January 24, 2022

Volume XII, Number 24


January 21, 2022

Subscribe to Latest Legal News and Analysis

Supreme Court Opines on Opinions v. Facts in the Sale of Securities

On March 24, 2015, the U.S. Supreme Court decided Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund et. al. The pension funds (Fund) had brought a claim against Omnicare, which significantly hinged on two sentences in Omnicare’s registration statement. The two sentences expressed Omnicare’s opinion (“We believe…”) that its contract arrangements were in compliance with applicable federal and state laws. 

Following the registration, the Federal Government brought lawsuits against Omnicare claiming that some of Omnicare’s contractual arrangements were not in compliance with applicable anti-kickback laws. The Fund, citing these actions, claimed that Omnicare had made “materially false” representations and “omitted to state [material] facts necessary” to make its representations not misleading in Omnicare’s registration statement.

The district court granted Omnicare’s motion to dismiss, finding “statements regarding a company’s belief…are only actionable if those who made them ‘knew [they] were untrue at the time’ [made].” The court of appeals, however, reversed the district court’s ruling and found that plaintiffs only need to allege the stated belief was “objectively false” and a plaintiff did not need to contend or prove the defendant did not know the opinions were incorrect.

The Supreme Court essentially disagreed with both of the lower courts and set forth a two pronged analysis regarding claims based on the statement of opinions in a registration statement:

1)    Do the opinions constitute factual misstatements?

2)    Do the omissions of fact make any of the statements of opinion misleading to an ordinary investor?

On the first prong, and sounding a bit like Donald Rumsfeld at times (“there are known knowns…things we know that we know and known unknowns…”), the Supreme Court pointed out that each statement of opinion in an offering statement “affirms one fact: that the speaker actually holds the stated belief.” Omnicare tried to argue that as long as the speaker sincerely believed the opinion, then such opinion could not, by definition, be misleading. The Supreme Court, however, ruled that a statement of opinion “conveys facts about how the speaker has formed the opinion – or, otherwise put, about the speaker’s basis for holding that view.” In short, a reasonable investor will see an opinion and should be able to assume that the opinion “fairly aligns with the information in the issuer’s possession at the time.” Essentially, it is an informed opinion – unless otherwise clearly indicated to the contrary.

In addressing the second prong of the opinion test, the Supreme Court requires that a fact finder determine “whether an omission makes an expression of opinion misleading” in the context of the registration statement. In stating an opinion, if the issuer is aware of material information that may contradict or call into question the opinion, such information should be presented with the opinion. Failure to provide known, material information that could call the stated opinion into question could be cause for a claim. The Supreme Court in remanding this matter back for a decision pointed out that Omnicare had provided information that qualified its opinions regarding legal compliance and required that the fact finder also look to “any other hedges, disclaimers, or qualifications it included in the registration statement.”


In drafting disclosure documents, we often admonish clients to temper statements of fact as to which they cannot be absolutely certain, by adding language such as “We believe that..,” to those statements. The Supreme Court has now set forth a standard providing that even statements that are so qualified must be based on a reasonableness and materiality standard.

When a company issuing securities believes that its investors will benefit from a well thought out opinion, the company should confirm that such opinion (i) is sincerely believed and supported by adequate diligence, and (ii) does not omit information and qualifications that would be material to a reasonable investor.

While the Supreme Court did not address this point, the same analysis likely applies in other disclosure materials, including Forms 10-K, 10-Q and Proxy Statements, as well as in private placement memorandums and other offering documents.

Justice Kagan delivered the opinion of the Court. Chief Justice Roberts and Justices Kennedy, Ginsberg, Breyer, Alito and Sotomayor joined. Justice Scalia filed an opinion concurring in part and concurring in the judgment. Justice Thomas filed an opinion concurring in the judgment.

For a full copy of the Court’s Opinion, download by clicking on the below link: http://www.supremecourt.gov/opinions/14pdf/13-435_8o6b.pdf

©2022 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume V, Number 84

About this Author

Brad R. Jacobsen, Michael Best, Merger Agreements Lawyer, securities law compliance Attorney

Brad counsels clients on mergers and acquisitions, federal and state securities law compliance, forming and financing startup businesses and real estate matters. He has extensive experience in private placements and other private securities transactions, Rule 506 offerings, and corporate governance matters.

Michael H. Altman, transactional lawyer, corporate mergers attorney, Milwaukee Law firm

Clients across multiple industries turn to Michael to coordinate their more complex business transactions. They value his quick assessment of issues and their implications, as well as his creative yet effective solutions to the many issues that arise during the course of a transaction.

Michael’s practice focuses on mergers and acquisitions, buyout transactions, securities regulation, and venture capital investment transactions. Both buyers and sellers, as well as issuers and shareholders, benefit from Michael’s counsel. Michael maintains a diverse business law practice, which...