United States: Second Circuit's First Published Opinion Applying Omnicare Adopts Strong Contextual Approach To Opinion Statement Liability

In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S.Ct. 1318 (2015) ("Omnicare"), the Supreme Court pronounced the standard for determining whether a statement of opinion is actionable under Section 11 of the Securities Act of 1933 (the "Securities Act"). The Second Circuit's first published opinion applying Omnicare, In re Sanofi Securities Litigation, AG Funds, L.P. v. Sanofi, Nos. 15-588-cv, 15-623-cv (2d Cir. Mar. 4, 2016) ("Sanofi"), applies Omnicare to claims challenging statements of opinion under Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), and reflects a rigorous, context-focused application of Omnicare that underscores the hurdles to pleading federal securities law claims based on omissions in connection with a statement of opinion. Concluding that the omitted facts did not, in context, render defendants' statements of opinion materially misleading, the Second Circuit affirmed the dismissal of claims under Sections 11 and 12 of the Securities Act and Section 10(b) of the Exchange Act.


In Omnicare, the Supreme Court held that even a sincerely held opinion could be actionable under Section 11's "omissions rendering an affirmative statement materially misleading" prong if the investor could 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."1 This holding modified the standard for opinion liability in the Second Circuit, which previously had required proof of subjective falsity for all forms of opinion liability.2

Sanofi is the first published opinion from the Second Circuit addressing Omnicare's newly recognized form of opinion liability. The Sanofi case concerns defendants' multiple sclerosis treatment drug Lemtrada. In April 2011, Sanofi acquired Genzyme, the biotechnology company that owned Lemtrada. As part of that acquisition, Sanofi issued contingent value rights ("CVRs") to Genzyme shareholders. The CVRs, which were publicly traded, entitled the holder to cash payouts if certain milestones, such as FDA approval of Lemtrada, were met. Between 2011 and 2013, Sanofi made statements in the offering materials for the CVRs, and subsequently to the market as a whole, to the effect that it expected the FDA to approve Lemtrada and that the clinical trials were progressing well.

Privately, the FDA had repeatedly expressed to Sanofi and Genzyme a "major concern" about the lack of double-blind studies in the Lemtrada clinical trials. The FDA had noted, however, that if the single-blind studies "reveal[ed] an extremely large effect, then the FDA [might] potentially accept" the results of such studies.3 In November 2013, in connection with the upcoming hearing on Lemtrada's application, the FDA released briefing materials that included physicians' concerns about the failure to use double-blind studies. Upon the release of those materials, the value of the CVRs dropped more than 62%. In December 2013, Sanofi announced that the FDA had formally rejected Lemtrada, resulting in a further drop in the CVRs' value. Although the FDA eventually approved Lemtrada without further clinical trials, by then the deadline for CVR milestone payments based on that approval had passed.

Two categories of CVR holders filed suit: (1) a putative class of those who had purchased CVRs between March 6, 2012 and November 7, 2013, who alleged violations of Section 10(b) of the Exchange Act and SEC Rule 10b-5; and (2) corporations that had either opted out of the class or had acquired CVRs outside of the class period, who asserted Exchange Act claims and also alleged violations of Sections 11 and 12(a)(2) of the Securities Act. Both categories of plaintiffs alleged that defendants' failure to disclose the FDA's concerns about the lack of double-blind studies rendered statements regarding the likelihood of meeting the approval milestone, upon which the CVRs' value partially depended, materially misleading.

The district court, in an opinion pre-dating Omnicare, dismissed both complaints for failure to state a claim.4  With regard to defendants' allegedly false or misleading statements of opinion, the district court held that there had been no showing of objective falsity and, invoking the pre-Omnicare standard from Fait v. Regions Financial Corp., 655 F.3d 105 (2d Cir. 2011), held that plaintiffs had failed to allege any facts suggesting that defendants "did not genuinely believe what they were saying at the time they said it."5 The Second Circuit affirmed, and wrote "principally to examine the impact of the Supreme Court's decision in Omnicare,"6 which "altered the standard announced [by the Second Circuit previously] in Fait."7

The Sanofi Decision

The Sanofi opinion addressed (1) statements in the CVR offering materials that the FDA would approve Lemtrada before the approval milestone, and (2) defendants' subsequent statements to the market about the FDA approval process, including statements that defendants were "very satisfied with where the progress is going" and "pretty relaxed." The Second Circuit held that plaintiffs had not adequately alleged that either category of opinion statements was materially misleading.

As to the first category of challenged opinions, the Second Circuit found that there was "no plausible allegation that the FDA's interim feedback conflicted with any reasonable interpretation of Defendants' statements about FDA approval."8 This was so because, although the FDA had expressed concerns about the lack of double-blind studies, it also had stated that those concerns could be overcome if the results showed an "extremely large effect," and it was undisputed that Lemtrada's treatment effect was large.9

The more interesting aspects of the Sanofi decision concern the Court's approach to assessing whether the challenged omissions could nevertheless be considered materially misleading. First, the Second Circuit emphasized "the need to examine the context of an allegedly misleading opinion."10 In this regard, the Sanofi court stressed plaintiffs' sophistication—something apparently not considered by the district court or argued in the parties' appellate briefs. Specifically, the Sanofi court concluded that, as sophisticated investors, plaintiffs were (i) aware that issuers' projections are synthesized from a wide variety of information, some of which may be in tension with the ultimate projection set forth by the issuer; and (ii) familiar with the customs and practices of the relevant industry, including that defendants and the FDA were engaged in a dialogue—necessarily including differing views—about the sufficiency of various aspects of the clinical trials.11 Moreover, the Court added, the offering materials "made numerous caveats to the reliability of the projections."12 Thus, "[w]hile a layperson, unaccustomed to the subtleties and intricacies of the pharmaceutical industry and registration statements, may have misinterpreted Defendants' statements as evincing assurance of success, Plaintiffs here can claim no such ignorance."13

