The Supreme Court granted certiorari to hear a case involving allegations that Omnicare, Inc. ("Omnicare") offered false opinions to investors (Ind. State Dist. Council v. Omnicare, Inc., 719 F.3d 498 (2013)). Under Section 11 of the Securities and Exchange Act, the Sixth Circuit Court of Appeals held that issuers of shares can be held responsible for providing stockholders with opinions that turned out to be wrong. Section 11 specifically states that issuers are liable if correspondence with shareholders "contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading."1 The Sixth Circuit decision provides an objective measure in determining fault. The Court found that the issuer of shares can be held liable under Section 11 of the Securities and Exchange Act regardless of whether the issuer knew the statement was false at the time it made the claim.2
Omnicare has argued for a reversal of the Sixth Circuit's decision, asserting that a stock issuer should only be liable for statements that the issuer knows to be false. In its initial proceedings, the Supreme Court has been struggling to find a legitimate, middle-ground approach between the Sixth Circuit decision and Omnicare's position. The Solicitor General, who has sided with the plaintiffs in the case, has advocated for a test based on "reasonableness," which the Court has reviewed in-depth. Specifically, the Supreme Court has been reviewing a test that would examine the reasonableness of an issuer's opinion to shareholders under the circumstances to determine if the opinion was false.3
The concern regarding the "reasonableness" test is that it would introduce a great deal of subjectivity into a process hoped to establish an objective standard. Omnicare claimed that the test as it is currently framed has the potential to cause more confusion for stock issuers about what is an actionable false statement, and it forces litigants to speculate about how a court will interpret whether an opinion is reasonable under various circumstances. Omnicare also argued that the test may cause stock issuers to avoid opinion statements in disclosures altogether because they would be unclear about the reasonableness of their statements.4
In an amicus curiae brief, the Washington Legal Foundation ("WLF") has proposed a different "middle ground" approach for the Court to consider in its deliberation. Recognizing that securities law forbids false statements but does not forbid incorrect opinions, WLF proposes a test focusing on whether the false statements are meant to and actually do mislead shareholders. WLF wants the Court to reinforce the standard regarding falsity of opinions held in Virginia Bankshares v. Sandberg (501 U.S. 1083 (1991)).5 In Virginia Bankshares, the Court held "that an opinion may be actionable as a false statement of 'fact,' to the extent to which it is a 'misstatement of the psychological fact of the speakers' belief in what he says.'"6
Even though it is unclear exactly what standard the Supreme Court will adopt, it appears set on establishing a middle ground for determining false opinions somewhere in between the plaintiffs' argument that an incorrect opinion is false if it is wrong and the opposite position, which "suggest[s] to investors that they have no recourse if companies falsely portray their beliefs."7 The decision will be very important because it "will affect the standards of pleading and proof for statements of opinion under other liability provisions of the federal securities laws, which likewise prohibit "untrue" or false" statements of 'material fact.'"8
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