Investors attempting to sue a company for potentially misleading registration statements were rebuffed by the 2nd U.S. Circuit Court of Appeals in the first opinion since the Supreme Court addressed the issue last year.
“Even under the Supreme Court’s revised approach to allegations of materially misleading opinions, plaintiffs have failed to meet the standards,” the New York appeals court ruled in Sanofi Securities Litigation, AG Funds vs. Sanofi on March 4, upholding a U.S. District Court’s dismissal of the investors’ complaints.
In March 2015, the Supreme Court considered whether investors can sue if a securities registration statement contains potentially misleading opinions in Omnicare Inc. vs. Laborers District Council Construction Industry Pension Fund et al., which was closely watched by scores of U.S. and foreign pension funds that filed an amicus brief. The Supreme Court remanded Omnicare back to the 6th U.S. Circuit Court of Appeals in Cincinnati, which allowed the case to continue. Justice Elena Kagan wrote that under securities law, an opinion statement may not constitute an untrue statement, “but … are not wholly immune from liability.”
In the Sanofi case, which involved several dozen institutional investors including Angelo Gordon funds and Och-Ziff Capital Management, the 2nd Circuit went further, saying that securities law does not impose on issuers “an obligation to disclose every piece of information in their possession,” the order said. “Given the sophistication of the investors here” and other factors, “we conclude that no reasonable investor would have been misled by defendants’ optimistic statements,” the appeals court wrote.