Term: 2014
Docket: 13-435
Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund
- Pro
13-435 OMNICARE, INC. V. LABORERS DIST. COUNCIL DECISION BELOW: 719 F.3d 498 CERT. GRANTED 3/3/2014 QUESTION PRESENTED: Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k, provides a private remedy for a purchaser of securities issued under a registration statement filed with the Securities and Exchange Commission if the registration statement "contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statement therein not misleading." Against that statutory backdrop, this case presents the following question: For purposes of a Section 11 claim, may a plaintiff plead that a statement of opinion was "untrue" merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false- requiring allegations that the speaker's actual opinion was different from the one expressed-as the Second, Third, and Ninth Circuits have held? LOWER COURT CASE NUMBER: 12-5287
The U.S. Supreme Court case Omnicare, Inc. v. Laborers Dist. Council Constr. Indus Pension Fund in 2014 revolved around the issue of securities fraud and misrepresentation under Section 11 of the Securities Act of 1933, which allows investors to sue for damages if a registration statement contains an untrue statement or omits material facts necessary to make statements not misleading. Omnicare, a provider of pharmacy services to nursing homes, was sued by pension funds who bought its shares alleging that certain statements about legal compliance in its registration documents were materially false as they did not disclose alleged kickback arrangements with pharmaceutical manufacturers. The court held that liability under Section 11 does not require proving subjective falsehood i.e., knowing that one's statement is false but rather focuses on whether the speaker had reasonable grounds for belief at the time when making it. Thus Omnicare could be liable if either (1) it knew these representations were untrue; or (2) lacked reasonable basis for believing them true even though it thought they were true at the time made. This decision clarified standards for corporate disclosures and provided guidance on how companies should approach their disclosure obligations while also protecting investor rights against fraudulent practices.
In the dissenting opinion for Omnicare, Inc. v. Laborers Dist. Council Constr. Indus Pension Fund, Justice Scalia disagreed with the majority's interpretation of Section 11 of the Securities Act regarding statements of opinion in registration statements filed with SEC by issuers or underwriters of securities. He argued that a statement could only be considered false if it was objectively incorrect and not merely because it was subjectively disbelieved by its author at the time it was made; thus, he believed that liability should only attach to untrue factual assertions rather than opinions expressed in good faith but later proven wrong. The majority's decision to broaden potential liability beyond this standard would chill corporate disclosure and undermine investor confidence due to fear from companies about being sued over honest mistakes or unforeseen developments contradicting their earlier views.
