                         RECOMMENDED FOR FULL-TEXT PUBLICATION
                             Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                      File Name: 13a0145p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                                    X
 LABORERS AND HOD CARRIERS PENSION AND -
 INDIANA STATE DISTRICT COUNCIL OF
                                                     -
 WELFARE FUND, on behalf of itself and all           -
                                                     -
                                                       No. 12-5287
 others similarly situated,
                                         Plaintiff, ,>
                                                     -
                                                     -
                                                     -
 CEMENT MASONS LOCAL 526 COMBINED
                                                     -
 FUNDS; LABORERS DISTRICT COUNCIL
                                                     -
                            Plaintiffs-Appellants, -
 CONSTRUCTION INDUSTRY PENSION FUND,

                                                     -
                                                     -
                                                     -
            v.
 OMNICARE, INC.; JOEL F. GEMUNDER; DAVID             -
                                                     -
                                                     -
 W. FROESEL, JR.; CHERYL D. HODGES;

                          Defendants-Appellees. -
 EDWARD L. HUTTON; SANDRA E. LANEY,
                                                    N
                      Appeal from the United States District Court
                  for the Eastern District of Kentucky at Covington.
               No. 2:06-cv-26—William O. Bertelsman, District Judge.
                                   Argued: January 15, 2013
                              Decided and Filed: May 23, 2013
         Before: COLE and GRIFFIN, Circuit Judges; GWIN, District Judge.*

                                      _________________

                                            COUNSEL
ARGUED: Eric Alan Isaacson, ROBBINS GELLER RUDMAN & DOWD LLP, San
Diego, California, for Appellants. Harvey Kurzweil, WINSTON & STRAWN LLP,
New York, New York, for Appellees. ON BRIEF: Eric Alan Isaacson, Henry Rosen,
Jennifer L. Gmitro, Amanda M. Frame, ROBBINS GELLER RUDMAN & DOWD LLP,
San Diego, California, for Appellants. Harvey Kurzweil, Richard W. Reinthaler, John
E. Schreiber, WINSTON & STRAWN LLP, New York, New York, Wm. T. Robinson



        *
           The Honorable James S. Gwin, United States District Judge for the Northern District of Ohio,
sitting by designation.


                                                  1
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.        Page 2


III, Michael E. Nitardy, FROST BROWN TODD LLC, Florence, Kentucky, for
Appellees.
         COLE, J., delivered the opinion of the court in which GRIFFIN, J., and GWIN,
D. J., joined. GWIN, J. (pp. 18–19), delivered a separate concurring opinion.
                                   _________________

                                         OPINION
                                   _________________

        COLE, Circuit Judge. Plaintiffs, all Omnicare investors, appeal the dismissal of
their securities suit under § 11 of the Securities Act of 1933, 15 U.S.C. § 77k (2010),
against Defendants Omnicare, Inc., its officers, and directors. Plaintiffs allege that
Defendants made material misstatements and/or omissions in a Registration Statement
filed with the Securities and Exchange Commission in connection with a December 2005
public stock offering. The district court held that Plaintiffs had not adequately pleaded
knowledge of wrongdoing on the part of Defendants and dismissed the complaint for
failure to state a claim upon which relief can be granted. Plaintiffs seek reversal of the
district court’s dismissal order on the grounds that § 11 is a strict liability provision. For
the following reasons, we REVERSE and REMAND in part and AFFIRM in part.

                                              I.

        Defendant Omnicare is the nation’s largest provider of pharmaceutical care
services for the elderly and other residents of long-term care facilities in the United
States and Canada. Ind. State Dist. Council v. Omnicare Inc., 583 F.3d 935, 938 (6th
Cir. 2009) (hereinafter “Omnicare I”); Ind. State Dist. Council v. Omnicare Inc., 527 F.
Supp. 2d 698, 700-01 (E.D. Ky. 2007). During the relevant time period, Defendant Joel
Gemunder was Omnicare’s Chief Executive Officer; Defendant David Froesel was
Omnicare’s Chief Financial Officer and a Senior Vice President; Defendant Cheryl
Hodges was Omnicare’s Secretary and a Senior Vice President; Defendant Edward
No. 12-5287             Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.                    Page 3


Hutton was Chairman of the Board of Directors;1 and Defendant Sandra Laney was a
Director.

         Plaintiffs are investors who purchased Omnicare securities in a December 15,
2005, public offering. In conjunction with the public offering, Omnicare offered
12.8 million shares of common stock and made related filings with the Securities and
Exchange Commission. These filings were incorporated into a Registration Statement
which is central to the current litigation. Plaintiffs did not hold the stock long. They
sold all of these securities by January 31, 2006.

