaintiffs and defendants in securities class actions, discouraging over-reliance on creative pleading and mandating deeper judicial engagement with damages evidence. Future certification battles—particularly those featuring vague ESG promises or ethics-policy statements—are likely to pivot on the Sixth Circuit’s newly minted test.