Police and Fire Retirement System of the City of Detroit v. Axogen, Inc.

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[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-11246
____________________
NEIL EINHORN,
Individually and on behalf of all others similarly situated,
Plaintiff,
POLICE AND FIRE RETIREMENT SYSTEM
OF THE CITY OF DETROIT,
Individually and on behalf of all others similarly situated,
Plaintiff-Appellant,
versus
AXOGEN, INC.,
KAREN ZADEREJ,
PETER J. MARIANI,
GREGORY G. FREITAG,
JAMIE M. GROOMS,
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21-11246 Opinion of the Court 2
ROBERT J. RUDELIUS,
MARK GOLD,
GUIDO NEELS,
AMY WENDELL,
LEERINK PARTNERS LLC,
JMP SECURITIES LLC,
JEFFERIES LLC,
WILLIAM BLAIR & COMPANY, L.L.C.,
Defendants-Appellees,
JOHN HARPER, et al.,
Defendants.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:19-cv-00069-TPB-AAS
____________________
Before LAGOA, BRASHER, and TJOFLAT, Circuit Judges.
BRASHER, Circuit Judge:
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21-11246 Opinion of the Court 3
The Police and Fire Retirement System of the City of De-
troit lost money when a short seller’s report concluded that Ax-
ogen, Inc., had overstated the market for its products, resulting in
a precipitous decline in Axogen’s stock price. Specifically, Axogen
said that its human nerve repair products had potential because
“each year” 1.4 million people in the United States suffer nerve
damage, leading to over 700,000 nerve repair procedures. The Re-
tirement System filed this lawsuit against Axogen and related enti-
ties, which presents the following question: Were Axogen’s public
statements forward looking? If so, as the district court held, the
statements are eligible for a safe harbor from liability. See 15 U.S.C.
§ 77z-2(c). After careful review and with the benefit of oral argu-
ment, we conclude that the challenged statements are forward
looking and affirm the judgment of the district court.
I.
An individual plaintiff filed a securities class action on behalf
of all persons and entities that purchased or otherwise acquired Ax-
ogen stock during a class period between August 7, 2017, and De-
cember 18, 2018. The district court eventually appointed the Re-
tirement System as lead plaintiff. Once in charge, the Retirement
System filed an amended class complaint alleging violations of the
1933 Securities Act (“the ‘33 Securities Act”), 15 U.S.C. §§ 77k,
77l(a)(2), 77o, and the 1934 Securities Exchange Act (“the ‘34 Ex-
change Act”), 15 U.S.C. §§ 78j(b), 78t(a). The district court granted
the defendants’ first motion to dismiss, and the Retirement System
filed a second amended complaint. The following allegations are
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21-11246 Opinion of the Court 4
recited from the second amended complaint, as we must take them
as true for the purposes of this decision.
Axogen is a medical technology company specializing in
“nerve repair” products. Axogen claims an “exclusive focus on pe-
ripheral nerve repair and protection solutions” and sells “just a
handful of products.” One of those products is the Avance Nerve
Graft, a segment of nerve tissue derived from human cadavers used
to “support and guide nerve regeneration” and “bridge gaps cre-
ated in peripheral nerves as a result of trauma.” Avance is Axogen’s
leading product, accounting for around half of the company’s total
revenues during the class period. Axogen claimed that between
thirty-three and forty percent of its total market related to Avance.
During the class period, Axogen billed itself as a company
with explosive growth potential, particularly for Avance. By the
end of the class period, it estimated that its potential market had
ballooned to 2.7 billion dollars. This estimate was made against a
background of modest revenues—thirteen years after launching its
core product, Axogen’s 2017 revenue totaled only sixty million dol-
lars, and it was operating at a loss. The result was a company that
claimed untapped “long-term sustainable growth” potential, which
was an attractive narrative to the plaintiffs.
Axogen conducted two public offerings of common stock
during the class period that raised more than 170 million dollars.
Documents related to those offerings contained statements in sup-
port of Axogen’s purported growth potential. Axogen stated that it
“believed” several things concerning the number of peripheral
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21-11246 Opinion of the Court 5
nerve injuries and procedures that occurred “each year” in the
United States. 1 The offering documents incorporated statements
made in Axogen’s 2016 and 2017 Form 10-K. The 2016 10-K stated
that:
Axogen believes each year in the U.S. more than 1.4
million people suffer traumatic injuries to peripheral
nerves. Axogen estimates that traumatic injuries to
peripheral nerves result in over 700,000 extremity
nerve repair procedures.
Similarly, the 2017 10-K stated:
We believe that each year in the U.S., more than 1.4
million people suffer damage or discontinuity to pe-
ripheral nerves resulting in over 700,000 extremity
nerve repair procedures.
These statements appeared in the general business overview sec-
tion of Axogen’s Form 10-K, under a subheading entitled “Periph-
eral Nerve Regeneration Market Overview.”
