Tenth Circuit: “False” Disclosure Opinions Not Actionable

The Tenth Circuit has joined a number of other circuits in affirming that a false statement in an offering document is not necessarily actionable simply because it proves to be wrong. Paul Hastings attorneys Shahzeb Lari, John Durrant & Sarah Kelly-Kilgore look at the August 1 decision in MHC Mutual Conversion Fund, L.P. v. Sandler O’Neill & Partners, L.P. and what it will mean going forward. The Tenth Circuit held there are grounds for a lawsuit, they write, only if the speaker knows it’s wrong “or – possibly- if the speaker lacked a reasonable basis for the statement.” The issue is far from settled, however. The authors also point out that in this decision the Tenth Circuit rejects a circuit court holding in another case, Omnicare Inc. v. Laborers District Council, which the Supreme Court will review in the upcoming term. In that case,  the Sixth Circuit ruled that a showing of “objective falsity” was enough to satisfy a Section 11 claim.