May 29, 2015 Articles

Omnicare Addresses Liability for Expressions of Opinion under Section 11

The decision creates an ambiguous and potentially shifting landscape.

Patricia A. Gorham and Samuel J. Casey

The Supreme Court, in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 135 S. Ct. 1318 (Mar. 24, 2015), recently addressed the scope of potential liability for expressions of opinions under section 11 of the Securities Act of 1933 and, in doing so, cast a considerable cloud of uncertainty over the advisability of including unnecessary opinion statements in registration filings going forward. While the Court adopted a narrow view of when an opinion statement violates section 11’s proscription against misrepresentations of material facts, the Omnicare decision developed a more expansive view of when statements of opinion may constitute omissions of material facts. The Omnicare decision, in focusing on the reasonable understanding of the investor, rather than the subjective belief of the issuer, creates an ambiguous and potentially shifting landscape through which issuers must navigate when filing registration statements with the Securities and Exchange Commission. This uncertainty will require increased restraint when making opinion statements and heightened attention to any proffered bases for such opinions.

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