Some of the offering documents repeated Axogen’s belief
concerning the number of injuries and procedures that occur each
1 To support its ‘34 Exchange Act claims, the Retirement System’s complaint
also relies on two public statements that estimated the number of nerve repair
procedures during the class period without using the phrase “each year.” Be-
cause the Retirement System does not appeal the district court’s dismissal of
its ’34 Exchange Act claims, we do not address those statements.
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year. A prospectus prepared in support of the November 2017 of-
fering stated:
We believe that, each year in the United States, more
than 1.4 million people suffer traumatic injuries to pe-
ripheral nerves, resulting in over 700,000 extremity
nerve repair procedures.
The same document contained similar statements concerning the
size of the market for a different Axogen product:
[R]esearch . . . has indicated approximately 80,000 [pe-
ripheral nerve injuries] occur in the U.S. each year
that are related to third molar extractions, anesthetic
injections, dental implants and benign pathology.
And a registration statement filed prior to the May 2018 offering
stated:
We believe that each year in the U.S. more than 1.4
million people suffer damage or discontinuity to pe-
ripheral nerves resulting in over 700,000 extremity
nerve repair procedures.
In December 2018, Seligman Investments, a short seller that
had been investigating Axogen, published a research report chal-
lenging Axogen’s claims about the frequency of peripheral nerve
injury repair procedures and the size of Axogen’s market. The re-
port concluded that, far from the number Axogen touted, there
were only 28,000 peripheral nerve injury repair procedures each
year in the United States. It also concluded that Axogen’s total
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21-11246 Opinion of the Court 7
market for Avance in trauma cases was only fifty-two million dol-
lars, almost twenty times less than the market Axogen represented
to investors during the class period. The release of the Seligman
Report caused a market shock. Axogen’s share price fell from
$27.53 per share at closing the day before the report was released
to $21.36 per share at close of the next trading day and $17.09 per
share at closing three days after that. Axogen’s stock price has yet
to recover to pre-Seligman levels.
The Retirement System later retained its own experts to ex-
amine Axogen’s claims about peripheral nerve injury frequency.
These experts argued that Axogen’s claims about its market and
the prevalence of repair procedures were inaccurate. The Retire-
ment System also contacted several former Axogen employees
who served as confidential witnesses in the complaint. These con-
fidential witnesses expressed further skepticism about Axogen’s
market estimates. And although the Retirement System alleged
that Axogen executives knew that the estimates were false to sup-
port its claims under the ‘34 Exchange Act, it “expressly dis-
claim[ed] any allegations of fraud or intentional misconduct in con-
nection with [the ’33 Securities Act] claims.”
After the Retirement System filed the second amended com-
plaint, the defendants moved to dismiss again. The district court
granted the defendants’ renewed motion and dismissed the com-
plaint with prejudice, holding that the challenged statements were:
(1) forward looking and protected by the safe-harbor provision, 15
U.S.C. § 78z-2, and in the alternative (2) non-actionable statements
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21-11246 Opinion of the Court 8
of opinion under Omnicare, Inc. v Laborers District Council Con-
struction Industry Pension Fund, 575 U.S. 175 (2015). The court
also held that the amended complaint failed to satisfy the height-
ened standard for pleading scienter under the Reform Act, render-
ing the ‘34 Exchange Act claims fatally deficient.
The Retirement System timely appealed, challenging only
the district court’s dismissal of its claims under the ‘33 Securities
Act. The question before us is further narrowed by the Retirement
System’s briefing, which disclaims any challenge to Axogen’s esti-
mates of the size of its market. Thus, the only question on appeal
is whether Axogen’s statements concerning the frequency of nerve
injuries and peripheral nerve injury repair procedures are shielded
from liability.
II.
We review a district court’s order granting a motion to dis-
miss under Federal Rule of Civil Procedure 12(b)(6) de novo, ac-
cepting the complaint’s well-pleaded factual allegations as true and
construing them in the light most favorable to the plaintiff. See S.
Fla. Water Mgmt. Dist. v. Montalvo, 84 F.3d 402, 406 (11th Cir.
1996). But “conclusory allegations, unwarranted deductions of
facts or legal conclusions masquerading as facts will not prevent
dismissal.” Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188
(11th Cir. 2002). To survive a motion to dismiss, a complaint must
allege “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
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21-11246 Opinion of the Court 9
claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the de-
fendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009).
III.
