City of Dearborn Heights Act 345 Police & Fire Retirement System v. Align Technology, Inc.

In this securities litigation, plaintiffs failed to adequately allege falsity of opinion under the Securities Exchange Act section 10 and Reg. 10-b5 because they did not allege particular facts showing that the defendant did not disclose facts known to him which cast significant doubt on the reliability of his opinion, nor did they meet any of the other standards for pleading falsity under OmnicareThis decision holds that the standards which Omnicare, Inc. v. Laborers Dist. Council Construction Ind. Pension Fund (2015) 135 S.Ct. 1318 held apply to claims under Securities Act section 11 also apply to claims under Securities Exchange Act section 10 and Reg. 10-b5. Thus, a plaintiff may plead falsity of an opinion in only one of the following three ways:  (a) facts showing that the defendant did not actually and honestly hold the stated opinion at the time; (b) particular facts showing that the defendant did not disclose facts known to him which cast significant doubt on the reliability of his opinion, or (c) falsity of facts that the opinion incorporates and affirms as true.  The (b) alternative narrows prior 9th Circuit precedent which allowed allegations of falsity of opinion by proof of facts showing there was no reasonable basis for the state opinion.  Under these standards, the plaintiffs in this case failed to allege falsity.  They also failed to plead scienter properly.

Ninth Circuit Court of Appeals (Smith, M., J.; Kleinfeld, J., concurring); May 5, 2017; 2017 WL 1753276

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