The Supreme Court has granted certiorari from the Sixth Circuit’s decision in Laborers District Council Construction Industry Pension Fund v. Omnicare, Inc. In that securities class action, the plaintiffs allege that statements from a 2005 registration statement that Omnicare’s agreements with drug companies were “legally and economically valid” had violated securities laws. Creating a split with other circuits, the Sixth Circuit held plaintiffs did not need to plead that Omnicare knowledge of falsity under Section 11. The panel held that Section 11 creates strict liability, and so held that the analysis in Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991), regarding Section 14(a), which requires scienter, did not apply to Section 11. Omnicare sought certiorari on the following question:
For purposes of a Section 11 claim [15 U.S.C. § 77k], 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?
Securities lawyers everywhere will be following this case to see if Virginia Bankshares’ scienter requirement will apply to claims brought under Section 11.