The ‘33 Securities Act creates a cause of action against per-
sons and entities that cause an “untrue statement of a material fact”
or omit a material fact from a public filing related to an offering of
securities. See 15 U.S.C. §§ 77k, 77l, 77o. But the law recognizes a
“safe harbor” for ‘33 Securities Act liability for “forward-looking”
statements. 15 U.S.C. § 77z-2. A forward-looking statement is,
among other things, “a statement containing a projection of reve-
nues” or “income” or “a statement of future economic perfor-
mance.” 15 U.S.C. § 77z-2(i)(1)(A) & (C). Any “statement of the as-
sumptions underlying or relating to any statement” about such
projections is also a “forward-looking statement.” Id. at (D). As rel-
evant here, the safe harbor provides a defense to liability if the
plaintiff fails to prove that the forward-looking statement was
“made with actual knowledge . . . that the statement was false or
misleading.” Id. §77z-2(c)(1)(B)(i).
For our part, we have held that the key characteristic of a
forward-looking statement is that its “truth or falsity is discernible
only after it is made.” Harris v. Ivax Corp., 182 F.3d 799, 805 (11th
Cir. 1999) (interpreting the safe-harbor provision covering claims
under the ‘34 Exchange Act). To differentiate “historical
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observations,” which are not forward looking, from “assumptions
about future events,” which are forward looking, we rely on the
context in which the statement appears. See id. A statement need
not be entirely forward looking to receive safe-harbor protection.
Even a statement that depends in part on present-tense observa-
tions is due safe-harbor protection so long as the conclusion it sup-
ports is forward looking. Id. at 806. Put another way, “when a for-
ward-looking statement is of the sort that, by its nature, rolls in
present circumstances—that is, when a statement forecasts in a ten-
tative way a future state of affairs in which a present commitment
unfolds into action—the statement isn’t barred from safe-harbor
protection solely on that ground.” Carvelli v. Ocwen Fin. Corp.,
934 F.3d 1307, 1329 (11th Cir. 2019). Nonetheless, if a statement
includes a “distinct present-tense . . . component” that is “readily
severable” from the forward-looking portion of the statement, the
safe harbor protects only the forward-looking part. Id. at 1328.
We must apply these principles to Axogen’s statements
about the number of nerve injuries and peripheral nerve injury re-
pair procedures performed in the United States “each year.” The
Retirement System argues that the statements are not forward
looking. In the alternative, the Retirement System argues that the
statements are still actionable even if they are forward looking.
Starting with the Retirement System’s first argument, we
conclude that the challenged statements are forward looking. As a
reminder, the critical phrase in the challenged statements is Ax-
ogen’s assertion that a certain number of peripheral nerve injuries
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21-11246 Opinion of the Court 11
and procedures occur in the United States “each year.” The Retire-
ment System argues that Axogen’s “each year” statement is about
a present, existing, or historical fact. Axogen argues that the phrase
“each year” reflects an ongoing state of affairs that extends from
the present into the future, not a historical state of affairs that ex-
isted at a particular point in time.
We agree with Axogen. Although there is certainly an ele-
ment of present or historical fact in the phrase “each year,” the
phrase is also forward looking. The “each year” statement is, at
least in part, a prediction about the number of injuries requiring
nerve repair procedures that are likely to occur “each year” in the
future. Forward-looking statements “often rest both on historical
observations and assumptions about future events.” Harris, 182
F.3d at 806. By making a claim about the number of injuries and
procedures “each year,” Axogen made an assertion about the likely
number of injuries and procedures in the current year and the year
after that and the year after that.
To be sure, we can imagine using the phrase “each year” to
refer solely to an existing or historical fact. A study could conclude,
for example, that a specified number of injuries occurred “each
year for the ten years observed.” That usage makes a claim about
past conditions based on the study’s observations. Or a company
could say that it pays an employee $100,000 each year. That state-
ment is a claim about the employee’s existing compensation struc-
ture, not a prediction of what the employee will be paid in the fu-
ture. But, as Axogen used the phrase, it is inherently forward
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21-11246 Opinion of the Court 12
looking; it was addressed to future years just as much as to past
years or the present year.
If there were any doubt about whether the statement was
forward looking, the context resolves it. See Harris, 182 F.3d at 805.
The plaintiffs concede that the statements were used to support
Axogen’s predictions about the size of the market that “could be
serviced” by its products. Those market-size predictions are about
“future economic performance” and are defined as forward-look-
ing statements under the statute. See 15 U.S.C. ¶ 77z-2(i)(1)(C). Ax-
ogen’s “statement of [its] assumptions underlying or relating to” its
market predictions—i.e., that “each year” a certain number of in-
juries occur and medical procedures are performed—are defini-
tionally forward looking. See 15 U.S.C. ¶ 77z-2(i)(1)(D); Harris, 182
F.3d at 806. Indeed, the only reason Axogen made the statements—
and the only reason the Retirement System found them material—
is that the statements could be used to predict the size of the going-
forward or anticipated market for Axogen’s products.
Having concluded that there is a forward-looking aspect to
the statements, we must address whether their forward-looking as-
pect is severable from their present-tense or historical implications.
