Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund

Supreme Court of the United States · 2015 · Corporations

CorporationsSecuritiesSection 11Statements of opinionMaterial omissionsSecurities Act of 1933Section 11registration statement

Facts

Omnicare filed a registration statement for a public stock offering that included two statements that it believed its contractual arrangements and pharmacy practices complied with federal and state law and that its contracts with pharmaceutical manufacturers were legally and economically valid. The statement also included cautions that enforcement actions had been brought against pharmaceutical manufacturers, that the federal government had expressed concerns about certain rebates, and that the relevant laws might later be interpreted differently. Pension funds that bought the stock alleged that Omnicare's receipt of payments from drug manufacturers violated anti-kickback laws and that the opinions on legal compliance were false or misleading by omission. The complaint also alleged that an Omnicare attorney had warned that a particular contract carried a heightened risk of anti-kickback liability, while disclaiming any fraud allegations.

Issue

When does a statement of opinion in a registration statement create liability under § 11 of the Securities Act? Specifically, is an honestly held but ultimately incorrect opinion an 'untrue statement of material fact,' and when can omitted facts make an opinion statement misleading?

Rule

A pure statement of opinion is not an 'untrue statement of material fact' under § 11 merely because the opinion ultimately proves incorrect; it is actionable as a false statement only if the speaker did not actually hold the stated belief or if the opinion statement contains an embedded false factual assertion. Separately, § 11's omissions clause can create liability when the registration statement omits material facts about the issuer's inquiry into or knowledge concerning the opinion, and those omitted facts conflict with what a reasonable investor would take from the opinion statement when read fairly and in context. A plaintiff must identify particular material facts about the basis for the opinion whose omission makes the statement misleading; alleging only that the opinion was wrong or lacked reasonable grounds in conclusory fashion is insufficient.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Lakeview Diagnostics, a Minnesota medical-device issuer, filed a registration statement for a stock offering in Chicago stating, "We believe our billing protocols comply with applicable state reimbursement laws." Management honestly held that view when the filing became effective. A year later, a Wisconsin court interpreted the law differently and held the protocols unlawful.

Investors sue under Securities Act § 11, alleging only that the statement turned out to be wrong. Which is the best answer?

Explanation. Under the majority rule, a pure opinion is not actionable under § 11's false-statement clause just because it later turns out to be wrong. The statement "we believe" conveys a belief, not certainty. Strict liability under § 11 does not erase the distinction between fact and opinion. The claim would require allegations that the speaker did not actually hold the belief or that the opinion contained an embedded false fact.