         Plaintiffs seek relief under § 11 of the Securities Act of 1933, 15 U.S.C. § 77k.
Section 11 provides a remedy for investors who have acquired securities under a
registration statement that was materially misleading or omitted material information.
It imposes liability on issuers and signers of registration statements containing untrue
statements or omissions of material fact. 15 U.S.C. § 77k(a). Section 11 also imposes
liability on the directors of the issuer. Id. at § 77k(a)(2).

         According to the Third Amended Complaint2, Omnicare was engaged in a variety
of illegal activities including kickback arrangements with pharmaceutical manufacturers
and submission of false claims to Medicare and Medicaid. Plaintiffs allege that
representations in the Registration Statement were material, untrue and misleading
because they effectively concealed Omnicare’s illegal activities from its investors.
According to the Plaintiffs, the Registration Statement stated “that [Omnicare’s]
therapeutic interchanges were meant to provide [patients with] . . . more efficacious
and/or safer drugs than those presently being prescribed” and that its contracts with drug
companies were “legally and economically valid arrangements that bring value to the
healthcare system and patients that we serve.” Plaintiffs claim that given Omnicare’s
alleged illegal activities, these and other statements indicating compliance with the law


         1
             According to Defendants, Mr. Hutton is deceased.
         2
             Although the Third Amended Complaint is titled “Second Amended Consolidated Complaint,”
it is the third amendment to the original complaint in this litigation. The parties and the district court have
consistently referred to it as the “Third Amended Complaint.”
No. 12-5287           Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.         Page 4


were misleading.        Specifically, Plaintiffs allege that these statements of “legal
compliance” made in the Registration Statement were material, false and misleading, and
therefore in violation of § 11.

          Furthermore, Plaintiffs allege that Omnicare failed to comply with Generally
Accepted Accounting Principles (“GAAP”), such that the financial statements filed in
connection with the December 2005 public offering substantially overstated the
company’s revenue.         Therefore, according to Plaintiffs, the financial statements
contained material misstatements and omissions in violation of § 11.

          Plaintiffs filed this case in the United States District Court for the Eastern District
of Kentucky in February 2006 as a putative securities class action, alleging claims for
violations of § 10(b), Rule 10b-5 and § 20(a) of the Securities and Exchange Act of
1934. Omnicare I, 583 F.3d at 939. A class was never certified. Plaintiffs later
amended the complaint, adding a claim under § 11 for material misstatements and
omissions in the Registration Statement. That § 11 claim is the basis of the instant
appeal.

          Defendants moved to dismiss the complaint on a variety of grounds. On October
12, 2007, the district court granted Defendants’ motion and dismissed the complaint in
its entirety. Omnicare, 527 F. Supp. 2d at 712. With respect to the § 10(b), Rule 10b-5
and § 11 claims, the district court determined that Plaintiffs had failed to plead loss
causation—the causal connection between a defendant’s misconduct and the plaintiff’s
loss. Id. at 704-05. The claim made under § 20(a) was dismissed as well. Id. at 711.
Plaintiffs appealed.

          On October 21, 2009, this Court affirmed the judgment of the district court with
respect to all claims except the § 11 claim. We held that “loss causation” is not an
element of a § 11 claim but is instead an affirmative defense. Omnicare I, 583 F.3d at
947. Accordingly, we determined that the district court had erred by requiring Plaintiffs
to plead loss causation in order to state their § 11 claim. We remanded the case to
district court for further analysis. Id. at 948.
No. 12-5287        Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.       Page 5


       Plaintiffs pursued a writ for certiorari, which they later dismissed, and then
moved for leave to amend the complaint in order to re-plead the § 11 claim. The motion
was granted. The Third Amended Complaint encompasses two types of § 11 allegations:
(1) material misstatements and omissions made with reference to the statements of “legal
compliance”; and (2) material misstatements and omissions in reference to GAAP.
Defendants filed a motion to dismiss the Third Amended Complaint.

       On February 13, 2012, the district court granted Defendants’ motion, concluding
that because the Plaintiffs’ § 11 claim “sounds in fraud,” it was subject to but failed to
meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b). The
court furthermore held that, for both claims asserted under § 11, Plaintiffs were required,
but failed to plead, knowledge of falsity on the part of the Defendants. Because the court
found that the complaint failed to satisfy the pleading standards of Rule 9(b), and
because Plaintiffs had not sufficiently pleaded Defendants’ knowledge of falsity, the
complaint was dismissed. Plaintiffs again appealed.

                                            II.

       Whether the district court properly dismissed a complaint pursuant to Federal
Rule of Civil Procedure 12(b)(6) is a question of law subject to de novo review.
Kottmyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006). The court must construe the
complaint in a light most favorable to the plaintiff and accept all factual allegations as
true. Id. at 688. The factual allegations must “raise a right to relief above the
speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Stated
otherwise, the Rule 12(b)(6) standard requires that the plaintiff provide “enough facts
to state a claim to relief that is plausible on its face.” Id. at 570. A complaint must
“contain either direct or inferential allegations respecting all the material elements to
sustain a recovery under some viable legal theory.” Mezibov v. Allen, 411 F.3d 712, 716
(6th Cir. 2005).

