Supreme Court Sets Standard For Section 11 Opinion Statement Liability In Omnicare Ruling

In its much-anticipated decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund ("Omnicare"), No. 13-435 (Mar. 24, 2015), the United States Supreme Court held that an honestly-held statement of opinion is not actionable as a misstatement of fact under Section 11 of the Securities Act of 1933, regardless of whether the opinion could be characterized as "objectively false." Recognizing a different form of opinion liability, however, the Court held that a valid Section 11 claim may exist if the omission of material facts relating specifically to the basis for the opinion renders the opinion statement misleading. This latter ruling may, at least until more guidance is provided, invite more Securities Act claims attacking statements of opinion, particularly in jurisdictions, including the Second and Ninth Circuits, where proof of subjective falsity previously was required for all forms of opinion liability.

1. Background

   Omnicare, Inc. ("Omnicare") is the nation's largest provider of pharmacy services for nursing home residents.1 Plaintiffs' Section 11 claims are based on alleged misstatements and omissions in the registration statement filed in connection with Omnicare's public offering of common stock that took place on December 15, 2005.

   Specifically, Plaintiffs criticize two statements in Omnicare's registration statement: (i) "We believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws"; and (ii) "We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements that bring value to the healthcare system and the patients that we serve."2 Plaintiffs allege that "Omnicare was engaged in a variety of illegal activities including kickback arrangements with pharmaceutical manufacturers and submission of false claims to Medicare and Medicaid" and that, as a result, the statements of opinion regarding Omnicare's legal compliance were materially false and misleading.3 The district court dismissed Plaintiffs' Section 11 claims, holding that "statements regarding a company's belief as to its legal compliance are considered 'soft' information," and are only actionable if the speaker "knew [they] were untrue at the time."4 The Sixth Circuit reversed, holding that Plaintiffs were not required to allege that Omnicare disbelieved the opinions at the time they were expressed (i.e., "subjective falsity") to state a Section 11 claim, but rather needed to allege only that the speaker's stated belief was "objectively false."5

2. The Omnicare Decision

   Justice Kagan delivered the opinion of the Court and, in contrast to the lower courts, separately considered Plaintiffs' claims under Section 11's "misstatement" and "omission" prongs.6 As detailed below, while the Court held that the "untrue statement of a material fact" prong of Section 11 does not allow investors to challenge sincerely-held statements of pure opinion on the basis that they are "objectively...