United States: 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.

A. 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

B. 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 false,"7 a claim will be viable under Section 11's "omission" prong if an investor can "identify particular (and material) facts going to the basis for the issuer's opinion . . . whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context."8 The Sixth Circuit's decision was thus vacated, and the case was remanded for consideration of Plaintiffs' omission claim under the standard articulated by the Court.

I. Honestly Held Pure Statements of Opinion Cannot Be Challenged as Material Misstatements of Fact Under Section 11

Plaintiffs expressly disclaimed any argument that Omnicare's statements of opinion regarding legal compliance were not honestly held. The issue under Section 11's misstatement prong thus was whether an honestly-held statement of opinion could be actionable on the grounds that it was "objectively false." The Court held it could not be, rejecting the Sixth Circuit's holding to the contrary.9

The Court observed that the difference between "fact" and "opinion" is "ingrained in our everyday ways of speaking and thinking," and that Section 11 "effectively incorporated just that distinction" by exposing issuers to liability not merely for "untrue statements" (which would have included statements of opinion), "but only for 'untrue statement[s] of . . . fact.'"10 The Court noted that the only fact explicitly affirmed in every statement of opinion is that "the speaker actually holds the stated belief."11 Thus, if the speaker honestly holds his or her stated opinion (which was conceded in Omnicare), the fact that the speaker's belief turns out to be wrong is not enough to allege an "untrue statement of a material fact" under Section 11. As the Court put it, "[t]hat clause, limited as it is to factual statements, does not allow investors to second-guess inherently subjective and uncertain assessments."12

II. The Court Opens the Door to Section 11 Omission Claims Challenging Statements of Opinion, but with Important Limits

The Court then considered an issue not addressed by the lower courts in Omnicare: when, if ever, the omission of a fact can make a statement of opinion, even if honestly held, actionable under Section 11. The Court held that, as applied to statements of opinion, Section 11's omission clause requires considering the foundation a reasonable investor would expect the issuer to have had before stating the opinion in question.13 As the Court explained: "a reasonable investor may, depending on the circumstances, understand an opinion statement to convey facts about how the speaker has formed an opinion—or, otherwise put, about the speaker's basis for holding that view. And if the real facts are otherwise, but not provided, the opinion statement will mislead its audience."14 Thus, "if a registration statement omits material facts about the issuer's inquiry into or knowledge concerning a statement of opinion, and if those facts conflict with what a reasonable investor would take from the statement itself," Section 11's omission clause could create liability.15 Under this standard, a viable Section 11 omission claim can be stated if the investor can "identify particular (and material) facts going to the basis for the issuer's opinion—facts about the inquiry the issuer did or did not conduct or the knowledge it did or did not have—whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context."16

The Court observed that meeting that standard would be "no small task for an investor,"17 and stressed that its holding does not permit plaintiffs to bring omission claims "by alleging only that an opinion was wrong; the complaint must as well call into question the issuer's basis for offering the opinion."18 The Court further stated that issuers are not required to disclose every fact that cuts against the opinion statement, stating that "[r]easonable investors understand that opinions sometimes rest on a weighing of competing facts."19 Ultimately, the Court noted, "whether an omission makes an expression of opinion misleading always depends on context."20 The Court recognized that its holding would require lower courts to make fact-specific determinations as to what a "reasonable person . . . would naturally understand a statement to convey beyond its literal meaning,"21 but noted that "courts have for decades engaged in just that inquiry."22 The Court accordingly vacated the Sixth Circuit's decision and remanded for consideration of whether Plaintiffs had stated a viable omission claim under the standard articulated by the Court.23

C. Significance of Omnicare

From the defense perspective, while the Court's repudiation of the Sixth Circuit's "objective falsity" standard for Section 11 material misstatement claims is an important victory, the Court's omissions analysis could invite more Securities Act claims attacking statements of opinion. Issuers frequently offer statements of opinion concerning "inherently subjective and uncertain assessments," including, for example, with respect to matters required by GAAP (such as goodwill calculations, reserves or loss contingencies). In the wake of Omnicare, an issuer cannot be confident that Section 11 challenges to such opinions will be subject to dismissal simply because the plaintiff is unable to adequately allege subjective falsity. Accordingly, issuers may need to consider, among other things, whether or the extent to which statements of opinion can or should be coupled with appropriate caveats (beyond those that inhere in the very nature of an opinion) or with an elucidation of the rationale or basis underlying the opinion. And with relatively little guidance from the Supreme Court on how to apply a context-specific standard, the outcomes in Section 11 cases challenging statements of opinion on an omission theory can be expected to vary depending upon the judge. Having said that, the Supreme Court's admonition that going the omissions route will be "no small task for investors," and its seeming requirement of a tight and specifically pleaded nexus between the opinion and a truly important omitted fact regarding its basis, bear emphasis. Properly construed, we believe the Court's decision should allow potential opinion liability based on omissions in a relatively narrow set of cases rather than open the floodgates to opinion-focused claims.


