United States: Second Circuit Reinforces Liability Standard In Securities Cases Based On Statements Of Opinion


The U.S. Court of Appeals for the Second Circuit reinforced the stringency of the new standard for liability in securities cases arising from allegedly misleading statements of opinion. Construing the Supreme Court's 2015 decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, the Second Circuit held in Gen. Partners Glenn Tongue v. Sanofi Pharmaceuticals, Inc. (March 4, 2016) that a statement of opinion does not become misleading based on allegedly omitted material facts unless the omitted facts conflicted with what a reasonable investor would have understood from the statement itself. The Second Circuit's decision helps to flesh out the evolving jurisprudence on when statements of opinion can be actionable under Omnicare based on an omissions theory, rather than a misrepresentation theory.

Omnicare and Liability for Opinions

Before the Supreme Court decided Omnicare in 2015, the Second Circuit – like many other courts – had held that the securities laws do not impose liability for a statement of opinion or belief unless the statement was "both objectively false and disbelieved by the defendant at the time it was expressed." The rationale was that, if a person states an opinion or belief, rather than a hard, verifiable fact, the statement cannot be "false" unless the speaker actually disbelieves the opinion.

Omnicare altered the Second Circuit's liability standard for statements of opinion by distinguishing between liability for material misrepresentations and liability for material omissions. The Supreme Court confirmed that an expression of opinion cannot be a misrepresentation unless "'the speaker did not hold the belief she professed' or 'the supporting fact[s] she supplied were untrue.'" But, as the Second Circuit recognized in Sanofi, the Supreme Court also held that "opinions, though sincerely held and otherwise true as a matter of fact, may nonetheless be actionable if the speaker omits information whose omission makes the statement misleading to a reasonable investor."  The Sanofi decision addressed Omnicare's new standard for liability based on alleged omissions.

Background of the Sanofi Case

The Sanofi case involved Sanofi's statements about a new "break-through" drug. Before the Food and Drug Administration (the "FDA") approved the drug in 2014, Sanofi and the drug's previous owner had expressed opinions about the timing of expected FDA approval, the drug's anticipated launch date, and the company's optimism about the drug's trial results. Although the drug received FDA approval, the approval came later than expected because of the FDA's initial concern about the use of "single-blind," rather than "double-blind," studies in the clinical trials – a concern that the FDA ultimately overcame.

Shareholders who had purchased contingent-value rights – whose value was tied to the achievement of certain milestones in the drug's development – brought securities claims, contending that Sanofi's and the predecessor owner's statements of opinion were misleading because defendants had not disclosed the FDA's concern about the use of single-blind studies. The District Court dismissed the case, holding that plaintiffs had failed to state a claim. The Second Circuit affirmed and wrote an opinion "principally to examine the impact of" Omnicare on the District Court's decision and on prior Second Circuit precedent (particularly the court's 2011 decision in Fait v. Regions Financial Corp.).

The Second Circuit's Decision

The court began by acknowledging that Omnicare had "altered the standard announced by this Court in Fait," which had held that statements of opinion or belief cannot be actionable unless the speaker actually disbelieved the expressed opinion. Under Omnicare, courts now must also consider whether the opinion constitutes a potentially misleading omission, which could arise if "a reasonable investor, upon hearing a statement of opinion from an issuer, 'expects not just that the issuer believes the opinion (however irrationally), but that it fairly aligns with the information in the issuer's possession at [the] time.'" The Second Circuit held (quoting Omnicare) that "[t]he core inquiry is whether the omitted facts would 'conflict with what a reasonable investor would take from the statement itself.'"

Focusing on Omnicare's "conflict" language, the Second Circuit held that defendants' expressions of opinion did not materially mislead investors. The court found "no plausible allegation that the FDA's interim feedback [about its preference for double-blind studies] conflicted with any reasonable interpretation of Defendants' statements about FDA approval." Although the FDA had raised issues about the testing methodology, it had also said that those issues could be overcome – as, in fact, they were. Thus, "[t]here can be no conflict inferred from a [corporate] statement of optimism consistent with the FDA's instructions as to the treatment results necessary for approval."

The Second Circuit also observed that Omnicare itself had rejected the argument that an opinion is misleading "'when an issuer knows, but fails to disclose, some fact cutting the other way.'"  According to the Second Circuit, Omnicare does not require issuers "to include a fact that would have potentially undermined Defendants' optimistic projections" as long as the disclosures "'fairly align[] with the information in the issuer's possession at the time.'"  "Certainly, Plaintiffs would have been interested in knowing about the FDA feedback, and perhaps would have acted otherwise had the feedback been disclosed, but Omnicare does not impose liability merely because an issuer failed to disclose information that ran counter to an opinion expressed in [an SEC filing]."

Nor will an issuer's statements of opinion be misleading merely because a government regulator disagrees with them. "[S]o long as Defendants conducted a 'meaningful' inquiry and in fact held th[e] view [expressed], the statements [will] not mislead in a manner that is actionable."


The Sanofi decision helps to clarify the post-Omnicare standard for omissions liability arising from allegedly misleading opinions.

First, the decision should squarely focus litigants and courts on whether allegedly omitted facts conflicted with how a reasonable investor would have interpreted a statement of opinion. Absent such a conflict, a statement of opinion should not be actionable on an omissions theory.

Second, the decision reinforces that an issuer need not disclose every fact relating to the opinion, even if some of those facts "cut[] the other way."  Investors are "not entitled to so much information as might have been desired to make their own determination about" the matter as to which the issuer has expressed its opinion.

Third, the decision – like the Omnicare ruling – stresses "the need to examine the context of an allegedly misleading opinion."  Relevant considerations can include the issuer's overall disclosures, the investors' sophistication, and the market's general awareness of the "'customs and practices of the relevant industry'" (in this case, the process for FDA approval of new drugs).

Second Circuit Reinforces Liability Standard In Securities Cases Based On Statements Of Opinion

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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.