The Supreme Court has decided numerous cases under Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) based on a judicially implied claim that has been expanded and contracted according to the political predilections of the justices on the bench. The court has not yet directed much attention, however, to cases arising under Section 11 of the Securities Act of 1933 (Securities Act),1 which are express statutory claims for damages arising from misstatements and omissions in offering documents used in public offerings. Omnicare v. Laborers District Council Construction Industry Pension Fund2 may therefore be an important indicator of how the current court will decide Section 11 cases. Will the court attempt to restrict a plaintiff’s opportunities for recovery under Section 11 in the same way it has done so under Section 10(b)?
Omnicare decided that an issuer may be liable under Section 11 for opinions set forth in a registration statement if the issuer did not genuinely hold the stated opinion, or if the issuer failed to disclose material facts relating to the foundation for the opinion. A few days later, the Supreme Court granted a writ of certiorari, vacated the judgment and remanded a case, Freidus v. ING Groep, to the U.S. Court of Appeals for the Second Circuit for consideration based on the Omnicare opinion.3 This column will discuss the application of Omnicare to that remand and a few other recent or pending cases.