       While notice pleading requirements are based on Rule 8, see Twombly, 550 U.S.
at 555, claims for fraud are held to the heightened pleading standard of Rule 9(b). We
held in Omnicare I that, although § 11 claims do not require pleading of scienter, Rule
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.        Page 6


9(b) pleading standards still apply to § 11 claims that sound in fraud. Omnicare I,
583 F.3d at 948. We furthermore held that the § 11 claims pleaded by Plaintiffs in the
instant case met this requirement. Id.

        Plaintiffs argue that, since this Court’s decision in Omnicare I, they have
amended their complaint to abandon all claims “that could be construed as alleging fraud
or intentional or reckless misconduct” and that, as a result, Rule 9(b) no longer applies.
They base this argument primarily on a disclaimer that has been added to the complaint
stating: “Plaintiffs expressly exclude and disclaim any allegation that could be construed
as alleging fraud or intentional or reckless misconduct, as this claim is based solely on
the theories of strict liability and negligence under the Securities Act.” This one-
sentence disclaimer, however, does not achieve Plaintiffs’ desired result. See Cal. Pub.
Emps. Ret. Sys. v. Chubb Corp., 394 F.3d 126, 160 (3rd Cir. 2004) (“[A]n examination
of the factual allegations that support Plaintiffs’ section 11 claims establishes that the
claims are indisputably immersed in . . . fraud. The one-sentence disavowment of fraud
contained [in] . . . the . . . [c]omplaint does not require us to infer” otherwise) (footnote
omitted). The basis of Plaintiffs’ allegations has not changed since Omnicare I, and
therefore the heightened pleading standard of Rule 9(b) still applies to the § 11 claims.

        Complaints subject to Rule 9(b) must plead “with particularity the circumstances
constituting fraud or mistake.” Fed. R. Civ. P. 9(b). In order to meet the “particularity”
requirement of Rule 9(b), “a plaintiff [must] allege the time, place, and content of the
alleged misrepresentations on which he or she relied; the fraudulent scheme; the
fraudulent intent of the defendants; and the injury resulting from the fraud.” Sanderson
v. HCA-The Healthcare Co., 447 F.3d 873, 877 (6th Cir. 2006) (internal quotation marks
and citation omitted); see also Omnicare I, 583 F.3d at 942-43. “Malice, intent,
knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R.
Civ. P. 9(b).
No. 12-5287          Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.       Page 7


                                              III.

        Plaintiffs have brought two separate § 11 claims in their Third Amended
Complaint: one for material misstatements and/or omissions of legal compliance and one
for Defendants’ alleged failure to comply with GAAP such that the Registration
Statement contained material misstatements and/or omissions. We address each of these
claims in turn.

                                              A.

                                               1.

        Plaintiffs allege that Omnicare’s statements of legal compliance led investors to
believe that Omnicare—which was allegedly engaged in illegal activities—was in
compliance with the law. Plaintiffs assert that these statements of legal compliance
made in the Registration Statement were therefore material, untrue, and misleading, in
violation of § 11.

        The district court held that Plaintiffs were required to plead that Defendants knew
that the statements of legal compliance were false at the time they were made. Because
the court found that Plaintiffs failed to plead knowledge of falsity, it dismissed the
complaint for failure to state a claim. On appeal, Plaintiffs argue that § 11 provides for
strict liability and it was therefore inappropriate for the district court to require them to
plead knowledge in connection with their § 11 claim. We agree.

        Section 11 provides for the imposition of liability if a registration statement, as
of its effective date, “contained an untrue statement of a 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). It provides a remedy for investors who have
acquired securities pursuant to a registration statement that was materially misleading
or omitted material information. See Herman & MacLean v. Huddleston, 459 U.S. 375,
381-82 (1983). Section 11 provides for strict liability, and does not require a plaintiff
to plead a defendant’s state of mind. See id. at 382. Plaintiffs contend that the argument
should end here and that the district court erred by requiring them to plead state of mind.
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.        Page 8


        Defendants respond, however, that the issue is not so simple. Section 10(b) of
the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R.
§ 240.10b-5, have elements parallel to § 11, prohibiting “fraudulent, material
misstatements or omissions in connection with the sale or purchase of a security.”
Miller v. Champion Enters. Inc., 346 F.3d 660, 671 (6th Cir. 2003) (internal quotation
marks and citation omitted). This Court held in Omnicare I—for purposes of § 10(b)
and Rule 10b-5—that legal compliance statements are “soft information.” See Omnicare
I, 583 F.3d at 945 (citation omitted). Soft information includes matters of opinion and
predictions. There is no duty to disclose soft information unless it is “virtually as certain
as hard facts.” In re Sofamor Danek Grp. Inc., 123 F.3d 394, 401-02 (6th Cir. 1997)
(internal quotation marks and citations omitted). Because there is generally no duty to
disclose soft information for purposes of § 10(b) and Rule 10b-5, a defendant
corporation that chooses to keep completely silent regarding soft information cannot be
held liable for a material omission under those provisions. See id.

        A thornier issue arises when a defendant chooses to disclose some soft
information, as occurred in the instant case. Defendants were not completely silent, but
instead spoke on issues of legal compliance. With regard to § 10(b) and Rule 10b-5, this
Court has reasoned:

        [T]he protections for soft information end where speech begins . . . . :
        [H]ow can a rule of non-disclosure apply to a company’s disclosure?
        If—as defendants contend—the protection for soft information remains
        intact even after a company speaks on an emerging issue, the speaker
        could choose which contingencies to expose and which to conceal. On
        any subject falling short of reasonable certainty, then, a company could
        offer a patchwork of honesty and omission. This proposition is
        untenable . . . .

Helwig v. Vencor, Inc., 251 F.3d 540, 560 (6th Cir. 2001) (en banc), abrogated on other
grounds by Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007).

        In Omnicare I, this Court addressed Plaintiffs’ § 10(b) and Rule 10b-5 claims
regarding statements of legal compliance. The Court reasoned, citing Kushner v. Beverly
Enterprises, Inc., 317 F.3d 820, 831 (8th Cir. 2003), and Helwig, that Plaintiffs could not
No. 12-5287        Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.       Page 9


stop at pleading that Defendants’ disclosures were untruthful. See Omnicare I, 583 F.3d
at 945. We held that in order for § 10(b) and Rule 10b-5 liability to attach to Omnicare’s
general assertions of legal compliance, the complaint must “adequately plead[] that the
defendants knew the statements were untruthful” at the time they were made. Id. at 945
(internal quotation marks and citation omitted). The Omnicare I panel found that
Plaintiffs had not adequately pleaded any allegation that Defendants knew that the legal
compliance statements were false when made and accordingly held that Plaintiffs had
failed to state a claim. Id. at 946-47.

       The Omnicare I panel relied heavily on Kushner, which had in turn relied heavily
on our Helwig and Sofamor opinions. See Omnicare I, 583 F.3d at 945 (citing Kushner,
317 F.3d at 831.). Kushner frames the knowledge of falsity pleading requirement as one
of disclosure. Kushner does not appear to have distinguished between material
misstatements and omissions under § 10b and Rule 10b-5. Although the primary issue
in Kushner was whether defendants were liable for a material misstatement, the court
began by commenting: “Before liability for non-disclosure can attach, the defendant
must have violated an affirmative duty of disclosure.” Kushner, 317 F.3d at 831
(internal quotation marks and citation omitted). Citing Sofamor, the court noted that
there is generally no duty to disclose soft information. When knowledge of falsity is
shown, however, “[o]pinions cease to be soft information” and become hard facts. Id.
At that point, the duty to disclose and liability for disclosure of false information under
§ 10b and Rule 10b-5 attach. See id. Although the court agreed that “even absent a duty
to speak, a party who voluntarily discloses material facts in connection with securities
transactions assumes a duty to speak fully and truthfully,” it held that “[a]bsent a clear
allegation that the defendants knew of the scheme and its illegal nature at the time they
stated the belief that the company was in compliance with the law, there [was] nothing
further to disclose.” Id. (internal quotation marks and citation omitted). According to
Kushner, under § 10b and Rule 10b-5 a defendant may only be liable for a material
misstatement if she knew the statements were false and therefore knew there was
something further to disclose.
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.       Page 10


         Language in Helwig supports the view taken by the Eighth Circuit in Kushner
for purposes of § 10b and Rule 10b-5. In Helwig, this Court stated: “With regard to
future events, uncertain figures, and other so-called soft information, a company may
choose silence or speech elaborated by the factual basis as then known . . . .” 251 F.3d
at 561 (emphasis added). In other words, a company that chooses to disclose soft
information assumes the duty to do so fully and truthfully, but only to the extent that
facts are known at the time the statements are made. Helwig, Kushner and Omnicare I,
therefore appear to indicate that, in § 10(b) and Rule 10b-5 cases, a plaintiff must plead
knowledge of falsity because there can be no liability for a material misstatement if a
defendant was not aware there was anything further to disclose in order to correct the
misstatement.

         Defendants now argue that the same reasoning should apply under § 11 to the
case at hand. We do not agree. Section 10(b) and Rule 10b-5 require a plaintiff to prove
scienter, § 11 is a strict liability statute. It makes sense that a defendant cannot be liable
for a fraudulent misstatement or omission under § 10(b) and Rule 10b-5 if he did not
know a statement was false at the time it was made. The statement cannot be fraudulent
if the defendant did not know it was false. Section § 11, however, provides for strict
liability when a registration statement “contain[s] an untrue statement of a material fact.”
15 U.S.C. 77k(a); see Huddleston, 459 U.S. at 382. No matter the framing, once a false
statement has been made, a defendant’s knowledge is not relevant to a strict liability
claim.

         It is immaterial that this issue has been framed as a disclosure requirement.
Disclosed information can nevertheless be indisputably wrong. Under the language of
§ 10(b) and Rule 10b-5, a defendant may take shelter in the fact that she did not know
there was anything further to disclose; it was not fraudulent for the defendant to fail to
disclose anything further. A plaintiff therefore fails to state a claim if she has not
pleaded knowledge of falsity.        Under § 11, however, if the defendant discloses
information that includes a material misstatement, that is sufficient and a complaint may
survive a motion to dismiss without pleading knowledge of falsity.
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.      Page 11


        Finally, Defendants urge us to follow Fait v. Regions Financial Corp., 655 F.3d
105 (2d Cir. 2011). In Fait, a case similar to the instant one, the Second Circuit held
“when a plaintiff asserts a claim under section 11 . . . based upon a belief or opinion
alleged to have been communicated by a defendant, liability lies only to the extent that
the statement was both objectively false and disbelieved by the defendant at the time it
was expressed.” Id. at 110 (citing Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083,
1095-96 (1991)). Defendants argue that in Fait the Second Circuit correctly interpreted
and applied the Supreme Court opinion Virginia Bankshares, 501 U.S. 1083 (1991), and
this Court is bound to follow suit. See also Rubke v. Capitol Bancorp Ltd., 551 F.3d
1156, 1162 (9th Cir. 2009) (citing to Virginia Bankshares and holding that opinions can
“give rise to a claim under section 11 only if the complaint alleges with particularity that
the statements were both objectively and subjectively false or misleading”).

        While Defendants are correct that we are bound by Supreme Court precedent, we
see nothing in Virginia Bankshares that alters the outcome in the instant case, and we
decline to follow the Second and Ninth Circuits as a result. Reserving the question of
whether scienter is necessary to make out a § 14(a) claim, the Supreme Court held in
Virginia Bankshares that a plaintiff may bring a claim under § 14(a) of the Securities and
Exchange Act of 1934 for a material misstatement or omission even if the statement is
vague and conclusory. Virginia Bankshares, 501 U.S. at 1093 (“[S]uch conclusory
terms in a commercial context are reasonably understood to rest on a factual basis that
justifies them as accurate, the absence of which renders them misleading”); 15 U.S.C
§ 78n(a). The Court furthermore held that a defendant’s disbelief in his own statement
is not enough, on its own, for a plaintiff to make out a claim for a material misstatement
under § 14(a). Id. at 1090, 1095-96. In other words, under § 14(a) a plaintiff is required
to plead objective falsity in order to state a claim; pleading belief of falsity alone is not
enough. Id. at 1095-96 (“proof of mere disbelief or belief undisclosed [standing alone]
should not suffice for liability under § 14(a)”). In the instant case, the Plaintiffs have
pleaded objective falsity. The Virginia Bankshares Court was not faced with and did not
address whether a plaintiff must additionally plead knowledge of falsity in order to state
a claim. Id. It therefore does not impact our decision today.
No. 12-5287            Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.                 Page 12


         The Court, at the same point that it declined to discuss scienter, also explicitly
limited its discussion to statements of opinion and belief that it presumed were made
with knowledge of falsity: “[W]e interpret the jury verdict as finding that the directors’
statements of belief and opinion were made with knowledge that the directors did not
hold the beliefs or opinions expressed, and we confine our discussion to statements so
made.” Id. at 1090. A footnote to this sentence reserves “the question whether scienter
[is] necessary for liability . . . under § 14(a).” Id. at 1090 n.5. The connection of these
two statements indicates that the Virginia Bankshares Court itself tied the knowledge of
falsity requirement to scienter but explicitly declined to address the issue further.
Instead, it assumed the jury in the case had already found knowledge of falsity—whether
necessary or not—and proceeded from there. See id. at 1090.

         The Second and Ninth Circuits have read more into Virginia Bankshares than the
language of the opinion allows and have stretched to extend this § 14(a) case into a § 11
context. Since the Supreme Court assumed knowledge of falsity for the purposes of the
discussion in Virginia Bankshares, § 14(a) was effectively treated as a statute that
required scienter.3 The Virginia Bankshares discussion, therefore, has very limited
application to § 11; a provision which the Court has already held to create strict liability.
See Huddleston, 459 U.S. at 381-82.

