Creating a split with the Second and Ninth Circuits, the Sixth Circuit has held that Section 11 of the Securities Act, 15 U.S.C. § 77k, which creates liability for false statements in registration statements, provides for strict liability and so does not require allegations of knowledge of falsity. The panel in Ind. State Dist. Council v. Omnicare, Inc. rejected the other circuits’ reliance on Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (1991), because that case dealt with Section 14(a), which requires scienter. Because the Supreme Court has already said that Section 11 creates strict liability, the panel held that the analysis in Virginia Bankshares on Section 14(a) did not apply. The Court found that the plaintiffs had adequately pled a cause of action for stock inflation under Section 11, but otherwise affirmed the district court’s dismissal.
It will be interesting to see whether the Supreme Court agrees to resolve the circuit split (assuming Omnicare seeks certiorari).
