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Opinion Isn't Fact: SCOTUS Reverses 6th Cir on Securities Fraud

By Casey C. Sullivan, Esq. on March 31, 2015 | Last updated on March 21, 2019

When is an opinion that turns out to be wrong an untrue statement of fact? Only when it is not sincerely held, the Supreme Court ruled last week in a securities fraud case. The Court's decision in Omnicare v. Laborers District Council Construct Industry Pension Fund, overturned a recent Sixth Circuit holding and reconciled a split between the Sixth and other circuits.

Omnicare had been sued for securities fraud stemming from a statement that it believed it was complying with the law. The Sixth Circuit had ruled that plaintiffs did not have to allege that the belief was not sincerely held; that it was false was good enough. That didn't work for the Supreme Court, which chided the circuit for failing to sufficiently distinguish between fact and opinion.

Omnicare is the largest provider of pharmaceutical services for residents of long-term care facilities in the United States. In a 2005 securities registration statement, it stated that it believed its contracts and practices complied with federal and state law. Turns out, Omnicare's beliefs were wrong, costing the company over $200 million in settlements over illegal kickbacks and false Medicare and Medicaid claims.

When pension funds sued, the Sixth ruled that they did not need to show that Omnicare had not believed the opinion for it to be an untrue fact -- that the opinion was objectively false was enough.

According to the Supreme Court, in a unanimous decision, the Sixth Circuit had failed to adequately distinguish between fact and opinion. A statement of opinion is not an untrue statement of fact, even if that opinion turns out to be wrong. Section 11 acknowledges such when it refers to "untrue statements of fact." Rather, an opinion can only become an untrue statement of fact when it turns out that the opinion was not sincerely held.

A Way Fun Grammatical Sideshow

Kagan's opinion has gained plenty of attention, though not for its impact on securities litigation. Some commentators took issue with her use of "way" as an adverb, when she wrote that Omnicare "way overstates" the looseness of the relevant test. Eugene Volokh's blog, claimed it was the first such use of the Wayne's World style inflection in a judicial opinion. He was way off base. At least one court, in 1992, had claimed a litigant's arguments were "most bogus" and "way improvident."

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