         The Second Circuit reads Justice Scalia’s concurring opinion as support for their
interpretation of Virginia Bankshares. See Fait, 655 F.3d at 111 (citing Virginia
Bankshares, 501 U.S. at 1108-1109). Justice Scalia wrote: “As I understand the Court’s
opinion, the statement ‘In the opinion of the Directors, this is a high value for the shares’
would produce liability if in fact it was not a high value and the directors knew that. It
would not produce liability if in fact it was not a high value but the directors honestly
believed otherwise.” Virginia Bankshares, 501 U.S. at 1108-09. We do not think it is
necessary to ignore Justice Scalia’s interpretation of the majority Virginia Bankshares
opinion; we only believe it is unreasonable to extend it to this case and §11. Because the


         3
          In this Circuit § 14(a) does in fact require proof of scienter to state a claim. Adams v. Standard
Knitting Mills, Inc., 623 F.2d 422, 430 (6th Cir. 1980).
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.     Page 13


Court chose to limit its discussion to “statements of belief and opinion . . . made with
knowledge that” the statements were false, id. at 1090, any musings regarding mens rea
are dicta. The Supreme Court was not faced with the question of knowledge of falsity
requirements.    Justice Souter carefully declined to discuss strict liability in his
introduction to the majority opinion, and it would be unwise for this Court to add an
element to § 11 claims based on little more than a tea-leaf reading in a § 14(a) case.
While there are contexts in which dicta provides valuable insight into the Court’s
outlook, we must be careful in how it is extended and applied. This is a context in which
extension of dicta is most dangerous. Even Justice Scalia’s seemingly direct statement
must be read in the context of § 14(a)—a non-strict liability statute. In writing the
opinion, the Court could not have intended that musings regarding the requirement
would later be applied to an unrelated statute. We therefore refuse to extend Virginia
Bankshares to impose a knowledge of falsity requirement upon § 11 claims.

                                              2.

        We construe facts alleged in the complaint in the light most favorable to the
Plaintiffs and accept all factual allegations as true. Kottmyer, 436 F.3d at 688; see
Tellabs, Inc., v. Makor Issues & Right, Ltd., 551 U.S. 308, 322 (2007). But complaints
subject to Rule 9(b) must plead “with particularity the circumstances constituting fraud
or mistake.” Fed. R. Civ. P. 9(b). Defendants argue that Plaintiffs have not met their
burden under Rule 9(b) due to their reliance on qui tam complaints and confidential
sources. We disagree.

        Defendants first argue that Plaintiffs’ citations to qui tam complaints are
insufficient to sustain their claim. In order to support this argument, Defendants first
contend that Plaintiffs have failed to conduct a “reasonable investigation” as required
under Rule 11. See Alrbright v. Upjohn Co., 788 F.2d 1217, 1220 (6th Cir. 1986); see
also Fed. R. Civ. P. 11. This argument, however, was also raised in district court, and
the court, at its discretion, did not issue sanctions or strike the relevant portions of the
Third Amended Complaint. See Mich. Div.-Monument Builders of N. Am.v. Mich.
Cemetery Ass’n, 524 F.3d 726, 739 (6th Cir. 2008) (“We review a district court’s
No. 12-5287            Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.               Page 14


decision to grant or deny sanctions . . . arising from . . . Rule 11, under the
abuse-of-discretion standard”). Rule 11 sanctions are a question of “whether the . . .
attorney’s conduct was reasonable under the circumstances.” Id. (internal quotation
marks and citations omitted). We see no reason to conclude that the district court abused
its discretion for purposes of Rule 11.

         Defendants next argue that allegations based on qui tam complaints nevertheless
cannot withstand a motion to dismiss under Rule 9(b). Defendants cite to several cases
in which courts, after noting reliance on third-party actions, have dismissed complaints
under Rule 9(b). We do not believe this case necessitates such action. The only Sixth
Circuit opinion cited by Defendants, Konkol v. Diebold, Inc., 590 F.3d 390 (6th Cir.
2009), abrogated on other grounds by Frank v. Dana Corp., 646 F.3d 954 (6th Cir.
2011), is inapposite. In Konkol, this Court began by determining that the complaint, in
a § 10b and Rule 10b-5 case, was insufficient to state a claim—on grounds that had
nothing to do with third-party complaints.4 Id. at 397-400. We then proceeded to
address the plaintiffs’ list of defenses to that holding, finding each of them insufficient.
Id. at 400-04. One of these defenses was the existence of government investigations into
the defendants’ actions. Id. at 401-02. We stated that “[a]lthough a government
investigation is not altogether irrelevant to the . . . analysis . . . [g]overnment
investigations can result from any number of causes, and the investors have not pointed
to any facts suggesting that the SEC investigation” supports their claim. Id. at 402.