The Retirement System contends that we can “pars[e]” the state-
ments’ present-tense observations and separate them from their
forward-looking components. The problem for the Retirement
System is that no portion of the statements are “readily” or “easily”
severable. Carvelli, 934 F.3d at 1328-29. The statement we found
severable in Carvelli was “lengthy” and had two distinct clauses,
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one addressing a present condition and one an “expect[ation].” See
id. at 1328. On the other hand, we explained in Carvelli that “a pre-
sent-tense declaration is, in some cases, an inextricable part, rather
than an easily severed ancillary, of a forward-looking statement.”
Id. The mere fact that “a forward-looking statement is of the sort
that, by its nature, rolls in present circumstances” does not mean it
falls outside the safe harbor. Id.
Here, we have only one clause, “each year.” It has both pre-
sent-tense and forward-looking implications because it says some-
thing about the past and something about the future. But, to the
extent the phrase “each year” may have two aspects—one that is
forward looking and one that is backward looking—the phrase is
not readily severable into “distinct present-tense and forward-look-
ing components.” Id. at 1328. We can sever the forward- and back-
ward-looking “portion[s]” of a statement, id., but we cannot sever
the meanings of a single phrase.
Turning now to the issue of Axogen’s liability for its for-
ward-looking statements, we agree with the district court that the
Retirement System has not stated a claim upon which relief may
be granted. As relevant here, the safe harbor does not apply to for-
ward-looking statements if “the plaintiff fails to prove that the for-
ward-looking statement . . . if made by a business entity, was . . .
made by or with the approval of an executive officer of that entity
and made or approved by such officer with actual knowledge by
that officer that the statement was false or misleading.” 15 U.S.C. §
77z-2(c)(1)(B).
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The district court concluded that the Retirement System
failed to plead “actual knowledge that the statements were false or
misleading,” and we agree. Aside from cursorily alleging that Ax-
ogen “knew the statement[s] w[ere] materially false or misleading,”
the Retirement System failed to allege any facts suggesting Ax-
ogen’s actual knowledge of the statements’ falsity. In fact, it dis-
claimed any allegation that Axogen “intentional[ly]” misrepre-
sented anything.
The Retirement System does not argue on appeal that it met
the “actual knowledge” standard. It contends instead that the state-
ment is not eligible for the safe harbor under a separate test because
it was unaccompanied by “meaningful cautionary statements.” 15
U.S.C. § 77z-2(c)(1)(A)(i). This argument is beside the point. We
have explained that “[e]ven if [a] forward-looking statement has no
accompanying cautionary language, the plaintiff must prove that
the defendant made the statement with ‘actual knowledge’ that it
was ‘false or misleading.’” Harris, 182 F.3d at 803 (quoting an iden-
tical provision covering ‘34 Exchange Act claims, 15 U.S.C. § 78u-
5(c)(1)(B)). So the Retirement System cannot get around the “ac-
tual knowledge” standard by pointing to the alleged lack of cau-
tionary statements.
Confronting the issue for the first time in its reply brief, the
Retirement System again does not argue that it meets the statutory
“actual knowledge” standard. Instead, it contends that the Su-
preme Court’s decision in Omnicare, Inc. v. Laborers District
Council Construction Industry Pension Fund, 575 U.S. 175 (2015),
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21-11246 Opinion of the Court 15
relieves it of that burden. The Retirement System’s argument mis-
understands the safe-harbor statute and Omnicare. For its part, the
“actual knowledge” standard is a non-negotiable part of the statute.
The safe-harbor provision expressly requires a plaintiff to prove
that a forward-looking statement was made with “actual
knowledge that the statement was false or misleading.” 15 U.S.C. §
77z-2(B)(ii)(II). Omnicare, on the other hand, addressed whether
an opinion may be an actionable misstatement of fact under 15
U.S.C. § 77k(a). See 575 U.S. at 178 (“This case requires us to decide
how [Section 77k(a)] applies to statements of opinion.”). The Court
did not address the safe-harbor provision, let alone alter the plain
text of the statute. Thus, the Retirement System’s failure to plausi-
bly allege—or even attempt to argue on appeal—Axogen’s actual
knowledge dooms its ’33 Securities Act claims.
IV.
For the foregoing reasons, the district court’s judgment is
AFFIRMED.
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21-11246 LAGOA, J. Concurring 1
LAGOA, Circuit Judge, concurring in judgment:
While I concur in the judgment, I write separately because I
would have affirmed the district court on the basis that the state-
ments at issue are clear examples of nonactionable statements of
opinion under the framework the Supreme Court articulated in
Omnicare v. Laborers District Council Construction Indus. Pen-
sion Fund, 575 U.S. 175 (2015), without addressing whether the
statements constitute forward-looking statements.
I.
As the majority opinion explains, certain statements within
a variety of offering-related documents form the foundation of the
legal challenge brought by the Retirement System (i.e., the plain-
tiff-appellant). While the Retirement System challenges several
statements made by Axogen (i.e., the defendant-appellee), many of
these statements are materially similar if not identical in either
plain language or in context.
