In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 2015 U.S. LEXIS 2120 (Mar. 24, 2015), the Supreme Court clarified when a statement of opinion can be subject to registration statement liability under Section 11 of the Securities Act of 1933. The Court held that “a sincere statement of pure opinion is not an ‘untrue statement of material fact,’ regardless whether an investor can ultimately prove the belief wrong.” Id. at *19. For an opinion to be subject to Section 11 liability based on an omission of material fact, the plaintiff “must identify particular (and material) facts going to the basis for the issuer’s opinion -- facts about the inquiry the issuer did or did not conduct or the knowledge it did or did not have -- whose omission makes the opinion statement at issue misleading to a reasonable person reading the statement fairly and in context.” Id. at **33-34. Section 11 liability thus cannot be based on an opinion honestly held which proves incorrect, instead requiring allegations that the omission of specific, material facts relevant to the making of the opinion makes that opinion misleading. Id.

In its registration statement in connection with a public offering of common stock, Omnicare, Inc. included the following statements concerning its compliance with applicable laws relating to its acceptance of rebates from pharmaceutical manufacturers: (i) “We believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws;” and (ii) “We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements that bring value to the healthcare system and the patients that we serve.” Omnicare, 2015 U.S. LEXIS 2120 at **7-8. Respondents, who purchased shares in the public offering, filed suit against Omnicare for violation of Section 11, alleging that Omnicare’s receipt of payments from drug manufacturers violated anti-kickback laws, thereby making Omnicare’s legal compliance opinions materially false. Id. at *9. The district court dismissed the Complaint, holding that “statements regarding a company’s belief as to its legal compliance are considered ‘soft’ information and are actionable only if those who made them ‘knew [they] were untrue at the time’ and that the Funds’ complaint ‘failed to meet that standard’ because it nowhere claimed that ‘the company’s officers knew they were violating the law.’” Id. at *10. The Sixth Circuit reversed, holding that the Funds needed only to allege that the statements of opinion were “objectively false” and that “they did not need to contend that anyone at Omnicare ‘disbelieved [the opinion] at the time it was expressed.’” Id. at **10-11. In other words, “a statement of opinion that is ultimately found incorrect -- even if believed at the time made -- may count as an ‘untrue statement of a material fact.’” Id. at *13.

Finding that the Sixth Circuit’s opinion “wrongly conflates facts and opinions,” the Supreme Court held that an opinion is shielded from liability under Section 11 provided: (i) the speaker actually holds the stated belief; and (ii) any “embedded statements of fact” contained in the opinion are true. Omnicare, 2015 U.S. LEXIS 2120 at **15-18. The Funds could not demonstrate Section 11 liability because the opinions at issue were “pure statements of opinion” and the Funds “do not contest that Omnicare’s opinion was honestly held.” Id. at **18-19. Observing that the Section 11 claim was essentially that “Omnicare’s belief turned out to be wrong -- that whatever the company thought, it was in fact violating anti-kickback laws,” the Court concluded that Section 11 “does not allow investors to second guess inherently subjective and uncertain assessments” and that the statute “is not, as the Court of Appeals and the Funds would have it, an invitation to Monday morning quarterback an issuer’s opinions.”Id. at *19. The Court held that the Funds’ omissions claim would, however, be cognizable if they could demonstrate that the opinion omitted material facts that were relevant to the making of that opinion. Id. at **19-34. The Supreme Court remanded the case to determine whether the Funds had stated a viable omissions claim or, if not, whether they should be given leave to replead. The Supreme Court instructed that on remand, the Funds “cannot proceed without identifying one or more facts left out of Omnicare’s registration statement” and the district court “must review the Funds’ complaint to determine whether it adequately alleged that Omnicare had omitted that (purported) fact, or any other like it from the registration statement” and, if so, determine whether the omitted fact would have been material to a reasonable investor…. Id. at ** 35-36.

Omnicare thus narrows the scope of liability under Section 11 based on statements of opinion. The issuer will not be subjected to Section 11 liability merely because its honestly held opinion turns out to be wrong. Only where the plaintiff alleges sufficient material facts relative to the making of the opinion, the omission of which makes the registration statement materially misleading, will Section 11 liability arise.