1Plaintiffs filed their original complaint in February 2006 as a putative class action alleging violations of § 10(b), Rule 10b-5 and § 20(a) of the Securities and Exchange Act of 1934. See Ind. State Dist. Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., 583 F.3d 935, 939 (6th Cir. 2009). Plaintiffs later amended the complaint to add a § 11 claim. On October 12, 2007, the district court granted Omnicare's motion to dismiss the original complaint in its entirety. See Ind. State Dist. Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., 527 F. Supp. 2d 698 (E.D. Ky. 2007), aff'd in part, rev'd in part, 583 F.3d 935 (6th Cir. 2009). On October 21, 2009, the Sixth Circuit affirmed the district court judgment regarding all claims except the § 11 claim, which was remanded to the district court for further analysis. See Ind. State Dist. Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., 583 F.3d at 947. Plaintiffs were then granted leave to amend the complaint to assert the § 11 claims at issue in Omnicare.

2Omnicare, Inc. v. Laborers Dist. Council Const. Indust. Pension Fund, No. 13-435, 575 U.S. ___, 2015 WL 1291916, at *4 (Mar. 24, 2015).

3Ind. State Dist. Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., 719 F.3d 498, 501 (6th Cir. 2013) cert. granted sub nom. Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 134 S. Ct. 1490, 188 L. Ed. 2d 374 (2014) and vacated and remanded sub nom. Omnicare, Inc. v. Laborers Dist. Council Const. Indust. Pension Fund, No. 13-435, 2015 WL 1291916 (Mar. 24, 2015).

4Ind. State Dist. Council of Laborers & Hod Carriers Pension & Welfare Fund v. Omnicare, Inc., No. CIV.A. 2006-26 WOB, 2012 WL 462551, at *4-5 (E.D. Ky. Feb. 13, 2012) aff'd in part, rev'd in part and remanded, 719 F.3d 498 (6th Cir. 2013) vacated and remanded sub nom. Omnicare, Inc. v. Laborers Dist. Council Const. Indust. Pension Fund, No. 13-435, 2015 WL 1291916 (Mar. 24, 2015).

5 Omnicare, 719 F.3d at 506.

6 Section 11 provides in relevant part: "In case any part of the registration statement, when such part became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring such security . . . [may] sue." 15 U.S.C. §77k(a). 7 Omnicare, 2015 WL 1291916, at *7.

8 Id. at *10.

9As the Sixth Circuit itself recognized, its decision in this regard was in conflict with decisions from the Second and Ninth Circuits. See Fait v. Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011); Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156 (9th Cir. 2009).

10 Omnicare, 2015 WL 1291916, at *10 (emphasis in original).

11Id. at *6. The Court did recognize, however, that a statement of opinion can also contain embedded statements of fact. The Court illustrated this point in the following example: "I believe our TVs have the highest resolution available because we use a patented technology to which our competitors do not have access." In that example, the Court stated, whether the TVs actually did use a patented technology was a statement of fact that, if material, could be actionable under Section 11's misstatement prong. The Court stressed, however, that the statements at issue in Omnicare contained no embedded facts and were pure statements of opinion. See id. at *6-7.

12Id. at *7.

13 Id. at *8, 10.

14 Id. at *8.

15 Id.

16Omnicare, 2015 WL 1291916, at *10.

17 Id.

18 Id.

19 Id. at *8.

20 Id. at *9.

21Id. at *10.

22 Omnicare, 2015 WL 1291916, at *11.

23 Id. Although Omnicare's registration statement contained some caveats accompanying its legal compliance opinion statements, Plaintiffs contended that one of Omnicare's attorneys had warned that a particular contract carried a heightened risk of liability. Id. at *4. The Court instructed that, on remand, the lower court would need to determine whether the complaint adequately alleged that the registration statement omitted a fact that would have been material to a reasonable investor and, if so, whether that omission rendered Omnicare's legal compliance opinions misleading, taking into account such things as the statements' context. Id. at *12.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions