United States: Supreme Court Decision Alert - March 24, 2015

Today, the Supreme Court issued two decisions, described below, of interest to the business community.

  • Securities Act of 1933—Misstatements in SEC Registration Statements
  • Lanham Act—Preclusive Effect of Trademark Trial and Appeal Board Determinations

Securities Act of 1933—Misstatements in SEC Registration Statements

Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, No. 13-435

Section 11 of the Securities Act of 1933 grants a right of action to investors who allege that they have purchased securities in reliance on a registration statement that "contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading." 15 U.S.C. § 77k(a). Today, the Supreme Court vacated a Sixth Circuit decision that had allowed expansive liability under Section 11 for statements of opinion. The Supreme Court held that an opinion may give rise to a Section 11 claim only if the speaker does not honestly believe the opinion or did not have the basis for the opinion implied by the opinion and its context.

The plaintiffs purchased Omnicare securities during a 2005 public offering. In connection with that offering, Omnicare had filed an SEC registration statement representing, among other things, that it believed that it was complying with all applicable laws. After the federal government sued Omnicare for alleged violations of anti-kickback laws, the plaintiffs sued Omnicare and its officers and directors, alleging that the stated belief regarding legal compliance was untrue because Omnicare was in fact engaged in unlawful activities. The district court dismissed the complaint on the ground that the plaintiffs had failed to allege that Omnicare knew that its legal-compliance opinion was untrue at the time that the registration statement was filed. The Sixth Circuit reversed, holding that it was sufficient under Section 11 for the plaintiffs to allege only that the stated belief was objectively false.

In an opinion by Justice Kagan, the Supreme Court vacated and remanded the decision of the Court of Appeals, holding that the Sixth Circuit had applied the wrong standard when evaluating the complaint. In doing so, the Court concluded that statements of opinion in a registration statement are actionable as "untrue statements of material fact" under Section 11 only if the speaker does not actually hold the belief expressed. The Court also concluded that a plaintiff may not bring a Section 11 claim that an opinion misleadingly omits material facts unless the plaintiff identifies "particular (and material) facts going to the basis for the issuer's opinion—facts about the inquiry the issuer did or did not conduct or the knowledge it did or did not have—whose omission makes the opinion statement at issue misleading." The Court therefore remanded the case for application of the proper legal standard.

Justice Scalia concurred, agreeing with the majority that opinions are not actionable as untrue material facts if they were honestly held, but reasoned that the majority took too expansive a view of the material-omission provision. And Justice Thomas concurred in the judgment that honestly held opinions cannot be the basis of an "untrue material facts" claim but argued that the Court should not have considered the material-omission theory of liability, which he thought that the complaint did not adequately raise.

The decision in Omnicare is of obvious importance to securities issuers and others (including underwriters and auditors) that may face Section 11 claims. The decision clarifies that statements of opinion may be a basis for Section 11 liability only in limited circumstances.


Lanham Act—Preclusive Effect of Trademark Trial and Appeal Board Determinations

B&B Hardware Inc. v. Hargis Industries, Inc., No. 13-352

Under the Lanham Act, the owner of an existing trademark may oppose the registration of a new mark before the Trademark Trial and Appeal Board ("TTAB") if the proposed new mark is likely to cause confusion with the existing mark. The Lanham Act also authorizes the owner of an existing mark to bring a civil action for trademark infringement in federal district court against any person who uses a mark that is likely to cause confusion with the owner's older mark. The Supreme Court granted certiorari in B&B Hardware Inc. v. Hargis Industries, Inc., No. 13-352, to resolve a disagreement among the federal courts of appeals as to whether the TTAB's determination on the likelihood-of-confusion issue in a registration proceeding is preclusive of that issue in subsequent trademark-infringement litigation. Today, the Court held that "[s]o long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially the same as those before the district court, issue preclusion should apply."

Petitioner B&B Hardware registered the trademark SEALTIGHT for a fastener system. Some years later, Respondent Hargis Industries applied to register the mark SEALTITE for a different kind of fastener system. B&B initiated a proceeding in the TTAB opposing Hargis's proposed mark. The TTAB sustained B&B's opposition and refused to register Hargis's mark, finding that there was a likelihood of confusion between the two marks. B&B also brought a trademark-infringement action against Hargis. The district court rejected B&B's argument that it should give preclusive effect to the TTAB's earlier likelihood-of-confusion determination. A jury then found that Hargis's mark was not likely to cause confusion and returned a verdict against B&B. On appeal, the Eighth Circuit affirmed, holding that the TTAB's likelihood-of-confusion findings did not address the same issues as the district court.

In an opinion by Justice Alito, the Supreme Court reversed. The Court first recognized that issue preclusion may be triggered by an agency's—as opposed to a court's—resolution of a dispute. Next, reasoning that "[i]ssue preclusion is available" with respect to an administrative structure "unless it is 'evident' ... that Congress does not want it," the Court concluded that "nothing in the Lanham Act bars the application of issue preclusion" in this context. The Court also concluded that there was no "categorical reason why registration decisions" by the TTAB "can never meet the ordinary elements of issue preclusion," as the controlling standard is essentially the same, and the same party bears the burden of proof in both proceedings.

But the Court included a significant caveat: In a challenge to a registration, the critical question is whether a mark "resembles a [pre-existing registered] mark" to the extent that it is "likely ... to cause confusion," whereas infringement queries whether one "use[s] in commerce ... a registered mark" in a way that "is likely to cause confusion." Thus, a TTAB proceeding may focus solely on the content of pre-existing federal registration and "not on any common-law rights in usages" outside the earlier registration. In these circumstances, claim preclusion will apply if "a mark owner uses its mark in ways that are materially the same as the usages included in its registration application." By contrast, "if a mark owner uses its mark in ways that are materially unlike the usages in its application, then the TTAB is not deciding the same issue." "[T]rivial variations," the Court explained, are not "material."

Application of this rule, accordingly, will turn on whether the owner of the pre-existing mark uses its mark only in ways that are "materially the same" as its registration. The lower courts will likely be called upon to supply more detailed standards to adjudicate this question. While the Court hinted that the controlling test may be whether any variation is "trivial," its decision to leave for remand application of the "materially the same" standard to the facts of this case will provide litigants room for debate in future matters.

In concurrence, Justice Ginsburg focused on this last point. Emphasizing that "contested registrations are often decided upon 'a comparison of the marks in the abstract and apart from their marketplace usage,'" she joined the majority opinion on the understanding that "for a great many registration decisions issue preclusion obviously will not apply."

Justice Thomas dissented, joined by Justice Scalia. He rejected the majority's presumption that it is Congress's intent to give preclusive effect to administrative determinations and suggested that such a presumption should not apply "at least for statutes" that predate Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U.S. 104 (1991), which suggested the existence of the presumption. After concluding that the Lanham Act does not otherwise authorize preclusive effect for TTAB determinations, the dissenters expressed concern that giving a TTAB determination preclusive effect in an infringement action could "deprive a trademark holder of the opportunity to have a core private right adjudicated in an Article III court."

Please visit us at www.appellate.net

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions