Omnicare

Second Circuit Applies Omnicare to Affirm Dismissal of Securities Fraud Actions

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On March 4, 2016, the Second Circuit affirmed the dismissal of two related securities actions against Sanofi Pharmaceuticals, its predecessor Genzyme Corporation, and three company executives (collectively, “Sanofi”).  In doing so, the Second Circuit offered its first substantial interpretation of the Supreme Court’s March 2015 decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (2015), which addresses how plaintiffs can allege securities claims based on statements of opinion.

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The Supreme Court’s Omnicare Decision: Implications And Remaining Questions Regarding When Opinions Are Actionable Under The Federal Securities Laws

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On March 24, 2015, the Supreme Court issued its much anticipated decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, No. 13-435, 2015 WL 1291916 (Mar. 24, 2015).  With some significant caveats (discussed below), the decision is largely protective of issuers: it enshrines the distinction between “opinions” and “facts,” and generally makes it difficult to hold issuers liable for securities fraud based on statements of opinion.

In brief, the Court held that issuers that include opinions in a registration statement may be liable under Section 11 of the Securities Act of 1933 (the “Securities Act”) for making an untrue statement of fact only when the issuer does not subjectively believe the stated opinion.  In so holding, the Court rejected the Sixth Circuit’s view that an honestly-held opinion that was at the time or later proved to be untrue could subject the issuer to liability.  As the Court put it, Section 11 “is not, as the Court of Appeals and the [plaintiffs] would have it, an invitation to Monday morning quarterback an issuer’s opinions.”

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Keep Your Unreasonable Opinions to Yourselves: The Supreme Court Hears Argument in Omnicare

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On November 3, 2014, the U.S. Supreme Court held oral argument in Omnicare v. Laborers District Council Construction Industry Pension Fund. As discussed in earlier posts, from March 18, 2014 and July 22, 2014, the Supreme Court in Omnicare has been asked to resolve a circuit split regarding the scope of liability under Section 11 of the Securities Act: does an issuer violate Section 11 if it makes a statement of opinion that is objectively false, or must the issuer also have known that the statement was false when made?

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Better Keep Your Opinions to Yourselves for Now: Second Circuit Doubles Down in Deutsche Bank Ruling in Advance of Supreme Court Review of Omnicare

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Gavel and Hundred-Dollar Bill

On July 16, 2014, a three-judge Second Circuit panel affirmed the dismissal of a securities class action against Deutsche Bank AG and several underwriters.  The case was brought on behalf of investors who purchased approximately $5.5 billion in preferred Deutsche Bank shares in 2007, and who alleged that defendants misled them about the bank’s exposure to mortgage-backed securities and other risks in a registration statement filed in October of 2006.  Plaintiffs alleged that the registration statement omitted details about Deutsche Bank’s business, including that the company failed to properly record provisions for RMBS, commercial real estate loans and exposure to monoline insurers.

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You Were Wrong, But Did You Know You Were Wrong? The Supreme Court to Resolve the Circuit Split On the Pleading Standard for Opinion-Based Allegations Under Section 11

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Can a securities plaintiff satisfy Section 11 of the Securities Act simply by alleging that a statement of opinion was objectively false, or must the plaintiff also allege that the speaker subjectively knew the statement was false when it was made?  That is the question taken up by the Supreme Court earlier this month when it granted certiorari in Omnicare, Inc. v. The Laborers District Council Construction Industry Pension Fund and the Cement Masons Local 526 Combined Funds.  As we previously discussed, the Sixth Circuit decision on appeal runs contrary to decisions in the Second and Ninth Circuits, so all eyes are on the Court to settle the debate. READ MORE →