For my purposes then, I focus on the following statement
from Axogen’s 2017 Form 10-K, which was incorporated into Ax-
ogen’s 2018 public offering documents:
We believe that each year in the U.S., more than 1.4
million people suffer damage or discontinuity to pe-
ripheral nerves resulting in over 700,000 extremity
nerve repair procedures (“Health”, United States,
2011, Publication of U.S. Department of Health &
Human Services; Noble, et al. J of Trauma Injury In-
fection and Critical Care 1998; Kurt Brattain, MD,
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21-11246 LAGOA, J. Concurring 2
Magellan Medical Technology Consultants, Inc.,
Minneapolis, Minnesota 2013).
At bottom, the Retirement System argues that this state-
ment, and similar statements about the incidence of peripheral
nerve injuries and procedures, falsely misrepresented the incidence
of such injuries and procedures, as well as contained omissions of
material facts that, in turn, misled investors—all in violation of the
Securities Act of 1933 (the “Securities Act”). As part of its argu-
ment, the Retirement System also challenges the citation to the
various studies within this broader statement.
Relevant to this appeal, Section 11 of the Securities Act pro-
vides a purchaser of a security a cause of action to sue an issuer of
a security (and certain other actors) if the issuer’s registration state-
ment: (1) “contained an untrue statement of a material fact”; or (2)
“omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.” 1 15
1 In addition to bringing claims under Section 11 of the Securities Act, 15
U.S.C. § 77k(a), the Retirement System also brought claims under Section
12(a)(2) of the Act, id. § 77l(a). “Claims under sections 11 and 12(a)(2)” have
been described as “Securities Act siblings,” with a slight difference being that
Section 11 pertains to untrue statements and omissions in registration state-
ments while Section 12(a)(2) pertains to untrue statements and omissions in
prospectuses and oral communications. In re Morgan Stanley Info. Fund Sec.
Litig., 592 F.3d 347, 358–59 (2d Cir. 2010). Section 12(a)(2) contains materially
similar language as Section 11 and provides a cause of action for a purchaser
of a security to sue an offeror or seller of a security if a relevant prospectus or
oral communication: (1) “include[d] an untrue statement of a material fact”;
or (2) “omitt[ed] to state a material fact necessary in order to make the
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21-11246 LAGOA, J. Concurring 3
U.S.C. § 77k(a). The Supreme Court has termed these two provi-
sions the “false-statement provision” and the “omissions provi-
sion,” respectively. Omnicare, 575 U.S. at 184, 186. Thus, under
these two provisions, Section 11 “creates two ways to hold issuers
liable for the contents of a registration statement—one focusing on
what the statement says and the other on what it leaves out.” Id.
at 179.
Under the first way to establish liability pursuant to Section
11’s false-statement provision, an inquiry must be made into
whether the statement at issue constitutes an opinion. This is be-
cause “statements of opinion are generally nonactionable because
liability attaches only in the case of an ‘untrue statement of a ma-
terial fact,’” and there is a distinction between an objective fact and
a subjective opinion. Carvelli v. Ocwen Fin. Corp., 934 F.3d 1307,
1322 (11th Cir. 2019) (emphasis in original) (quoting Omnicare, 575
U.S. at 183). But an opinion statement may still be actionable be-
cause even an opinion statement “explicitly affirms one fact: that
the speaker actually holds the stated belief.” Omnicare, 575 U.S. at
184. “Thus, a statement of opinion that ‘falsely describe[s] [the
speaker’s] own state of mind’ is an untrue statement of fact—as to
statements, in the light of the circumstances under which they were made, not
misleading.” § 77l(a)(2). The parties do not substantively distinguish between
the Section 11 and Section 12(a)(2) claims in their briefings. And the Retire-
ment System noted in its operative complaint that Axogen’s May 2018 regis-
tration statement “contained” a prospectus, which “incorporated by refer-
ence” Axogen’s 2017 Form 10-K. Thus, for purposes of this concurrence, I see
no need to draw a distinction, as well.
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21-11246 LAGOA, J. Concurring 4
what the speaker actually believes—and accordingly will ‘subject
the issuer to liability (assuming the misrepresentation were mate-
rial).’” Carvelli, 934 F.3d at 1322 (alterations in original) (quoting
Omnicare, 575 U.S. at 184). Additionally, an opinion statement
may be actionable if the opinion statement contains “embedded
statements of fact” in which liability may be established “not only
if the speaker did not hold the belief she professed but also if the
supporting fact she supplied were untrue.” Omnicare, 575 U.S. at
185–86.
Under the second way to establish liability pursuant to Sec-
tion 11’s omissions provision, an “objective” inquiry must be made
into whether the opinion statement at issue would, against the
broader context of the registration statement, mislead a “reasona-
ble investor.” Id. at 186–87, 190–91. Thus, for an investor to bring
a claim alleging a material omission in violation of Section 11,
“[t]he investor must identify 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
to a reasonable person reading the statement fairly and in context.”
