Deciding this Term’s big securities case, a unanimous Supreme Court held on March 24 that a statement of opinion does not become actionable under the “untrue statement of material fact” clause of section 11 of the Securities Act of 1933 merely because subsequent events prove it wrong, so long as the speaker honestly held the opinion. But the Court split 7-1-1 as to whether such an honest-but-wrong-in-hindsight opinion might nevertheless be actionable under the “material omissions” clause of section 11, and the Court remanded for further proceedings. Taken together, the three opinions in the case flag the issue of the extent to which opinions in a registration statement ought to be qualified and their bases explained. Omnicare, Inc. v. Laborers Dist. Council Constr. Ind. Pension Fund, No. 13-435, 2015 WL 1291916 (Mar. 24, 2015).

Who Should Care—and Why -

The decision affects anyone contemplating a public offering, and that’s a lot of companies. Initial public offerings are on the upswing (206 in 2014 versus 157 in 2013 and 93 in 2012). For those who engage in public offerings, section 11 is a dangerous statute: It is a strict liability statute for the issuer that does not require pleading and proving that the defendant had a culpable state of mind (unlike, say, Rule 10b-5); and it is frequently employed to attack registration statements (in 2014, 24 IPOs were challenged by securities class actions, versus 15 in 2013).