Supreme Court Separates Facts From Opinion in Omnicare Ruling

The Supreme Court gave public companies slightly broader leeway in making public statements that turn out to be wrong, siding with a health-care company over statements made — or omitted — in stock-offering documents.

In a unanimous ruling, the court said that Omnicare Inc. was not liable because the statements in dispute were opinions, and investors were unable to demonstrate that the Cincinnati pharmaceutical-services company knew they were false when it made them.

“(A) sincere statement of pure opinion is not an ‘untrue statement of material fact,’ regardless whether an investor can ultimately prove the belief wrong,” the court said Monday in an opinion written by Justice Elena Kagan.

The case stems from a 2005 secondary stock offering in which Omnicare issued a statement saying: “We believe our contractual arrangements” with pharmaceuticals suppliers and health-care providers “complied with state and federal laws.”

Later, the federal government alleged in a lawsuit that Omnicare received kickbacks from pharmaceuticals manufacturers.

In 2006, a group of investors, led by the Laborers District Council Construction Industry Pension Fund, sued the company under a securities-law provision that authorizes lawsuits if a statement “contains an untrue statement of a material fact” or “omit(s) to state a material fact.” The investors alleged the company’s stated belief that it was in legal compliance was a false statement.

The U.S. District Court in Cincinnati dismissed the case, ruling that the investor had failed to allege that Omnicare officers knew the statement was false.

However, the U.S. Court of Appeals for the 6th Circuit reversed, finding that the law didn’t require that investors demonstrate “subjective disbelief” on the part of Omnicare officers and that the mere allegation that the opinions were “objectively false” was enough to support the claim.

The Supreme Court ruled, however, that the 6th Circuit’s ruling “wrongly conflates facts and opinions” and that a statement of opinion does not constitute an “untrue statement of … fact” merely because the stated opinion ultimately proves incorrect.

“A statement of fact expresses certainty about a thing, whereas a statement of opinion conveys only an uncertain view as to that thing,” the court said.

Omnicare said it was “pleased” with the Supreme Court’s decision. It said that under the new standard, the case should be dismissed when it is returned to the District Court.

A representative for the pension funds couldn’t immediately be reached.

This article appeared in print in the March 25th, 2015 edition of Hamodia.