WASHINGTON, D.C. — (Mealey’s) The U.S. Supreme Court today agreed to hear an appeal in a securities class action lawsuit, challenging whether a shareholder may allege only that a statement of opinion was objectively wrong under Section 11 of the Securities Act of 1933 or must the shareholder also allege that the statement at issue was subjectively false (Omnicare Inc., et al. v. The Laborers District Council Construction Industry Pension Fund and The Cement Masons Local 526 Combined Funds, No. 13-435, U.S. Sup., See February 2014, Page 21).
Investors who purchased securities of Omnicare Inc., a provider of pharmaceutical care for the elderly, sued the company, directors Joel F. Gemunder, David W. Froesel, Cheryl D. Hodges and Sandra E. Laney and the estate of the late director Edward L. Hutton in the U.S. District Court for the Eastern District of Kentucky. They allege that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933. The plaintiffs allege that the defendants engaged in a fraudulent scheme to artificially inflate Omnicare’s stock price by misrepresenting the company’s financial results and business practices.
Judge William O. Bertelsman dismissed the complaint under the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA) for failure to plead loss causation. The plaintiffs appealed to the Sixth Circuit U.S. Court of Appeals.
The Sixth Circuit reversed and remanded. On remand, the defendants moved to dismiss, and on Feb. 13, 2012, Judge Bertelsman granted the motion.
The investors again appealed to the Sixth Circuit, which affirmed in part and reversed and remanded in part.
The defendants filed a petition for writ of certiorari with the Supreme Court on Oct. 4, 2013.
The question presented is: “For purposes of a Section 11 claim, may a plaintiff plead that a statement of opinion was ‘untrue’ merely by alleging that the opinion itself was objectively wrong, as the Sixth Circuit has concluded, or must the plaintiff also allege that the statement was subjectively false—requiring allegations that the speaker’s actual opinion was different from the one expressed—as the Second, Third, and Ninth Circuits have held?”
The investors are represented by Kevin L. Murphy of Graydon Head & Ritchey in Fort Mitchell, Ky., and Darren J. Robbins, Eric Alan Isaacson, Henry Rosen, Steven F. Hubachek and Amanda M. Frame of Robbins Geller Rudman & Dowd in San Diego.
The defendants are represented by Harvey Kurzweil, Richard W. Reinthaler, James P. Smith III and John E. Schreiber in New York, Linda T. Coberly in Chicago and Gene C. Schaerr, Steffen N. Johnson and Elizabeth P. Papez in Washington, all of Winston & Strawn.
Mealey's is now available in eBook format!
For more information about LexisNexis products and solutions connect with us through our corporate site.