Omnicare and Oral Argument at the Supreme Court
The Supreme Court heard oral argument on the Omnicare case yesterday.The primary issue was whether an opinion could be false absent allegations of subjective disbelief. I was counsel of record on a brief on behalf of law and business faculty who argued that the statement at issue was not an opinion. For a copy of the brief, go here.
One of the statements alleged to be false stated that: "We believe that our contracts with pharmaceutical manufacturers are legally and economically valid arrangements". The complaint alleged that the statement was false "when made."
In part, the case raises the issue of whether a statement in a registration statement prefaced by "we believe" amounts to an opinion. The issue came up during oral argument came up as evidenced by the following colloquy:
- CHIEF JUSTICE ROBERTS: So if I say or the company says in a prospectus, we believe that we have 3.5 million units of inventory in our secret inventory warehouse, so long as they say we believe, they can't you know, it turns out they have none, that's all right? They're still protected?
- MR. SHANMUGAM: I think that that would probably be a statement of opinion, but it is much closer to the line between statements of opinion and statements of fact. Let me explain
- CHIEF JUSTICE ROBERTS: Really, you think it's an open question if they say it's a very precise number for something that only they know anything about, and it's wildly off, you think they're protected or may be simply by saying "We believe"?
- MR. SHANMUGAM: Well, I I think that the reason why I think it's a close question as to whether or not that would be a statement of opinion is simply because the second restatement's definition of what constitutes a statement of opinion, which we think is a useful guide, includes not just statements on matters of judgment, like the statements we have at issue here, but also statements that express uncertainty about factual matters. And I think in your hypothetical, Mr. Chief Justice, you can view that statement as being the equivalent of a factual statement that along the lines of, we have approximately 3 million units or widgets in our inventory, such that if they had nowhere near that, that statement would be an objectively false statement of fact and, therefore, actionable.
The oral argument primarily focused on whether an opinion subjectively believed was required to have a "reasonable basis," something the Government asserted (as did the law faculty brief). While opinions are difficult to predict, there seems to be a clear majority for the proposition that opinions issued by the company in a Section 11 context must have some support.
The only question is whether the Court will find that an opinion can be false if subjectively believed but lacking in a reasonable basis or if the lack of a reasonable basis is prima facie evidence that the opinion was not subjectively believed. The two positions are not equal. Note the following colloquy between counsel for Petitioner and Justice Alito:
- MR. SHANMUGAM: But, again, our view is that for purposes of pleading a claim, a plaintiff is not restricted to smoking gun evidence that the speaker did not possess the stated belief. And so, again, if a plaintiff is able to come forward with allegations that cross the pleading threshold of plausibility to suggest that the speaker, in fact, did not hold the stated belief, that will, in fact, be sufficient.
- JUSTICE ALITO: Well, that may be true, but do you deny the fact that there can be situations in which a person makes a makes a statement of belief and believes that to be true, but lacks a reasonable basis for stating the belief? There is a difference between those two situations, isn't there?
- MR. SHANMUGAM: I think there is a difference between those two situations, and I think this illustrates an important conceptual distinction. I think in a case where a speaker has no basis whatsoever for the stated belief, there will be comparatively few cases and I'm certainly not aware of any case from the reported cases in this area where the speaker held the stated belief but lacked any basis for it whatsoever.
The other issue was whether the adoption of the reasonable basis standard for opinions subjectively believed required reversal of the 6th Circuit opinion. While the outcome is difficult to predict, the tenor of the opinion was that the Justices would opt for something like the reasonable basis standard (there was discussion about the precise formulation of the standard) and probably send the case back to the 6th Circuit to apply the standard (and to determine whether it had been sufficiently alleged).
Our prediction? A substantive victory for Respondents (opinions can be subjectively believed but still false) but a reversal of the 6th Circuit's decision.