False opinions in stock filings

1. A statement of opinion does not constitute an “untrue statement of... fact” simply because the stated opinion ultimately proves incorrect. The Sixth Circuit’s contrary holding wrongly conflates facts and opinions. A statement of fact expresses certainty about a thing, whereas a statement of opinion conveys only an uncertain view as to that thing. Section 11 incorporates that distinction in its first clause by exposing issuers to liability only for “untrue statement[s] of... fact. ” §77k(a) (emphasis added). 2. If a registration statement omits material facts about the issuer’s inquiry into, or knowledge concerning, a statement of opinion, and if those facts conflict with what a reasonable investor, reading the statement fairly and in context, would take from the statement itself, then §11’s omissions clause creates liability. 719 F. 3d 498, vacated and remanded.

Result

Vacated

The Court distinguished opinions from factual claims: an opinion expresses an uncertain view, so it does not become a false fact just because it proves wrong. But material facts omitted about the issuer’s inquiry or knowledge can create liability if they conflict with what a reasonable investor would understand from the opinion, read fairly and in context.

The Sixth Circuit will reconsider the case under the Supreme Court’s rule. Whether the investors can prove an omission that meets the test remains unresolved.