In the opinion issued yesterday in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund (“Omnicare”), the Supreme Court rejected the two extremes advocated by the parties regarding how the truth or falsity of statements of opinion should be considered under the securities laws, and instead adopted the middle path advocated in the amicus brief filed by Lane Powell on behalf of the Washington Legal Foundation (“WLF”). In doing so, the Court also laid out a blueprint for examining claims of falsity under the securities laws, which we believe will do for falsity analysis what Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007), did for scienter analysis.

From the tenor of oral argument, it seemed inevitable that the Court would reject the Sixth Circuit’s erroneous position – that a genuinely believed opinion may nonetheless be considered “false” under Section 11 of the Securities Act if it is later determined that the opinion was incorrect. But the Court also expressed discomfort with the potential loopholes that could be created by Omnicare’s position at the other extreme – that if a statement is phrased as an opinion, it cannot be found to be either false or misleading under the securities laws, as long as the opinion was honestly held by the speaker.

There were many wrong turns that the Court could have taken in rejecting these two extremes, running the risk of further confusing the law not only regarding the truth or falsity of opinions, but also muddling the law of scienter and materiality. But the Court successfully navigated these potential pitfalls – including refusing to adopt the “reasonable basis” standard advocated by the Solicitor General – and instead adopted an analytically sound approach that is consistent with its previous securities rulings, holding that 1) a statement of opinion is only “false” under the securities laws if it is not genuinely believed by the speaker; and 2) like any other kind of statement, a statement of opinion may be “misleading” if, when considered in context, it creates a false impression in the mind of a reasonable investor.

Because Omnicare’s analysis concerns what makes a statement false or misleading, it will apply not only in Section 11 cases, but in cases brought under Section 10(b) of the Securities Exchange Act. In fact, much of the Court’s reasoning will also assist defendants in battling inadequate allegations that factual statements are false or misleading. Similar to how Tellabs laid a definitive groundwork for the consideration of scienter allegations after the Reform Act, Omnicare has thus laid out a clear blueprint for how courts must consider allegations that statements of fact or opinion were false or misleading.

For our complete discussion of the Omnicare opinion, please see our post today on WLF’s The Legal Pulse Blog.

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Photo of Claire Loebs Davis Claire Loebs Davis

Claire Loebs Davis is a seasoned litigator who focuses on using her commercial litigation experience to assist nonprofit entities and advocate for animal and environmental causes. Claire is Co-Chair of Lane Powell’s Nonprofit Team and its Animal and Earth Advocacy Team. She also chairs the Pro Bono Committee in Seattle.

Claire has more than a decade of experience in commercial litigation, including trial and appellate advocacy, and securities and corporate governance litigation. She has represented a wide range of companies and their directors and officers, including Ambassador’s Group, Biovest International, Cell Therapeutics, Dendreon Corporation, Lihua International, Micron Technology, Nordstrom, PremierWest Bancorp, Primo Water, Sterling Financial, Washington Mutual, Washington Banking, WSB Financial Group, and Zumiez.

Claire has assisted nonprofit organizations with a variety of legal needs, including:

  • Helping them to incorporate, draft governance documents and file for federal 501(c)(3) tax-exempt status;
  • Advising them on employment matters, risk assessment and issues of corporate governance; and
  • Representing them in a variety of commercial disputes, such as actions for breach of contract, RICO violations and defamation.

Throughout her legal career, Claire has focused on advocacy on behalf of animals and the environment, including serving as a general counsel and legal consultant for Best Friends Animal Society, the country’s largest animal sanctuary and a leading national proponent of companion animal welfare.  Since leaving Best Friends to enter private practice, Claire has represented nonprofit organizations including the Animal Legal Defense Fund and the Center for Biological Diversity, in addition to multiple regional animal rescues and sanctuaries. She has also been extensively involved in community advocacy efforts, including leading a successful grassroots effort to reform King County, Washington’s animal shelters.

Claire defended the former Administrative Director of Sea Shepherd Conservation Society in a contempt action brought by the Institute for Cetacean Research, a Japanese whaling entity, related to Sea Shepherd’s interference with Japan’s killing of whales in the Southern Ocean. Following a two-week trial in the Ninth Circuit Court of Appeals and extensive appellate practice, Claire secured a defense verdict for her client. She subsequently represented Sea Shepherd and its founder, Paul Watson, in litigation against the Institute for Cetacean Research that raised multiple unique questions of standing, animal rights and international law.

As the Chair of the firm’s Seattle Pro Bono Committee, Claire led the citywide effort to provide legal assistance at SeaTac airport to travelers affected by President Trump’s travel bans. She has shown a commitment throughout her career to pro bono work, advising numerous nonprofit entities, volunteering at a variety of local legal clinics, representing asylum seekers in immigration court, working with the American Civil Liberties Union to bring an action against the state of California on behalf of English language learners in the state’s public schools, and submitting amicus briefs in State of Washington v. Trump and State of Hawaii v. Trump.

Claire joined Lane Powell from Wilson Sonsini Goodrich & Rosati in December 2012. She graduated from the University of Michigan Law School in 2003 (class rank 2 of 387), and clerked for the Honorable Richard Nygaard of the Third Circuit Court of Appeals. Before attending law school, Claire was a newspaper reporter for several years, primarily covering legal and political issues, and winning multiple state and national writing awards.