Fulton County Employees Retirement System v. MGIC Investment Corp., 675 F.3d 1047

MGIC Insurance Corporation insured mortgages and faced a market-wide subprime crisis affecting its securitization ventures, including C-BASS.
C-BASS was 46% owned by MGIC and 46% by Radian; the remaining 8% was held by C-BASS managers, creating a joint-venture structure with no single controlling bloc.
C-BASS engaged in purchasing, packaging, and securitizing subprime loans, using margin financing subject to margin calls when collateral values fell.
In 2007, C-BASS faced substantial margin calls; by July 19, 2007 it had $150 million in cash reserves, after meeting large margin calls earlier in the year.
MGIC publicly stated C-BASS had “substantial liquidity,” while Fulton alleged the statement was misleading given later margin calls and liquidity concerns.
The district court dismissed most claims under PSLRA; Fulton’s remaining claim centered on the July 19 earnings call statements and related disclosures.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the July 19 statements about C-BASS liquidity were fraudulent	Fulton contends the statements misrepresented liquidity and concealed looming margin calls.	MGIC argues the statements portrayed current position accurately and were not knowingly false.	No; statements were not fraudulent under PSLRA; disclosure about liquidity and warning language rendered scienter unlikely.
Whether MGIC can be held liable under § 20(a) for Williams/Draghi's statements	MGIC’s 46% stake in C-BASS gives rise to control liability for the statements of Williams and Draghi.	No single bloc could control C-BASS; Williams/Draghi acted independently for their firm.	No; § 20(a) does not apply where no controlling party existed and management was balanced between MGIC and Radian.
Whether MGIC is directly liable under § 10(b)/Rule 10b-5 for aiding statements	MGIC invited Williams/Draghi to speak and thereby made their statements.	Janus Capital controls that the maker is the entity with ultimate authority; MGIC did not control those statements.	No; Janus Capital precludes holding MGIC as the maker of those statements.

Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Supreme Court 2007) (requires a plausible inference of scienter at least as likely as any non-culpable inference)
Wielgos v. Commonwealth Edison Co., 892 F.2d 509 (7th Cir. 1989) (firm-specific disclosure required; industry-wide facts not actionable)
Janus Capital Group, Inc. v. First Derivative Traders, 131 S. Ct. 2296 (U.S. 2011) (maker of a statement is the entity with ultimate authority over its language)
Denny v. Barber, 576 F.2d 465 (2d Cir. 1978) (no securities fraud by hindsight)
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (Supreme Court 2007) (see Tellabs discussion above; reused for scienter standard)