The Petitioners in Omnicare, Inc. v. The Laborers District Council Construction, No. 13-435 came out swinging in their opening merits brief to the Supreme Court, which granted certiorari earlier this year. See Brief of Petitionerssee also here for background on the case. The Sixth Circuit inOmnicare had previously held that plaintiffs did not have to show actual intent for defendants to be liable under Section 11 for a statement of opinion. Instead, it held that if the statements were objectively false, defendants could be held liable. The Petitioners vigorously contested this holding, saying that it defeats long-standing precedent under Virginia Bankshares Inc. v. Sandberg, which requires proof that defendants subjectively knew the opinion to be false when it was made in order to be held liable.

Petitioners argued that plaintiffs “did not allege, and in fact disclaimed any allegation, that the issuer did not hold the stated belief.”  Ultimately, the Petitioners argued, “The word ‘fact’ conveys an element of certainty, . . . Opinions and beliefs, by contrast, are inherently subjective assessments. The only ‘fact’ conveyed by a statement of opinion or belief is the fact that the speaker held the stated belief. It naturally follows that such a statement can be ‘untrue’ as to a ‘material fact’ only if the speaker did not actually hold the stated belief.”

Omnicare highlights a significant risk of the Sixth Circuit’s ruling: it would allow securities plaintiffs to challenge all opinion statements that, in hindsight, turn out to be false. “The Sixth Circuit’s approach flouts the presumption of consistency, which calls for the same language to be given the same meaning wherever it appears in a similar statutory provision. Neither the absence of a scienter requirement nor any other feature of Section 11 requires departing from the reasoning of Virginia Bankshares in this case.”

The Petitioners were not alone in their request to overturn the Sixth Circuit’s decision. They were joined by several amici, including the Securities Industry and Financial Markets Association (SIFMA), U.S. Chamber of Commerce and Business Roundtable, Washington Legal Foundation and the Center for Audit Quality, who each emphasized the precedent of Virginia Banksharesand the potential impact to U.S. capital markets if the Sixth Circuit’s opinion is affirmed.

The U.S. Department of Justice and U.S. Securities and Exchange Commission advocated for a middle ground, arguing that statements of opinions are actionable if either (1) the speaker did not subjectively hold that opinion or (2) “if [the statement of opinion] lacked a basis that was reasonable under the circumstances, even if it was sincerely held.”  See Brief for the United States. This position may have some appeal, particularly for a practical court that may see requiring proof of subjective intent as gutting the strength of Section 11.