The First Department, in a full-fledged opinion by Justice Gische, reversing Supreme Court, determined defendant pharmaceutical company’s, Genfit’s, motion to dismiss the complaint alleging the company misrepresented the efficacy of a drug in violation of the Federal Securities Act should have been granted. The court noted that the pleading requirements for misrepresentation in this context are not the heightened pleading requirements for fraud:
The gravamen of plaintiff’s complaint is that Genfit made misrepresentations and/or omissions in the registration statement and prospectus (collectively offering documents) it filed with the Securities and Exchange Commission in connection with the IPO (initial public offering). Before a company may sell securities in interstate commerce, it must file a registration statement with the SEC. Pursuant to section 11 of the 1933 Securities Act, if … the registration statement contains an untrue statement of material fact or omits a material fact necessary to make the statement therein not misleading, a purchaser of the stock may sue for damages (15 USC § 77 [k] …). * * *
Plaintiff … objects to certain statements in the offering documents, which we characterize as opinions. … Opinions in offering documents are subject to an analysis under the Supreme Court Decision in Omnicare, Inc. v Laborers Dist. Council Constr. Indus. Pension Fund (575 US 175, 184 ). Under Omnicare, an opinion is actionable if (1) the speaker does not actually hold the stated belief … ; or (2) the opinion affirms an underlying fact … a registration statement omits material facts about the issuer’s inquiry into or knowledge concerning a statement of opinion, and if those facts conflict with what a reasonable investor would take from the statement itself … .
[The] statements of opinion do not affirm underlying facts. … … Plaintiff claims … [the] statements are misleading because Genfit does not actually believe the opinions stated and that the offering documents omit material facts and knowledge. The complaint, however, alleges no facts supporting these conclusions. Schwartz v Genfit, S.A., 2022 NY Slip Op 06892, First Dept 12-6-22
Practice Point: The allegation that a company’s registration statement is misleading in violation of the Federal Securities Act is not subjected to the heightened pleading requirements for fraud. Here the allegations in the complaint did not support even the less stringent pleading requires for misleading statements.