Omnicare Amicus Brief: Deadline Approaching for Institutional Investors to Support Important Brief in U.S. Supreme Court

August 20, 2014

We are writing to alert you that the August 28 deadline is approaching for institutional investors to support an important "friend-of-the-court" brief in the U.S. Supreme Court case of Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, which concerns the standards for public offering liability and will be decided during the Court's upcoming October term. The brief is supported by numerous domestic and international pension plans. However, as with recent institutional investor amicus briefs in Halliburton II and IndyMac, it is imperative to have as much support as possible from the institutional investor community to demonstrate the importance of the issue presented in Omnicare to the Supreme Court.

The Omnicare case raises a securities law issue with profound implications for investor rights. In Omnicare, the Court will decide whether investors may continue to seek recovery of losses incurred in public stock offerings under Section 11 of the Securities Act of 1933 by alleging that a statement of "opinion" in the registration statement was objectively wrong, or whether investors must also show that the speaker did not genuinely believe the opinion.

An adverse ruling in Omnicare would significantly impair the private remedy available to investors under Section 11, which is a strict liability statute. Enacted in the aftermath of the stock market crash of 1929, Section 11 is one of the most powerful tools available to investors under the federal securities laws, and imposes absolute liability on issuers for registration statements that are in any material respect incomplete or misleading. However, the pleading standard advocated by the petitioners in Omnicare - showing that the maker of the statement did not subjectively believe the opinion - would be extraordinarily difficult to overcome. Such a standard would effectively immunize potential defendants from public offering liability in the vast majority of cases concerning their "opinion"-linked statements. It would also reward ignorance on the part of issuers, officers, directors, underwriters, and auditors who could genuinely claim "sincere belief" if they simply avoided a thorough investigation of the facts. Further, an adverse ruling could prevent or discourage institutional investors from taking corporate disclosures regarding a variety of important topics about the company - including financial line-items - at face value, forcing investors to incur substantial additional costs of independent verification. Finally, the utility of a securities prospectus and the integrity of this nation's capital markets and securities laws would be substantially eroded if those involved in the preparation of registration statements and offering prospectuses could avoid liability for demonstrably untrue statements of fact by the simple artifice of adding words like "we believe." 

Updated draft amicus brief attached

In order to protect the billions invested annually by institutional investors in public stock and bond offerings, and the trillions invested annually by institutional investors through purchases of securities on the open market, we believe it is imperative that the Supreme Court receive a strong message from the institutional investor community regarding the important issues presented in Omnicare. Accordingly, BLB&G encourages you to strongly consider supporting the institutional investor amicus brief. Working closely with Jonathan Massey, a highly regarded Supreme Court practitioner serving as "counsel of record," we continue to revise and refine the brief. You can download the updated draft of the brief at http://www.blbglaw.com/misc_files/OmnicareAmicus.

Deadline Approaching

With the deadline for the filing the institutional investor amicus brief with the Supreme Court on September 2, we respectfully request that if your fund or financial institution is interested in joining the brief, that you please let BLB&G partner Blair Nicholas know by email (BlairN@blbglaw.com) as soon as possible, but no later than August 28. There are no costs or expenses associated with supporting the brief.


If you have any questions, please contact Mr. Nicholas directly at 858-720-3183.