Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension Fund

• Decision Date: 24 March 2015
• Docket Number: No. 13–435.,13–435.
• Citation: 191 L.Ed.2d 253,575 U.S. 175,135 S.Ct. 1318
• Parties: OMNICARE, INC., et al., Petitioners v. LABORERS DISTRICT COUNCIL CONSTRUCTION INDUSTRY PENSION FUND et al.
• Court: U.S. Supreme Court

575 U.S. 175

135 S.Ct. 1318

191 L.Ed.2d 253

OMNICARE, INC., et al., Petitioners

v.LABORERS DISTRICT COUNCIL CONSTRUCTION INDUSTRY PENSION FUND et al.

No. 13–435.

Supreme Court of the United States

Argued Nov. 3, 2014.

Decided March 24, 2015.

Kannon K. Shanmugam, Washington, DC, for Petitioners.

Thomas C. Goldstein, Washington, DC, for Respondents.

Nicole A. Saharshky for the United States as amicus curiae, by special leave of the Court, supporting the Respondents.

Linda T. Coberly, Winston & Strawn LLP, Chicago, IL, Harvey Kurzweil, Richard W. Reinthaler, John E. Schreiber, Winston & Strawn LLP, New York, NY, Andrew C. Nichols, Winston & Strawn LLP, Washington, DC, Kannon K. Shanmugam, Counsel of Record, Joseph M. Terry, John S. Williams, Sarah K. Campbell, A. Joshua Podoll, Williams & Connolly LLP, Washington, DC, for Petitioners.

Thomas C. Goldstein, Kevin K. Russell, Goldstein & Russell, P.C., Washington, DC, Kevin L. Murphy, Graydon Head & Ritchey LLP, Fort Mitchell, KY, Darren J. Robbins, Eric Alan Isaacson, Counsel of Record, Henry Rosen, Joseph D. Daley, Steven F. Hubachek, Amanda M. Frame, Susannah R. Conn, David J. Harris, Jr., Robbins Geller Rudman & Dowd LLP, San Diego, CA, for Respondents.

Justice KAGANdelivered the opinion of the Court.

Before a company may sell securities in interstate commerce, it must file a registration statement with the Securities and Exchange Commission(SEC).If that document either "contain[s] an untrue statement of a material fact" or "omit[s] to state a material fact ... necessary to make the statements therein not misleading," a purchaser of the stock may sue for damages.15 U.S.C. § 77k(a).This case requires us to decide how each of those phrases applies to statements of opinion.

I

The Securities Act of 1933,48 Stat. 74,15 U.S.C. § 77a et seq., protects investors by ensuring that companies issuing securities (known as "issuers") make a "full and fair disclosure of information" relevant to a public offering.Pinter v. Dahl,486 U.S. 622, 646, 108 S.Ct. 2063, 100 L.Ed.2d 658(1988).The linchpin of the Act is its registration requirement.With limited exceptions not relevant here, an issuer may offer securities to the public only after filing a registration statement.See§§ 77d,77e.That statement must contain specified information about both the company itself and the security for sale.See§§ 77g,77aa.Beyond those required disclosures, the issuer may include additional representations of either fact or opinion.

Section 11 of the Act promotes compliance with these disclosure provisions by giving purchasers a right of action against an issuer or designated individuals (directors, partners, underwriters, and so forth) for material misstatements or omissions in registration statements.As relevant here, that section provides:

"In case any part of the registration statement, when such part became effective, 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, any person acquiring such security ... [may] sue."§ 77k(a).

Section 11 thus creates two ways to hold issuers liable for the contents of a registration statement—one focusing on what the statement says and the other on what it leaves out.Either way, the buyer need not prove (as he must to establish certain other securities offenses) that the defendant acted with any intent to deceive or defraud.Herman & MacLean v. Huddleston,459 U.S. 375, 381–382, 103 S.Ct. 683, 74 L.Ed.2d 548(1983).

This case arises out of a registration statement that petitioner Omnicare filed in connection with a public offering of common stock.Omnicare is the nation's largest provider of pharmacy services for residents of nursing homes.Its registration statement contained (along with all mandated disclosures) analysis of the effects of various federal and state laws on its business model, including its acceptance of rebates from pharmaceutical manufacturers.See, e.g., App. 88–107, 132–140, 154–166.Of significance here, two sentences in the registration statement expressed Omnicare's view of its compliance with legal requirements:

• "We believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws."Id., at 95.

• "We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements that bring value to the healthcare system and the patients that we serve."Id., at 137.

