The Sixth Circuit Establishes A Lenient Standard For Pleading A Section 11 Claim Based On An Allegedly Misleading Opinion In A Registration Statement

The United States Court of Appeals for the Sixth Circuit recently issued an important decision regarding the requirements for stating a claim under Section 11 of the Securities Act of 1933 based on an allegedly misleading opinion in a registration statement. In Indiana State District Council of Laborers & HOD Carriers Pension & Welfare Fund v. Omnicare, Inc., 2013 US App. LEXIS 10385 (6th Cir. May 23, 2013), the Sixth Circuit ruled that, when a plaintiff asserts a Section 11 claim premised on an allegedly false statement of opinion or belief, the plaintiff must plead (and eventually prove) that the statement was objectively false, but does not have to plead or prove that the defendant knew the statement was untrue at the time it was made. This ruling conflicts with decisions by the Second and Ninth Circuits, which have held that an opinion can give rise to a claim under Section 11 only if the complaint alleges that the statement was both objectively false and disbelieved by the defendant at the time it was made. See Fait v. Regions Fin. Corp., 655 F.3d 105, 110 (2d Cir. 2011); Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156, 1162 (9th Cir. 2009).

Background

Omnicare, Inc. ("Omnicare") is the largest provider of pharmaceutical care services for the elderly in the United States and Canada. On December 15, 2005, Omnicare conducted a secondary public offering of more than 12 million shares of common stock. A month later, in January 2006, several government agencies raided Omnicare facilities, and by late 2006, Omnicare and one of its subsidiaries settled allegations of illegal activity, including alleged kickback arrangements with pharmaceutical manufacturers and the submission of false claims to Medicare and Medicaid.

The plaintiffs, who purportedly purchased shares of Omnicare stock in the secondary public offering, alleged that Omnicare and certain of its officers and directors violated Section 11 by making material misstatements or omitting material facts in the registration statement for the secondary public offering. In particular, the plaintiffs alleged that the registration statement was materially misleading because it stated that Omnicare's contracts with drug companies were "legally and economically valid arrangements that bring value to the healthcare system and patients that [it] serve[s]." The plaintiffs claimed that the defendants' statement about "legal compliance" was materially misleading in light of its allegedly illegal...