Second, the Sanofi court rejected out-of-hand the suggestion that Omnicare required defendants to disclose the FDA's feedback merely because it tended to undermine their optimistic projections. Thus, even though plaintiffs "[c]ertainly ... would have been interested in knowing about the FDA feedback, and perhaps would have acted otherwise had the feedback been disclosed," Omnicare "does not impose liability merely because an issuer failed to disclose information that ran counter to an opinion expressed in the registration statement."14 In further support of this conclusion, the Sanofi court noted that the FDA had long made public its preference for double-blind trials, while defendants had publicly stated that they were relying on single-blind studies, adding: "[e]specially where a complex financial instrument whose value is tied to FDA approval is involved, investors may be expected to keep themselves apprised of the FDA's public positions on testing methodology."15

As to the next category of challenged opinions about the FDA approval process—those that post-dated the CVR offering materials—the Second Circuit concluded that they failed to support a claim "for many of the same reasons" that the statements about FDA approval that were in the offering materials failed to support a claim.16 Specifically, the Court stated that, "whatever the implication" of defendants' statements that they were feeling "relaxed" or "satisfied" with the process, "no reasonable investor would have inferred that mere statements of confidence suggested that the FDA had not engaged in industry-standard dialogue with Defendants about potential deficiencies in either the testing methodology or the drug itself."17

The Significance of Sanofi

Sanofi is important by virtue of its being the Second Circuit's first published opinion applying Omnicare, and potentially even more so to issuers given its strict adherence to the Supreme Court's admonition that pleading viable opinion omission claims should be "no small task for an investor."18 Sanofi holds that Omnicare requires only that statements of opinion "fairly align with the information in the issuer's possession at the time," and does not require that all information conflicting with that opinion be disclosed.19

Also noteworthy is the Sanofi court's consideration of the sophistication of CVR investors in analyzing whether omitted information could be considered to have rendered an opinion materially misleading. In order to guard against an "overly expansive" application of the Omnicare standard,20 the Sanofi court charged the initial CVR holders, as sophisticated investors, with responsibility for taking into consideration caveats to defendants' opinions that the court concluded should fairly have been understood or implied in light of the industry and circumstances involved. Even more interesting, perhaps, was the court's apparent application of similar reasoning to those investors who acquired CVRs later, on the public market, and might not necessarily have been "sophisticated." In this regard, the court appears to have held those investors to a similar standard as the initial CVR holders.21 How this particular aspect of Sanofi may be developed or applied in future cases will be interesting to observe, but, regardless, issuers should be heartened by the fact that the Second Circuit's first published opinion discussing Omnicare suggests that the Second Circuit will continue to narrowly limit potential opinion liability based on omissions and expect investors to understand that opinion statements are not misleading for failing to disclose allegedly contradictory facts that are not "out of the ordinary, or . . . of the kind normally confronted by pharmaceutical companies seeking FDA approval."22

Finally, Sanofi is also significant because the Second Circuit applied Omnicare to claims challenging statements of opinion under Section 10(b) of the Exchange Act, employing the same analysis it used for plaintiffs' claims under Section 11 of the Securities Act. Omnicare addressed only the Securities Act, so applying it to Section 10(b) claims reflects an extension of the Supreme Court's reasoning beyond the statute in question in Omnicare. Many courts have taken Omnicare into account in connection with Section 10(b) claims, however—with some courts holding that Omnicare actually applies to Section 10(b) claims and others holding that it can provide instructive or persuasive authority for such claims. The question whether, after Omnicare, subjective falsity continues to be required to challenge statements of opinion under Section 10(b) in light of the statute's scienter requirement remains live, and was not definitively resolved by the Second Circuit in Sanofi. The Sanofi court did not expressly address the issue—finding that no material omission had been pleaded under either the Securities Act or the Exchange Act, and not referring to scienter.


1 Omnicare, 135 S. Ct. at 1331.

2 See Fait v. Regions Fin. Corp., 655 F.3d 105 (2d Cir. 2011). The Ninth Circuit too had required proof of subjective falsity. See Rubke v. Capitol Bancorp Ltd., 551 F.3d 1156 (9th Cir. 2009).

3 Sanofi, No. 15-588-cv, slip op. at 6.

4 In re Sanofi Sec. Litig., 87 F. Supp. 3d 510 (S.D.N.Y. 2015).

5 See id. at 531-33.

6 Sanofi, No. 15-588-cv, slip op. at 5.

7 Id. at 17.

8 Id. at 19-20.

9 Id. at 20.

10 Id.

11 Id.

12 Id.

13 Id. at 21.

14 Id.

15 Id. at 22. 

16 Id. at 23.

17 Id. The Court also rejected plaintiffs' challenge to defendants' positive statements regarding Lemtrada's clinical trial results, noting that there was (i) no relationship between the FDA's critical feedback and defendants' statements touting the results of Lemtrada's trials and, moreover (ii) no conflict between the two. See id. at 23-25.

18 Omnicare, 135 S. Ct. at 1332.

19 Sanofi, No. 15-588-cv, slip op. at 18.

20 Id.

21 The Court did not explain its reasoning in this regard. It may be by virtue of plaintiffs' having decided to invest in what the court termed a "complex financial instrument," id. at 22, or, perhaps, because they must be charged with implicit knowledge in light of the presence of sophisticated investors in an allegedly efficient marketplace. 

22 Sanofi at 21-22

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