United States: Second Circuit Narrowly Applies Supreme Court's Decision In Omnicare

In In re Sanofi Securities Litigation, No. 15-588-cv, 2016 U.S. App. LEXIS 4107 (2d Cir. Mar. 4, 2016), the United States Court of Appeals for the Second Circuit affirmed the dismissal of class action complaints alleging that the defendants had made materially false or misleading statements or omissions in their registration statement. The Court examined the impact of the United States Supreme Court's intervening decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S.Ct. 1318 (2015) (previously covered here), which held that a statement of opinion which omits material facts about the issuer's knowledge may be misleading if the omitted facts conflict with what a reasonable investor would infer from reading the statement in context. The Second Circuit in Sanofi held that statements of opinion were not misleading under Omnicare where they omitted a fact that did not conflict with what a reasonable investor would take from the statement. The court further noted that statements of opinion are not misleading simply because they omit facts cutting the other way.

The claims at issue in Sanofi centered on statements made regarding Lemtrada, a multiple sclerosis ("MS") drug being developed and tested by defendant Genzyme. While Lemtrada was still under review by the United States Food & Drug Administration ("FDA"), defendant Sanofi acquired Genzyme. As a result of the sale, defendants' shareholders received, among other things, contingent value rights tied to the achievement of certain "milestones" related to the success of Lemtrada. Defendants made public statements regarding Lemtrada, its clinical results, and its potential approval by the FDA, both in SEC filings and other venues. Those statements did not disclose that the FDA had expressed concern that Lemtrada was being tested using single-blind, rather than double-blind, studies. The FDA rejected Lemtrada's initial application referencing, among other things, concerns about the failure to use double-blind studies. The FDA ultimately approved Lemtrada for the treatment of MS, but did so only after the deadline for the Approval Milestone had passed.

Plaintiffs brought class action complaints against defendants, alleging violations of various securities laws, including Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), Securities & Exchange Commission Rule 10b-5, and Section 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. § 78t(a). Plaintiffs alleged that defendants had made false and misleading statements about Lemtrada by failing to disclose feedback received from the FDA regarding the use of single-blind studies. Plaintiffs challenged three groups of statements: (1) statements regarding the expected timing of FDA approval; (2) statements regarding the timing of Lemtrada's launch; and (3) statements regarding Lemtrada's trial results. Defendants moved to dismiss.

The United States District Court for the Southern District of New York granted the motion to dismiss, holding that plaintiffs had failed to allege false or materially misleading statements. As pertinent to the appeal, the court held that plaintiffs had failed to allege facts suggesting that any statements of opinion that had been made were objectively false, or that defendants did not believe the statements when they made them.

After the district court issued its opinion in this case, the United States Supreme Court decided Omnicare. Omnicare refined the Second Circuit's standard for analyzing a statement of opinion is materially misleading. Under Omnicare, sincerely held opinions may be actionable if the speaker omits information, the omission of which renders the statement misleading to a reasonable investor. Under this new standard, the core inquiry is whether the omitted facts would conflict with what a reasonable investor would take from the statement itself.

In Sanofi, the Second Circuit affirmed, emphasizing two points from Omnicare. First, in order for a statement of opinion to be misleading, it must conflict with what a reasonable investor would take from the statement itself. Applying this principle to statements regarding the timing of FDA approval, the court found that Defendants' statements were not misleading. Though the FDA had made preliminary statements expressing concern about the use of single-blind testing, other statements made by the FDA indicated that the concern could be overcome. The omitted information thus did not conflict with the optimistic opinion. The court noted that context was also important to this determination. Here, plaintiffs were sophisticated investors who were familiar with the pharmaceutical industry. They would have expected the FDA to discuss the sufficiency of the clinical trials with defendants, and would have considered the caveats included in defendants' written statements. That the statement of opinion ultimately proved incorrect did not render it misleading.

Second, the Court emphasized that a statement of opinion is not necessarily misleading when an issuer knows, but fails to disclose, a fact cutting the other way. Issuers are required to make statements that fairly align with the information in their possession but are not required to disclose facts that potentially undermine that opinion. Accordingly, the Court held that defendants' statements were not misleading simply because they had not disclosed facts that tended to cut against their opinion. The Court held this was particularly true given plaintiffs' familiarity with the drug approval process.

The Second Circuit also applied these principles to two other groups of statements. The Court held that defendants' statements regarding the timing of Lemtrada's launch were generalized statements of subjective optimism or confidence. Such statements were not actionable both because they did not conflict with the information available to the defendants and because no reasonable investor would have inferred that statements of confidence meant the FDA was not discussing potential deficiencies in the testing protocol with defendants. The Court similarly held that defendants' statements that Lemtrada demonstrated a strong treatment effect in trials were not actionable, because plaintiffs failed to show a relationship between the omitted information and the statements, and failed to demonstrate any conflict between the two. The Court noted that the defendants' statements were not misleading simply because the FDA disagreed with defendants' interpretation of the data.

Sanofi provides useful; guidance as to how courts will interpret and apply Omnicare. Although issuers may be held liable for statements of opinion that omit facts which conflict with what a reasonable investor would take from their statement, they may not be held liable simply because they did not disclose a fact which merely cut the other way.

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.

Events from this Firm
24 Oct 2017, Seminar, Los Angeles, United States

Presented by The American Bar Association White Collar Crime Committee.

24 Oct 2017, Conference, Los Angeles, United States

Corporate transactions are not just in the domain of M&A corporate attorneys. This program will cover the important role of employment and benefits counsel in shaping mergers and acquisitions. The presenters will provide practical guidance on conducting due diligence of labor, employment, employee benefits and executive compensation arrangements of target companies.

25 Oct 2017, Business Breakfast, New York, United States

Please join us for a complimentary breakfast program and networking with private equity investment banking professionals to discuss private equity activity and prospective deal flow opportunities in the technology industry.

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.