The U.S. Supreme Court found middle ground in Omnicare this week, holding that issuers’ statements of opinion issued in registration statements can be the basis for liability under Section 11 if either the speaker does not actually hold the stated opinion, or the statement omitted facts regarding the basis for the opinion and those omissions made the statement misleading in context. Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, No. 13-435 (March 24, 2015).
The Omnicare case involved a pharmacy operator that was alleged to be giving improper kickbacks to nursing homes that used its services. Plaintiffs sued Omnicare, arguing that two statements of opinion included in Omnicare’s registration statement were false and thus actionable under Section 11 of the Securities Act of 1933. These statements were:
- “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
- “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.”
Defendants responded that the complaint fails because defendants subjectively believed that their opinion statements were true at the time, so even if such statements were wrong in hindsight, they could not be held liable. The 6th Circuit sided with plaintiffs and held that if an opinion is proven to be false—even in hindsight—it is actionable under Section 11. The 6th Circuit’s opinion stood in direct contradiction with the 2nd, 3rd and 9th Circuits and set the stage for determination of under what circumstances opinions could be actionable under Section 11.
Click here to read the full alert.