March 26, 2015
In a classic Seinfeld episode, George Costanza opined: “it’s not a lie, if you believe it”. In a ruling handed down on March 24th, the Supreme Court agreed with this sentiment as it concerned claims brought under Section 11 of the Securities Act of 1933. In Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, the Supreme Court determined that under Section 11, a statement of opinion in a registration statement is only untrue (and therefore actionable) if the issuer does not believe it. However, in the same case the Supreme Court held that, even if an issuer believes the opinions offered in a registration statement, the issuer may still be liable under Section 11 if it omits material facts which are necessary to make the opinion not misleading to a reasonable investor.

As the Court’s opinion explained, “belief” that an opinion in a registration statement is true is only half the battle. A company may still be liable, even if it truly believes the opinion, if it should have disclosed more information about the opinion or the basis for the opinion in the registration statement. For a defense to claims that more information needed to be disclosed, companies should have a basis for the opinions offered and, if the company is aware of conflicting or additional information that would qualify or undermine the opinions, it should identify and disclose such information in its registration statement or face potential liability under Section 11.

To read the full alert, click here.