"We're Cool" Statements After Omnicare: Securities Fraud Suits for Failures to Comply with the Law

Authors

James D. Cox, Duke Law SchoolFollow

Document Type

Article

Publication Date

2015

Abstract

As part of a symposium celebrating the multiple contributions of the late Alan Bromberg, this article examines implications flowing from the Supreme Court’s recent decision in Omnicare Inc. v. Laborers District Council Construction Industry Pension Fund. Because Omnicare lands so squarely on the Court’s earlier opaque opinion in Virginia Bankshares, Inc. v. Sandberg addressing the treatment of the materiality of opinion statements, Omnicare is the new currency in the realm that will have far-reaching implications. In Virginia Bankshares, the Supreme Court quickly concluded shareholders would attach significance to the board of directors’ statement that the cash-out merger price was “fair” and “high” so that the statement met the materiality standard, but emphasized there was another, more perplexing, issue: whether such an opinion statement was a statement of fact. On this question, Virginia Bankshares’ formulation is hopelessly ambiguous. As developed in this article, Omnicare Inc. returns the focus to the traditional orientation of the information’s significance to the investor and thereby not only provides an understandable, indeed conventional vis-à-vis the common law, but also harbors the strong potential to dramatically change existing approaches to how we view general statements that provide optimism and reassurance, for example “puffery statements” or even what constitutes “meaningful cautionary language under the Bespeaks Caution Doctrine. The article also provides insight to how Omnicare complements the positive contributions of state law doctrine that has developed in the wake of Omnicare Inc. v. NCS Healthcare, Inc. that extended the directors’ monitoring duty to their oversight of compliance systems.

Citation

James D. Cox, "We're Cool" Statements After Omnicare: Securities Fraud Suits for Failures to Comply with the Law, 68 Southern Methodist University Law Review 715-726 (2015)