Accompanying those legal opinions were some caveats.On the same page as the first statement above, Omnicare mentioned several state-initiated "enforcement actions against pharmaceutical manufacturers" for offering payments to pharmacies that dispensed their products; it then cautioned that the laws relating to that practice might "be interpreted in the future in a manner inconsistent with our interpretation and application."Id., at 96.And adjacent to the second statement, Omnicare noted that the Federal Government had expressed "significant concerns" about some manufacturers' rebates to pharmacies and warned that business might suffer "if these price concessions were no longer provided."Id., at 136–137.

Respondents here, pension funds that purchased Omnicare stock in the public offering (hereinafter Funds), brought suit alleging that the company's two opinion statements about legal compliance give rise to liability under § 11.Citing lawsuits that the Federal Government later pressed against Omnicare, the Funds' complaint maintained that the company's receipt of payments from drug manufacturers violated anti-kickback laws.Seeid., at 181–186, 203–226.Accordingly, the complaint asserted, Omnicare made "materially false" representations about legal compliance.Id., at 274.And so too, the complaint continued, the company "omitted to state [material] facts necessary" to make its representations not misleading.Id., at 273.The Funds claimed that none of Omnicare's officers and directors "possessed reasonable grounds" for thinking that the opinions offered were truthful and complete.Id., at 274.Indeed, the complaint noted that one of Omnicare's attorneys had warned that a particular contract "carrie[d] a heightened risk" of liability under anti-kickback laws.Id., at 225(emphasis deleted).At the same time, the Funds made clear that in light of § 11's strict liability standard, they chose to "exclude and disclaim any allegation that could be construed as alleging fraud or intentional or reckless misconduct."Id., at 273.

The District Court granted Omnicare's motion to dismiss.SeeCiv. No. 2006–26(ED Ky., Feb. 13, 2012), App. to Pet. for Cert. 28a, 38a–40a, 2012 WL 462551, *4–*5.In the court's view, "statements regarding a company's belief as to its legal compliance are considered ‘soft’ information" and are actionable only if those who made them "knew [they] were untrue at the time."App. to Pet. forCert. 38a.The court concluded that the Funds' complaint failed to meet that standard because it nowhere claimed that "the company's officers knew they were violating the law."Id., at 39a.The Court of Appeals for the Sixth Circuit reversed.See719 F.3d 498(2013).It acknowledged that the two statements highlighted in the Funds' complaint expressed Omnicare's "opinion" of legal compliance, rather than "hard facts."Id., at 504(quotingIn re Sofamor Danek Group Inc.,123 F.3d 394, 401–402(C.A.61997) ).But even so, the court held, the Funds had to allege only that the stated belief was "objectively false"; they did not need to contend that anyone at Omnicare "disbelieved [the opinion] at the time it was expressed."719 F.3d, at 506(quotingFait v. Regions Financial Corp.,655 F.3d 105, 110(C.A.22011) ).

We granted certiorari, 571 U.S. ––––, 134 S.Ct. 1490, 188 L.Ed.2d 374(2014), to consider how § 11 pertains to statements of opinion.We do so in two steps, corresponding to the two parts of § 11 and the two theories in the Funds' complaint.We initially address the Funds' claim that Omnicare made "untrue statement[s] of ... material fact" in offering its views on legal compliance. § 77k(a);seeApp. 273–274.We then take up the Funds' argument that Omnicare "omitted to state a material fact ... necessary to make the statements [in its registration filing] not misleading."§ 77k(a);seeApp. 273–274.Unlike both courts below, we see those allegations as presenting different issues.¹In resolving the first, we discuss when an opinion itself constitutes a factual misstatement.In analyzing the second, we address when an opinion may be rendered misleading by the omission of discrete factual representations.Because we find that the Court of Appeals applied the wrong standard, we vacate its decision.

II

The Sixth Circuit held, and the Funds now urge, that a statement of opinion that is ultimately found incorrect—even if believed at the time made—may count as an "untrue statement of a material fact."15 U.S. C § 77k(a);see719 F.3d, at 505; Brief for Respondents 20–26.As the Funds put the point, a statement of belief may make an implicit assertion about the belief's "subject matter": To say "we believe X is true" is often to indicate that "X is in fact true."Id., at 23;seeTr. of OralArg. 36.In just that way, the Funds conclude, an issuer's statement that "we believe we are following the law" conveys that "we in fact are following the law"—which is " materially false," no matter what the issuer thinks, if instead it is violating an anti-kickback statute.Brief for Respondents 1.

But that argument wrongly conflates facts and opinions.A fact is "a thing done or existing" or "[a]n actual happening."Webster's New International Dictionary 782 (1927).An opinion is "a belief[,] a view," or a "sentiment which the mind forms of persons or things."Id., at 1509.Most important, a statement of...