In its Omnicare decision, 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. A key open question, however, is whether Omnicare’s reasoning extends to securities fraud claims brought under Section 10(b) of the Securities Exchange Act of 1934.
While some district courts have held that Omnicare is limited to Section 11 claims, the appellate trend is going the other way. In City of Dearborn Heights Act 345 Police & Fire Retirement System v. Align Technology, Inc., et al., No. 14-16814 (9th Cir. May 5, 2017), the court agreed with a recent Second Circuit decision and found that Omnicare should apply to Section 10(b) claims as well. The court reasoned that both Section 11 and Section 10(b) claims are based on untrue statements of fact and, as a result, the same falsity analysis is warranted.
Holding: Dismissal affirmed.