This article examines when statements in a registration statement, couched as opinion, can and cannot be considered to be misstatements of material fact that could lead to liability under Section 11 (and potentially other sections) of the Securities Act. The rest of this paper is formatted as follows. We review the Omnicare case, followed by the key cases in the Second, Third, Ninth, and Sixth Circuit Courts of Appeals. The Second, Third, and Ninth Circuits have all required that, in order for there to be an actionable claim under Section 11, the plaintiff must plead not only that the statement or omission was false, but also that the defendant had subjective knowledge that its opinion was false. The Sixth Circuit, although later reversed by the Supreme Court, applied a strict liability interpretation of Section 11 and required only that the fact or omission be false or misleading. The split decisions among the circuits may be the reason that the Supreme Court granted certiorari. Then, we explain the implications of these decisions to future registrants and to professionals preparing opinions that are to be included in registration statements. This article is important to future registrants and opining professionals because of their liability implications. We conclude with the assumption that future cases will decide how to apply the new rational basis test created by the Supreme Court in interpreting when an opinion statement becomes a misstatement of material fact, or leads to an omission that renders a registration statement false or misleading in violation of Section 11.
Recommended CitationBrian Elzweig and Valrie Chambers, Omnicare v. Indiana State District Council and Its Rational Basis Test for Allowing for Opinion Statements to Be a Misleading Fact or Omission Under Section 11 of the Securities Act of 1933, 37 Pace L. Rev. 55 (2017)
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