Id. at 194. And as the Supreme Court has noted, this “is no small
task for an investor.” Id.
With this background in mind, I turn to the dispositive issue
at hand—whether the statement from Axogen’s 2017 Form 10-K
(and others like it) constitutes a statement of opinion and, if so,
whether it is a nonactionable statement of opinion.
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21-11246 LAGOA, J. Concurring 5
II. Nonactionable Statement of Opinion
As discussed above, there are two ways to establish liability un-
der Section 11—i.e., by showing that the statement at issue (1) in-
cluded a materially untrue statement under Section 11’s false-state-
ment provision or (2) omitted a material fact needed to make the
statement not misleading under Section 11’s omissions provision.
Assuming materiality for purposes of this concurrence, I first dis-
cuss why the statement at issue is an opinion statement, rather than
a statement of fact, and why such an opinion statement is not ac-
tionable under Section 11’s false-statement provision. I then con-
clude by discussing why such an opinion statement also is not ac-
tionable under Section 11’s omissions provision.
1. False-Statement Provision
The first step in the inquiry under Section 11’s false-state-
ment provision is to determine whether the statement at issue is a
statement of fact or a statement of opinion. This is because the
general rule is that a statement of opinion is a nonactionable state-
ment under the false-statement provision. Carvelli, 934 F.3d at
1322.
The Supreme Court has explained that “[a] fact is ‘a thing
done or existing’ or ‘[a]n actual happening’” whereas “[a]n opinion
is ‘a belief[,] a view,’ or a ‘sentiment which the mind forms of per-
sons or things.’” Omnicare, 575 U.S. at 183 (some alterations in
original) (quoting Webster’s New International Dictionary 782,
1509 (1927)). In perhaps the seminal example of the difference
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between a fact and an opinion, the Supreme Court distinguished
between the phrase “the coffee is hot” and the phrase “I think the
coffee is hot.” Id. The phrase “the coffee is hot” is a statement of
fact because it “expresses certainty about a thing.” Id. On the other
hand, the phrase “I think the coffee is hot” is a statement of opin-
ion—not a statement of fact—because it “does not” “express[] cer-
tainty about a thing.” Id.
To distill the Supreme Court’s example down even further,
a person definitively knows, and it is unquestionably certain, that
“the coffee is hot” if that person just brewed a pot of coffee in a
well-functioning machine and poured the coffee into a mug. But a
person does not definitively know, and it is uncertain, that “the cof-
fee is hot” if a person arrives at her office thirty-minutes late and
spies a pot of coffee in the breakroom. The person might “think
the coffee is hot” based on her educated belief, but ultimately there
is uncertainty about whether the “coffee is hot” given her late arri-
val to the office, the fact that she did not brew the coffee herself,
and so on.
Such a difference between a statement of fact and a state-
ment of opinion is “ingrained in our everyday ways of speaking.”
Id. And words like “believe” and “think,” or phrases like “In my
opinion,” trigger the listener or reader to be aware that the speaker
is giving a statement of opinion. Carvelli, 934 F.3d at 1322. Indeed,
this is why “[t]he common law recognized that most listeners hear
‘I believe,’ ‘in my estimation,’ and other related phrases as disclaim-
ing the assertion of a fact. Hence the (somewhat overbroad)
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common-law rule that a plaintiff cannot establish a misrepresenta-
tion claim ‘for misstatements of opinion, as distinguished from
those of fact.’” Omnicare, 585 U.S. at 197–98 (Scalia, J., concurring
in part) (emphasis in original) (quoting W. Keeton, D. Dobbs, R.
Keeton & D. Owen, Prosser and Keeton on Torts § 109, at 755 (5th
ed. 1984) (Prosser & Keeton)).
Turning to this case, we must decide whether the statement
at issue—i.e., “We believe that each year in the U.S., more than 1.4
million people suffer damage or discontinuity to peripheral nerves
resulting in over 700,000 extremity nerve repair procedures”—ex-
presses certainty. It does not. The statement is predicated on the
phrase “We believe” just as the statement found to be an opinion
in Omnicare was predicated on the same exact phrase. See id. at
179–80. Plain text aside, the statement does not have a definitive
number—e.g., “there are 784,322 nerve procedures”—or a defini-
tive timespan—e.g., “there were 784,322 nerve procedures last
year”—rather the statement includes the phrase “over 700,000”
and a nebulous term “each year.” To be sure, the fact that the state-
ment does not use a definitive number or a definitive timespan
does not render the statement an opinion automatically, but the
use of the phrase “We believe” coupled with the use of inherently
imprecise phrasing should trigger the purchaser to realize that Ax-
ogen is reciting an opinion in the form of an estimate. After all, the
inquiry into whether a statement is a statement of opinion or state-
ment of fact is an “everyday” inquiry, id. at 183, where words like
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“believe” have long been known to “disclaim[] the assertion of a
fact,” id. at 197 (Scalia, J., concurring in part) (emphasis removed).
