In its Omnicare decision issued earlier this year, the U.S. Supreme Court held that opinions presented in registration statements can be subject to liability under Section 11 of the Securities Act of 1933 if either (a) the opinion was not genuinely held, or (b) the registration statement omitted material facts about the issuer’s inquiry into, or knowledge concerning, the opinion. In Firefighters Pension & Relief Fund of The City of New Orleans v. Buhlman, 2015 WL 7454598 (E.D. La. Nov. 23, 2015), the court had the opportunity to address two interesting questions about Omnicare‘s scope.
First, does Omnicare‘s reasoning extend to securities fraud claims brought under Section 10(b) of the Securities Exchange Act of 1934? A handful of district courts have found that it does. See., e.g., In re Genworth Fin. Inc. Sec. Litig., 2015 WL 2061989 (E.D. Va. Mar. 1, 2015). The Firefighters Pension court, however, went the other way. In particular, the court concluded that Omnicare‘s creation of “liability for statements of opinions that are genuinely held but misleading to a reasonable investor” could not be reconciled with the scienter requirement for securities fraud. Accordingly, the court held that Omnicare “does not directly apply” to Section 10(b) claims.
Second, does Omnicare apply to forward-looking statements of opinions (e.g., financial projections) and thereby modify the PSLRA’s safe harbor for forward-looking statements? The Firefighters Pension court noted that “the opinion statements at issue in Omnicare centered on the lawfulness of the issuer’s existing contracts” and were not forward-looking. Omnicare therefore did not address or purport to modify the PSLRA’s safe harbor.
Holding: Motion to dismiss granted.
The 10b-5 Daily 