         The same is not true in the instant case. Plaintiffs do not simply cite to the
existence of government investigations, they allege numerous reasons why the facts of
those investigations support their claim. In Konkol, the plaintiffs relied on the fact that
government agencies had dedicated resources to investigating defendants, and they
therefore concluded, “as a matter of common sense,” that something must be amiss. Id.
at 401-02. The Plaintiffs here jump to no such conclusions. Instead of relying on the
mere existence of qui tam complaints or investigations, they comprehensively discuss

         4
          We also note that plaintiffs in Konkol were not only subject to Rule 9(b) but also to the higher
more exacting pleading standards of the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4(b),
which are inapplicable in this case. Konkol, 590 F.3d at 396.
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.      Page 15


how the details are relevant to their own complaint, and give extensive rationale for that
support. We find the other cases cited by Defendants similarly inapplicable.

        Defendants’ second argument is that the confidential witness statements in the
complaint should be “steeply discounted.” See Omnicare I, 583 F.3d at 946 (discounting
the weight of the confidential witness statements). Even giving the confidential witness
statements minimal weight, however, we do not doubt that sufficient facts have been
presented to “raise a reasonable expectation that discovery will reveal evidence.”
Twombly, 550 U.S. at 556. We therefore conclude that Plaintiffs have adequately met
the particularity requirement of Rule 9(b).

                                             B.

        Plaintiffs also appeal the dismissal of their § 11 claim for GAAP-based
misstatements and omissions. The district court held that Plaintiffs failed to plead
knowledge of falsity and therefore failed to state a claim. Defendants argue that we
should affirm because the GAAP allegations are based on “soft information.” Cf. In re
Almost Family, Inc. Sec. Litig., No. 3:10-CV-00520-H, 2012 WL 443461, at *4 (W.D.
Ky. Feb. 10, 2012) (holding that some GAAP allegations were soft information because
the allegations in plaintiff’s complaint focused on defendants’ beliefs about accounting
numbers, not on the actual data they reported). We disagree that Plaintiffs’ GAAP
allegations qualify as soft information. Plaintiffs’ allegation is that Defendants’ hard
numbers were incorrect. These are allegations of hard facts and do not require pleading
knowledge of falsity under any standard. Even if we were to hold that the GAAP
allegations are soft information, however, plaintiffs are not required to plead knowledge
of falsity under § 11 to make out a claim for a material misstatement. Therefore, the
district court erred in requiring Plaintiffs to plead knowledge of falsity with regard to the
GAAP violations.

        However, Plaintiffs still have to meet the particularity requirements of Rule 9(b)
in pleading that GAAP violations occurred. As this Court noted in Omnicare I,
Plaintiffs’ GAAP allegations appear to contain some factual holes. In assessing
Plaintiffs’ 10(b) and 10b-5 claims, the Omnicare I Court stated:
No. 12-5287          Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.     Page 16


          Although Plaintiffs list numerous alleged violations of GAAP rules, the
          complaint nowhere suggests how or when any of these alleged
          accounting improprieties were disclosed. Rather, Plaintiffs argue that
          they were implicitly disclosed because Omnicare’s allegedly illegal
          conduct (drug recycling, etc.) translated into accounting violations.
          Thus, when news of the government raids appeared, the accounting
          statements were thrown into question by extension. This causation
          theory, however, rests entirely on speculation and is substantially
          undercut both by the lack of any financial restatements on Omnicare’s
          part and by the willingness of third-party auditors to continue to certify
          Omnicare’s GAAP compliance.

Omnicare I, 583 F.3d at 945.

          While that analysis concerned whether Plaintiffs had adequately alleged “loss
causation” with particularity, it is applicable to whether they have pleaded a GAAP
violation at all. Plaintiffs’ Third Amended Complaint alleges many GAAP-based
violations, but as the Court noted in Omnicare I, the details of the accounting violations
remain unclear. Although Plaintiffs’ complaint has been amended since our previous
opinion, Plaintiffs have not pointed to any updated information that would resolve these
issues.

                                              C.

          Defendants urge us to affirm the district court on the alternative ground that the
affirmative defense of loss causation is evident on the face of the complaint. “Loss
causation” refers to the causal connection between the defendant’s material
misrepresentation or omission and the plaintiff’s loss. See Omnicare, 527 F. Supp. 2d
at 704-05. When an affirmative defense is evident on the face of a complaint, the
complaint may be subject to dismissal under Rule 12(b)(6). Jones v. Bock, 549 U.S. 199,
215 (2007). Furthermore, this Court held in Omnicare I that the complaint did not
adequately plead loss causation for the 10(b) and Rule 10b-5 claims. Omnicare I, 583
F.3d at 943-47.

