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In Omnicare, the Supreme Court Clarifies When Statements of Opinion Are Actionable Under Section 11 of the Securities Act
26 March 2015
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Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund
, the Supreme Court clarified how Section 11 of the Securities Act of 1933 applies to a statement of opinion, holding that an opinion may give rise to liability under that statute only if the issuer either
does not genuinely believe the opinion or
omits a material fact regarding the issuer’s basis for the opinion that renders it misleading to a reasonable person.
In rejecting the Sixth Circuit’s “falsity” standard, the
decision relieves issuers from a significant source of potential liability. It remains to be seen how broadly courts will interpret the Supreme Court’s holding regarding omitted facts, as well as whether investors and their counsel will seek to press new claims based on alleged omissions as courts sort out the limits of potential omission liability.
Issuers should be mindful of the Court’s guidance when crafting cautionary language concerning the basis of their opinions, estimates and judgments, as well as any significant limitations on, or “tentativeness” surrounding, their opinions.
Matthew E. Kaplan
Gary W. Kubek
Peter J. Loughran
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