Litwin v. Blackstone Group, L.P.

Blackstone Group (defendant), a financial services firm, held a 23% stake in insurer FGIC, which by 2007 was providing credit default swap insurance on subprime-backed securities just as subprime lenders began warning of major losses amid a broader real estate downturn. Around this time, Blackstone launched an IPO without informing potential investors of the real estate trends affecting FGIC's business, even though Blackstone's FGIC stake, worth $331 million, represented only 0.4% of its total assets. Litwin (plaintiff) brought a putative class action alleging Blackstone violated SEC Regulation S-K Item 303 by omitting this FGIC-related information from its Registration Statement and Prospectus; the district court granted Blackstone's motion to dismiss for lack of materiality, and Litwin appealed.