The fact that the statement at issue contained a citation does
not inherently change the larger statement into a statement of fact.
Indeed, the statement at issue still contains the qualifying phrase
“We believe.” And just like the example with the employee late to
work who spies a pot of coffee in the breakroom and believes the
coffee may be hot based on her past experiences, Axogen may be-
lieve in the recited figures based on its sources. But, in neither sit-
uation, is the employee or Axogen expressly certain. Indeed, here,
Axogen has not made “a determinate, verifiable” statement, id. at
184, in the form of a sentence like: “There are over 1.4 million
nerve injuries each year and there are over 700,000 nerve proce-
dures each year according to specific studies.” Rather, Axogen has
alerted the purchaser that it is expressing an opinion through the
words “We believe.” See id. at 183–84 (emphasis in original) (dis-
tinguishing between a CEO stating “The TVs we manufacture
have the highest resolution available on the market” as a statement
of fact and a CEO stating “I believe” or “I think” “the TVs we man-
ufacture have the highest resolution available on the market” as a
statement of opinion).
In sum, the statement at issue is a statement of opinion, not
a statement of fact. But “simply because a statement is couched as
opinion . . . doesn’t foreclose a finding that it constitutes an express
or implied misrepresentation of fact.” Carvelli, 934 F.3d at 1322.
There is “still . . . some room for [Section 11’s] false-statement
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provision to apply to expressions of opinion.” Omnicare, 585 U.S.
at 184.
As noted above, Section 11’s false-statement provision first
applies to opinions because an opinion statement “explicitly affirms
one fact: that the speaker actually holds the stated belief.” Id. at
184. So in all but the most unusual circumstances, a statement of
opinion is actionable under the false-statement provision if the
speaker has lied in stating an untrue belief. Carvelli, 934 F.3d at
1322; see also Omnicare, 585 U.S. at 185 n.2 (emphasis in original)
(explaining that there could be a “rare set of facts,” not applicable
here, where “a director could think he was lying while actually
(i.e., accidentally) telling the truth about the matter addressed in
his opinion,” which would not lead to Section 11 liability). But the
Retirement System cannot establish liability under this first path-
way of the false-statement provision because the Retirement Sys-
tem “expressly disclaim[ed] any allegations of fraud or intentional
misconduct in connection with the[] non-fraud claims” of the Se-
curities Act in its operative complaint. The Supreme Court said as
much in Omnicare when the Court explained that the relevant in-
vestors could not challenge the particular statements at issue be-
cause “their complaint explicitly ‘exclude[d] and disclaim[ed]’ any
allegation sounding in fraud or deception” and therefore the inves-
tors “d[id] not contest that [the issuer’s] opinion was honestly
held.” Omnicare, 585 U.S. at 186.
With the first pathway to liability under the false-statement
provision foreclosed, the Retirement System is left with the second
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pathway—trying to establish that “embedded statements of fact”
within the statement of opinion are “untrue.” Id. at 185–86. Here,
a parsing of the full statement in question is, again, necessary, and
it reveals only two embedded statements of fact within the larger
statement of opinion. First, the statement of opinion inherently
contains an embedded fact that Axogen and those responsible for
the statement of opinion “[held] the stated belief” that over 1.4 mil-
lion peripheral nerve injuries occur each year and that there are
over 700,000 medical procedures addressing these injuries each
year. Id. at 184. As discussed above, the Retirement System cannot
challenge this, as it has expressly disclaimed any allegations that
Axogen’s opinion was not honestly held. Second, the statement of
opinion cites to the three studies at issue, thereby requiring the fac-
tual inquiry into whether those studies exist and whether Axogen,
in some form, reviewed those studies. This is because it is a fact
that the referenced studies exist or do not exist, and it is a fact as to
whether Axogen reviewed or did not review the studies. And,
here, the Retirement System does not challenge whether those
studies exist (they do) or whether Axogen reviewed those studies
(it did).
By challenging what it pegs as the “objectively verifiable
then-existing facts concerning the numbers of nerve injuries and
nerve procedures”—i.e., over 1.4 million injuries and over 700,000
procedures—the Retirement System is not challenging facts at all.
This is because those figures are predicated on the opinion-oriented
phrase “We believe.” And while the Retirement System argues
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that “there was nothing subjective about the figures in [Axogen’s]
statements” because “the number of nerve injuries or nerve proce-
dures . . . are ‘fixed’ and ‘definite,’” in reality the Retirement Sys-
tem’s own proffered estimates for those figures show that there is
inherent subjectivity in these figures. Id. In fact, by its own admis-
sion, the Retirement System proffered three different estimates of
the prevalence of peripheral nerve injuries and procedures in its
operative complaint—one each from its medical expert, an outside
consulting firm, and the original short-seller report.
