575 U.S. 175, 183–184 (2015)
In 2005, Omnicare, Inc., the nation’s largest provider of pharmacy services for residents of nursing homes, filed a registration statement with the Securities and Exchange Commission in connection with a public offering of its common stock.1
The registration statement contained two statements expressing Omnicare’s opinion on legal compliance: “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.”2 Adjacent text noted state-initiated enforcement actions against pharmaceutical manufacturers for offering payments to pharmacies.3 It cautioned that laws might be interpreted inconsistently with Omnicare’s views.4 It warned that business could suffer if federal concerns about rebates led to the end of price concessions.5
Respondents, pension funds that purchased Omnicare stock in the offering, sued after the Federal Government filed suit against Omnicare alleging receipt of kickbacks from pharmaceutical manufacturers in violation of anti-kickback laws.6 Their complaint alleged that the opinion statements were materially false.7 Their complaint alleged that Omnicare had omitted material facts necessary to make the statements not misleading, including an attorney’s warning that a particular contract carried a heightened risk of liability.8 The complaint expressly excluded and disclaimed any allegation that could be construed as alleging fraud or intentional or reckless misconduct.9
The United States District Court for the Eastern District of Kentucky granted Omnicare’s motion to dismiss.10 The Court of Appeals for the Sixth Circuit reversed.11 The Supreme Court granted certiorari.12
Whether a statement of opinion in a securities registration statement constitutes an untrue statement of a material fact under Section 11 of the Securities Act of 1933 solely because the opinion ultimately proves incorrect?13
A statement of opinion does not constitute an untrue statement of a material fact under Section 11 simply because the stated opinion ultimately proves incorrect.14 Section 11 exposes issuers to liability only for untrue statements of fact.15 A sincere statement of pure opinion remains true even if later shown to be erroneous because it conveys only the speaker's belief rather than a certainty about the underlying subject.16
No. Omnicare's registration statement contained two statements expressing the company's opinion that its contract arrangements were in compliance with applicable federal and state laws.17 The statements also expressed the opinion that its contracts with pharmaceutical manufacturers were legally and economically valid.18 The pension funds alleged that these opinions were materially false because Omnicare was in fact receiving kickbacks in violation of anti-kickback laws.19 The complaint expressly excluded and disclaimed any allegation that could be construed as alleging fraud or intentional or reckless misconduct.
Because the statements were pure opinions and the funds did not contest that Omnicare actually believed them when made, the statements do not constitute untrue statements of material fact under the first clause of Section 11.20
The opinion statements do not give rise to liability under Section 11's false-statement provision.21
Related opinions on this issue
Justice Scalia concurred in the judgment on the false-statement issue.22 He emphasized that an expression of opinion implies facts beyond the speaker's own belief only where a reasonable listener would understand it to do so.23 He argued that the majority's approach would count far more expressions of opinion as conveying collateral facts than the common law would allow.24
He would limit liability to cases where the opinion implies the speaker knows no facts incompatible with it.25 He would also limit liability to cases where the speaker has a reasonable basis only in narrow circumstances such as relationships of trust or expert opinions on matters within their expertise.26
Whether an issuer can be liable under Section 11's omissions clause when a registration statement omits facts about the issuer's inquiry into or knowledge concerning a statement of opinion that conflict with what a reasonable investor would take from the statement itself?27
An issuer can be liable under Section 11's omissions clause if a registration statement omits material facts about the issuer's inquiry into or knowledge concerning a statement of opinion.28 Those facts must conflict with what a reasonable investor reading the statement fairly and in context would take from the statement itself.29 Liability arises when the omitted facts show that the issuer lacked the basis for the opinion that a reasonable investor would expect.30 An opinion is not misleading merely because the issuer knows some fact cutting the other way.31
Yes. The pension funds alleged that Omnicare omitted material facts necessary to make its legal-compliance opinions not misleading.32 The omitted facts included an attorney's warning that a particular contract carried a heightened risk of liability under anti-kickback laws.33 The registration statement included some caveats about enforcement actions and federal concerns.34
It did not disclose the specific attorney warning or other facts about the basis for the opinions.35 On remand the lower court must determine whether the complaint adequately alleges that Omnicare omitted specific facts that would have been material to a reasonable investor.36 The court must also determine whether those omissions rendered the opinion statements misleading when read in the full context of the registration statement, including its hedges and disclaimers.37
The case is remanded for determination of whether the pension funds have stated a viable omissions claim under the proper standard.38
Related opinions on this issue
Justice Scalia concurred only in part on the omissions issue.39 He argued that the majority's objective test for what a reasonable investor would expect as a basis for an opinion is incompatible with the common law and common sense.40 He maintained that a listener assumes an expert has conducted an investigation the expert deems adequate, not one the listener considers reasonable.41
He maintained that liability should not attach when the speaker and listener honestly disagree on the nature of the investigation absent subjective intent to deceive.42
Justice Thomas concurred in the judgment but wrote separately to state that the Court should not have addressed the omissions theory at all because it was not properly before the Court.43 He noted that the question was never passed on below.44 He noted that the funds did not articulate the theory until their merits brief.45
He noted that the highly fact-intensive nature of the inquiry counseled against deciding it without the benefit of lower-court consideration in an actual case.46