For the second time in 12 months, the U.S. Supreme court took the middle ground with its decision in Omnicare, a case with heavy implications on securities class actions. In late March, the Supreme Court clarified a recurring question under Section 11 of the Securities Act of 1933 whether or not, and under what circumstances, an issuer’s statement of opinion or belief may give rise to liability. In Omnicare, Inc v. Laborers District Council Construction Industry Pension Fund, it was decided that a speaker will not be held liable for a statement of belief or opinion if the statement turns out to be wrong.

The Omnicare decision concluded that a statement of opinion or belief can be actionable if the issuer omits material facts about the basis for its opinion on how an investor would interpret the statement, leading to misguiding context. The Supreme Court also noted that the standard for liability is demanding and cannot just rely on allegations, but must identify material facts to create the belief of misleading context to an investor.

As we saw in the SCOTUS’ decision regarding Halliburton, the Omnicare decision raises the hurdle for plaintiffs looking to file securities class actions. The two recent decisions essentially shrink the protections offered to investors under federal securities law by creating additional burdens for investor to bring class actions.

Click here to read more about the liability standard for statement of opinions.

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