And therein lies the rub for the Retirement System. The Re-
tirement System has framed its argument about the figures in the
statement constituting embedded facts as a battle of experts and
estimates. The Retirement System therefore is asking this Court
to agree with the Retirement System that its subjective estimates,
while relatively close in range, are better than Axogen’s subjective
estimates of the incidence of peripheral nerve injuries and proce-
dures. But that does not comport with the mandate established by
Omnicare. Indeed, Section 11 neither allows investors to “second-
guess inherently subjective and uncertain assessments” nor allows
investors to “Monday morning quarterback an issuer’s opinions.”
Omnicare, 575 U.S. at 186. And the Retirement System attempts
to do just that by arguing that its experts are better than Axogen’s
experts and by framing Axogen’s estimates not as part of an opinion
but as objectively verifiable facts. While Axogen’s overall opinion
about the incidence of peripheral nerve injuries and procedures
could “turn[] out to be wrong,” it is still an opinion—not a fact. Id.
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Thus, the Retirement System’s challenge to Axogen’s opinion must
fail under the second pathway to liability of Section 11’s false-state-
ment provision.
2. Omissions Provision
Section 11 provides another means of establishing liability
under its omissions provision. To pursue a claim that a statement
“omitted to state a material fact required to be stated therein or
necessary to make the statement[] therein not misleading,”
§ 77k(a), an investor “must identify 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 mis-
leading to a reasonable person reading the statement fairly and in
context,” id. at 194. This is a contextual inquiry and because “[r]eg-
istration statements as a class are formal documents . . . [i]nvestors
do not, and are right not to, expect opinions contained in those
statements to reflect baseless, off-the-cuff judgments, of the kind
that an individual might communicate in daily life.” Id. at 190. But
“an investor cannot state a claim by alleging only that an opinion
was wrong; the complaint must as well call into question the is-
suer’s basis for offering the opinion.” Id. at 194.
Similar to the thrust of its arguments under the false-state-
ment provision, the Retirement System again argues that Axogen’s
peripheral nerve injury and procedure figures are flawed. Here,
the Retirement System takes aim at the citation to the three studies
after the figures. The Retirement System contends that there are
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21-11246 LAGOA, J. Concurring 13
various flaws in the three studies and that the estimates proffered
by its experts are more accurate than the studies relied upon by
Axogen. The Retirement System takes particular issue with Ax-
ogen not explicitly using a certain prevalence rate for peripheral
nerve injuries that is cited in one of the studies. For these reasons,
the Retirement System argues that Axogen “falsely represented the
basis of [its] assertions” and omitted facts about its knowledge of
the studies underlying its assertions. Id.
Despite these arguments, the Retirement System has failed
to meet its burden to state a claim under the omissions provisions,
which, from the outset, is “no small task for an investor.” Om-
nicare, 585 U.S. at 194. While reasonable investors “are right not
to . . . expect opinions contained in . . . statements to reflect base-
less, off-the-cuff judgments,” reasonable investors cannot “expect
that every fact known to an issuer supports its opinion statement.”
Id. (emphasis in original); see also Tongue v. Sanofi, 816 F.3d 199,
212 (2d Cir. 2016) (“Omnicare does not impose liability merely be-
cause an issuer failed to disclose information that ran counter to an
opinion expressed in the registration statement.”). Axogen set
forth an opinion about the incidence of peripheral nerve injuries
and procedures. Axogen then cited three studies for investors. The
Retirement System challenges this opinion because the Retirement
System believes that its own estimates about the incidence of pe-
ripheral nerve injuries and procedures, based on various studies re-
viewed by its own experts, are better than Axogen’s estimates.
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But as noted by the district court, in coming to this assertion,
the Retirement System neither “allege[d] omitted facts regarding
the nature of the inquiry conducted by [Axogen] in creating the es-
timates that would render the statements misleading to reasonable
investors” nor made “any allegation regarding what reasonable in-
vestors would expect regarding the particular sources consulted or
the methodology used by a company to create estimates of this
type.” And the Retirement System did not “alleg[e] that [Axogen],
at the time [it] issued the challenged estimates, possessed the data
or analyses that [the Retirement System] now argues show [Ax-
ogen’s] estimates were incorrect.” The Retirement System simply
alleges that Axogen’s cited studies are flawed and questions those
studies based on its own studies and experts. That does not satisfy
the tall task to state a claim under Section 11’s omissions provision.
Omnicare, 575 U.S. at 194 (“[A]n investor cannot state a claim by
alleging only that an opinion was wrong.”).
III. Conclusion
For these stated reasons, I believe that the statements at is-
sue are clear-cut examples of nonactionable statements of opinion.
As a result, I would have affirmed the district court on this ground
without reaching the question of whether the statements consti-
tute forward-looking statements.