Mixed Securities-Fraud Actions After Owens v. FirstEnergy:
The Sixth Circuit’s Two-Step Test for Affiliated Ute and the Reaffirmed Comcast Damages Mandate

1. Introduction

In Diane Owens v. FirstEnergy Corporation, Nos. 23-3940 et al. (6th Cir. Aug. 13 2025), the Sixth Circuit confronted two perennial flash-points in Rule 10b-5 class litigation:

1. When, if ever, can a putative securities class invoke the Affiliated Ute presumption of reliance in a “mixed” fraud case alleging both misstatements and omissions?
2. What does Comcast Corp. v. Behrend require of district courts when they certify a Rule 23(b)(3) class asserting Exchange Act claims for damages?

Unanimously authored by Judge Boggs, the opinion vacates a class-certification order in sprawling litigation over FirstEnergy’s alleged $60 million bribery scheme to secure passage of Ohio House Bill 6. Although the district judge had granted plaintiffs the benefit of Affiliated Ute and accepted their damages methodology at face value, the Court of Appeals held that both moves were premature.

Critically, the Sixth Circuit announced a new, structured, two-step framework for determining whether a mixed case is “primarily based on omissions” (and thus eligible for Affiliated Ute). It also reaffirmed that Comcast’s “rigorous analysis” of class-wide damages applies just as much to Exchange Act cases as to antitrust. These twin holdings will govern securities class actions in the Sixth Circuit and influence other circuits struggling with the same issues.

2. Summary of the Judgment

• Class Certification Vacated in Part. The panel held that the district court abused its discretion by applying the Affiliated Ute presumption because plaintiffs’ claims were primarily misrepresentation-based.
• New Two-Step Test. Judges must (i) classify each allegation as an omission or misrepresentation and (ii) assess four factors. If any factor points to predominating misrepresentations, Affiliated Ute is unavailable and the Basic “fraud-on-the-market” presumption governs.
• Damages Analysis Remanded. The panel found that the district court’s wholesale adoption of its Securities Act damages rationale for the Exchange Act counts flouted Comcast. A fresh “rigorous analysis” is required.
• Outcome. Case remanded; district court must reconsider (a) reliance under Basic and (b) a class-wide damages model consistent with plaintiffs’ sole liability theory.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

1. Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) – origin of the omission-based presumption of reliance.
2. Basic Inc. v. Levinson, 485 U.S. 224 (1988) – fraud-on-the-market presumption for public misstatements.
3. Comcast Corp. v. Behrend, 569 U.S. 27 (2013) – rigorous analysis of damages predominance.
4. Halliburton II, 573 U.S. 258 (2014) – reaffirmed Basic and price-impact rebuttal.
5. Macquarie Infrastructure Corp. v. Moab Partners, 601 U.S. 257 (2024) – distinguished “pure omissions” from “half-truths”.
6. Nine sister-circuit decisions (e.g., Waggoner, Volkswagen “Clean Diesel”, Johnston) – competing tests that the Sixth Circuit harmonises.

3.2 The Court’s Legal Reasoning

A. Two-Step Classification Framework

1. Step 1 – Claim-by-Claim Typing. Courts must label each allegation a misrepresentation or an omission. “Half-truths” and aspirational statements (“we act with integrity”) are misrepresentations, not omissions.
2. Step 2 – Four-Factor Balancing. A mixed case qualifies for Affiliated Ute only if none of the following is true:
   1. Omissions are merely the inverse of the alleged misstatements.
   2. Reliance can be proven via the misstatements themselves.
   3. Misrepresentations constitute the “preponderance and primary thrust” of the pleadings.
   4. Omissions have no standalone impact apart from misstatements.

Failing one factor dooms Affiliated Ute; plaintiffs must rely on Basic.

B. Application to FirstEnergy

• Every one of plaintiffs’ thirteen pleaded groupings was found to be a misrepresentation (often half-truths), not a pure silence.
• All four factors indicated misrepresentation predominance; therefore Affiliated Ute was inapplicable.
• The district court misclassified the case by focusing on what the company “failed to say” while ignoring how much it did say.

C. Comcast and Damages

The panel chastised the lower court for grafting its Securities Act rationale (where Congress supplies a damages formula) onto Exchange Act claims (which require proof of loss causation). A proper analysis must:

1. Scrutinise plaintiffs’ event-study or price-impact model.
2. Demonstrate that the model isolates inflation attributable only to the alleged fraud (no “value drop” from unrelated news).
3. Show that the methodology applies uniformly across all class members (bond-holders and shareholders alike).

3.3 Expected Impact

• Within the Sixth Circuit – District judges now have a clear map for deciding between Affiliated Ute and Basic. The decision is immediately precedential for Ohio, Michigan, Kentucky and Tennessee.
• National Dialogue – The opinion synthesises the scattered approaches of nine other circuits and may be cited as a persuasive harmonisation, especially in the Fourth Circuit (whose bright-line rule in Cox the panel explicitly criticized).
• Pleading Strategy – Plaintiffs will think twice before sprinkling “and omitted” language into primarily misstatement cases, because doing so no longer triggers the easier Affiliated Ute path.
• Class Certification Battles – Defendants gain a blueprint for attacking reliance and damages; plaintiffs will need stronger price-impact analyses up-front.
• Regulatory Compliance & Disclosure – Corporations issuing “soft” ESG or ethics statements should regard them as potentially actionable misstatements, not harmless puffery.

4. Complex Concepts Simplified

• Presumption of Reliance – In fraud-on-the-market cases, courts presume investors relied on publicly available information embedded in the stock price; otherwise each investor would have to testify individually.
• Affiliated Ute vs. Basic – Affiliated Ute helps when the fraud is silence; Basic helps when the fraud is spoken. The Sixth Circuit says you can’t mix them unless silence truly dominates.
• Half-Truth – A statement that is accurate on its face but misleading because it withholds key context (“I had dessert” after eating the whole cake).
• Rule 23(b)(3) Predominance – Common issues must outweigh individual ones (liability, damages, reliance). Presumptions and uniform damages models help achieve this.
• Loss Causation – Plaintiffs must link a drop in security price specifically to revelation of the fraud, not to general market forces.
• Comcast Rigorous Analysis – Courts must test, not simply accept, expert models to ensure damages flow from the alleged wrongdoing and are measurable for every class member.

5. Conclusion

Owens v. FirstEnergy is more than a procedural skirmish; it is a doctrinal milestone. By declaring that a mixed securities-fraud suit may tap the powerful Affiliated Ute presumption only when all four safeguards tilt toward true omissions, the Sixth Circuit has tightened the gateway to class certification. Simultaneously, it underscored that Comcast is not an antitrust one-off but a universal demand for quantitative rigor.

Going forward, litigants in the Sixth Circuit—and likely well beyond—must carefully parse their pleadings, segregate omissions from misstatements, and be prepared to defend or attack a class-wide damages methodology with econometric precision. The decision thus recalibrates the balance between investor protection and defendant fairness, anchoring it in structured analysis rather than pleading artifice.