Today, the U.S. Supreme Court issued its anticipated Omnicare decision, which addresses the standard of liability applied to expressions of opinion in a registration statement for a public offering. While there will be clamoring about Omnicare (it is somewhat rare for the Supreme Court to issue securities law decisions), in my opinion the case does not involve a fundamental shift in how disclosure is drafted, although it does invite a few drafting and diligence strategies.
Statutory Backdrop
Section 11 of the Securities Act of 1933 permits purchasers of securities to sue for damages if a registration statement, at the time it became effective:
- contained an untrue statement of a material fact; or
- omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
In contrast with other types of securities liability, neither the untrue statements prong nor the omissions prong of Section 11 requires showing that a defendant acted with any intent to deceive or defraud.
Omnicare’s Opinions
Omnicare, the nation’s largest provider of pharmacy services for residents of nursing homes, filed a registration statement for a public offering of its common stock. In discussing the effects of various laws on its business model, including its acceptance of rebates from pharmaceutical manufacturers, the registration statement contained the following statements of opinion:
- “We believe our contract arrangements with other healthcare providers, our pharmaceutical suppliers and our pharmacy practices are in compliance with applicable federal and state laws.”
- “We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements that bring value to the healthcare system and the patients that we serve.”
Continue Reading IMHO, Omnicare Doesn’t Materially Change Opinion Disclosure