The Sixth Circuit’s Two-Step Test for Affiliated Ute in Mixed Securities-Fraud Actions
(Commentary on Diane Owens v. FirstEnergy Corporation, 23-3940/3943/3945/3946/3947, 6th Cir. Aug. 13 2025)

1. Introduction

The Court of Appeals for the Sixth Circuit has delivered a precedential opinion that recalibrates class-certification doctrine in securities litigation. In Diane Owens v. FirstEnergy Corp., an interlocutory appeal from an order certifying a Rule 23(b)(3) class, the court vacated certification and crafted a clear doctrinal framework for two recurrent controversies:

1. When a plaintiff invoking both misstatements and omissions may rely on the Affiliated Ute presumption of reliance;
2. What constitutes a “rigorous analysis” of class-wide damages under Comcast Corp. v. Behrend where §10(b) claims are asserted.

The underlying factual narrative is dramatic: FirstEnergy allegedly bankrolled a \$60 million bribery scheme to secure Ohio’s House Bill 6—an operation prosecutors called one of the largest corruption scandals in state history. Stock and bond investors sued under both the Securities Act of 1933 and the Exchange Act of 1934, claiming billions in losses when the scandal surfaced. After the district court certified the class, FirstEnergy sought Rule 23(f) review.

2. Summary of the Judgment

Writing for a unanimous panel, Judge Boggs held that the district court abused its discretion on two fronts:

• Reliance. The lower court wrongly applied the Affiliated Ute presumption. The Sixth Circuit announced a two-step test plus four dispositive factors for determining whether a “mixed” case (alleging both misstatements and omissions) is “primarily omissions-based.” If even one factor indicates the primacy of misstatements, Affiliated Ute is unavailable and plaintiffs must proceed under Basic’s fraud-on-the-market theory.
• Damages. The district court failed to perform the “rigorous analysis” commanded by Comcast for Exchange Act claims. Simply importing the statutory formula that applies to Securities Act claims was error because §10(b) lacks a comparable formula and requires proof of loss causation.

The Sixth Circuit therefore vacated the certification order insofar as it rested on Affiliated Ute and remanded for a proper damages inquiry consistent with Comcast. It left open whether plaintiffs might yet prove reliance under Basic and salvage certification.

3. Analysis

3.1 Precedents Cited and Their Influence

• Affiliated Ute Citizens v. United States, 406 U.S. 128 (1972) – creates a rebuttable presumption of reliance in pure omission cases where a defendant had a duty to speak.
• Basic Inc. v. Levinson, 485 U.S. 224 (1988) – establishes the fraud-on-the-market presumption for public misstatements in efficient markets.
• Halliburton II, 573 U.S. 258 (2014); Goldman Sachs, 594 U.S. 113 (2021) – refine Basic and the defendant’s ability to rebut price-impact at certification.
• Comcast Corp. v. Behrend, 569 U.S. 27 (2013) – requires a class-wide damages model aligned with the theory of liability.
• Macquarie Infrastructure v. Moab Partners, 601 U.S. 257 (2024) – clarifies the difference between omissions and “half-truth” misstatements.
• Multiple circuit precedents (2d, 3d, 5th, 8th, 9th, 10th, 11th, D.C.) limiting Affiliated Ute to cases “primarily involving omissions.” The Sixth Circuit harmonizes with these cases but adds structure.

3.2 Legal Reasoning

3.2.1 The Two-Step Test

1. Classification: The court must first classify each challenged statement as either an omission or a misrepresentation. “Half-truths” and vague corporate bromides (“Integrity is our core value”) count as misrepresentations because they say something, albeit misleadingly.
2. Primacy Determination: A case is “primarily omissions-based” only if it fails all four factors below; otherwise it proceeds under Basic.

3.2.2 The Four Factors

1. The alleged omissions are merely the inverse of the misstatements (i.e., no independent content).
2. Plaintiffs can, in practice, prove reliance by pointing to the misstatements and their price impact.
3. The gravamen and numerical weight of the complaint lie in misstatements rather than silence.
4. The omissions have no standalone market impact apart from the misstatements.

If any factor is satisfied, the Affiliated Ute presumption is unavailable.

3.2.3 Application to FirstEnergy

• Thirteen groups of challenged statements were examined; every group consisted of affirmative statements or half-truths.
• All four factors pointed toward misstatement primacy: the “omissions” were simply the hidden bribery facts that made the public statements misleading.
• Therefore plaintiffs must satisfy Basic; the lower court’s resort to Affiliated Ute was an abuse of discretion.

3.2.4 Damages and Comcast

For §10(b) claims the district court cannot rely on Securities Act arithmetic. It must:

• Require an expert model that ties price inflation and deflation to the specific misstatements that survive class certification;
• Demonstrate that the model works for all class members’ purchases and is not swamped by individual loss-causation issues.

3.3 Impact of the Decision

The ruling has immediate and long-range consequences:

• Clarifies Circuit Split. The Sixth Circuit aligns with eight sister circuits yet contributes a formal, factor-driven methodology, likely to be cited nationwide.
• Pleading & Certification Strategy. Plaintiffs can no longer tack on token references to “omissions” to obtain Affiliated Ute. Precise pleading and expert work will be essential.
• Corporate Disclosure. Companies should recognize that broad “culture” statements, compliance codes, and ESG rhetoric are actionable misstatements, not silent omissions.
• Damages Models. In §10(b) cases, courts in the Sixth Circuit must expressly walk through Comcast; boilerplate reliance on statutory caps or formulas will not suffice.
• Potential Supreme Court Attention. Because the Fourth Circuit still reads Affiliated Ute differently (Cox v. Collins), the structured test may draw cert petitions seeking national uniformity.

4. Complex Concepts Simplified

• Affiliated Ute Presumption: When a defendant had a duty to speak but stayed silent, courts presume investors relied on the missing information, sparing plaintiffs the impossible task of proving reliance on silence.
• Basic/Fraud-on-the-Market: In an efficient market the stock price reflects all public information. Investors are presumed to rely on any public misstatement because they relied on the integrity of the market price.
• Half-Truth: A statement that is literally accurate but misleading because it omits critical context (“We’re pursuing legislative solutions” while secretly bribing legislators).
• Rule 23(b)(3) Predominance: Common questions must outweigh individual ones. Reliance and damages are frequently pivotal individual questions in securities suits.
• Comcast Rigorous Analysis: The trial court must vet the proposed damages model at certification and ensure it meshes with the liability theory.
• Loss Causation: Plaintiffs must show that the revelation of the truth (not unrelated market forces) caused their economic loss.

5. Conclusion

Owens v. FirstEnergy re-sets the bar for securities class actions in the Sixth Circuit. By erecting a structured, factor-based gatekeeping test, the court prevents automatic invocation of Affiliated Ute in cases where plaintiffs can realistically proceed under Basic. The opinion simultaneously re-affirms that Comcast applies with full force to Exchange Act damages, demanding a disciplined economic model at the certification stage. Collectively, these holdings promote doctrinal clarity, safeguard defendants’ due-process interests, and guide district courts in the careful calibration of class actions that can involve billions in potential liability.

Practitioners should study the decision closely: defendants gain potent new grounds to resist class certification, while plaintiffs must sharpen both their pleadings and their expert damages frameworks if they hope to achieve class status in the post-FirstEnergy landscape.