          Loss causation is an element of a § 10(b) and Rule 10b-5 claim but only an
affirmative defense to a § 11 claim. The Omnicare I panel reversed the district court on
No. 12-5287        Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.    Page 17


the § 11 claim on exactly that basis. Had the Court determined that the affirmative
defense of loss causation was evident from the face of the pleadings, it would have
affirmed and dismissed the case. Instead, it chose to remand to the district court for
further analysis. Id. at 948. The district court, having declined to reach this issue on
remand, has not yet addressed the merits of the argument. Although the complaint has
been amended since Omnicare I was decided, the Defendants urge us to find loss
causation on the basis of language in the outdated complaint. We therefore have no
more information on this issue now than we had at the time of the Omnicare I opinion.

       “When attention has been focused on other issues, or when the court from which
a case comes has expressed no views on a controlling question, it may be appropriate to
remand the case rather than deal with the merits of that question in this Court.”
Dandridge v. Williams, 397 U.S. 471, 476 n.6 (1970); see also Lewis v. Philip Morris
Inc., 355 F.3d 515, 534 (6th Cir. 2004) (remanding due to the fact-intensive nature of the
review required). The district court in this case has had many years to familiarize itself
with the facts of this case and is in a stronger position than this Court to conduct the
fact-intensive analysis this ruling requires.

                                            IV.

       For the foregoing reasons, we REVERSE the district court with regard to
Plaintiffs’ legal compliance claims and REMAND for further proceedings consistent
with this opinion; and AFFIRM with respect to Plaintiffs’ GAAP-based claims.
No. 12-5287         Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.     Page 18


                           ____________________________

                                 CONCURRENCE
                           ____________________________

        GWIN, District Judge, concurring. I concur in the majority’s thoughtful and
comprehensive opinion. I write separately to make clear that the district court retains
the statutory and inherent discretion to resurrect previously dismissed claims and
previously dismissed parties should later discovered evidence warrant it. See Rodriguez
v. Tenn. Laborers Health & Welfare Fund, 89 F. App’x 949, 959 (6th Cir. 2004)
(“District courts have authority both under common law and Rule 54(b) to reconsider
interlocutory orders and to reopen any part of a case before entry of final judgment.”).

        Rule 54(b) of the Federal Rules of Civil Procedure provides the statutory vehicle
for such revision. If a court decides fewer than all the claims presented, as is the case
here, dismissed claims can be revived until the entry of final judgment. Fed. R. Civ. P.
54(b) (“[A]ny order . . . that adjudicates fewer than all the claims or the rights and
liabilities of fewer than all the parties does not end the action as to any of the claims or
parties and may be revised at any time before the entry of a judgment adjudicating all
the claims and all the parties’ rights and liabilities.”). The district court’s ability to
reconsider past rulings must be tempered by “the sound public policy that litigation be
decided and then put to an end.” Petition of U.S. Steel Corp., 479 F.2d 489, 494 (6th
Cir. 1973).

        In deciding whether to revisit previously dismissed claims or parties, a district
court may consider “(1) an intervening change of controlling law; (2) new evidence
available; or (3) a need to correct a clear error or prevent manifest injustice.” Rodriguez,
89 F. App’x at 959. (citing Reich v. Hall Holding Co., 990 F. Supp. 955, 965 (N.D. Ohio
1998)). Simple reargument of evidence that had been available at the time of the earlier
decision is usually not enough to warrant reconsideration. Id.

        Rule 54(b) is particularly relevant in suits subject to the Private Securities
Litigation Reform Act (PSLRA). The PSLRA, passed in 1995 after considerable
lobbying by corporate and investment interests, mandates heightened pleading
No. 12-5287        Ind. State Dist. Council, et al. v. Omnicare, Inc., et al.    Page 19


requirements to avoid dismissal. As one scholar notes, the PSLRA “created a super-
heightened pleading standard for certain aspects of securities claims and deferred
discovery until after resolution of an inevitably protracted motion to dismiss . . . .”
Arthur Miller, From Conley to Twombly to Iqbal: A Double Play on the Federal Rules
of Civil Procedure, 60 Duke L.J. 1, 11 (2010). Such motions to dismiss, as is the case
here, often include questions of “scienter, loss causation, reliance, and
materiality—questions that formerly would have been considered trial worthy.” Id.
Remarkably, the PSLRA imposes what amounts to a probabilistic pleading standard for
scienter. See Tellabs v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314 (2007) (defining
the “strong inference” of scienter under the PSLRA as “more than merely plausible or
reasonable—it must be cogent and at least as compelling as any opposing inference of
nonfraudulent intent”).

       If newly-found evidence in a PSLRA case supports a previously dismissed
claim’s scienter (or materiality, or reliance, or loss causation) allegation, the district
court could allow the claim to be revived. District courts are charged with enforcing
rules “to secure the just, speedy, and inexpensive determination” of an action. Fed. R.
Civ. P. 1. There’s a reason that “just” precedes “speedy.”
