BNA Insights: Whose Statement Is It Anyway? - Section 11 Claims Against Auditors After Omnicare

Since its enactment in 1933, Section 11 of the Securities Act has been a sharp arrow in the quiver of securities plaintiffs and their counsel. Because a securities plaintiff is not required to prove intent or reliance or allege loss causation, Section 11 presents a particular danger to any defendant that participated in the registration statement process. For the independent auditor, the concern is heightened because of recent decisions that have interpreted Section 11 to extend beyond the auditor’s opinion on the issuer’s financial statements to errors in the financial statements themselves. These decisions, which threaten to vastly expand liability for independent auditors, are not only inconsistent with the statutory framework and more than 75 years of professional practice, but also run contrary to the Supreme Court’s decision in Omnicare. While the only court of appeals to address the issue since Omnicare has rejected the reasoning behind these decisions, the battle continues on the front lines of the district courts.