The Ninth Circuit explained that although Omnicare referenced a fraud waiver, the plaintiffs in that case had not argued subjective disbelief at all.
On June 10, 2025, the U.S. Court of Appeals for the Ninth Circuit issued an opinion in Pino v. Cardone Capital, LLC, F.4th, 2025 WL 1642422 (9th Cir. Jun. 10, 2025), which clarified the viability of certain Securities Act of 1933 claims in light of the U.S. Supreme Court’s decision in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund, 575 U.S. 175 (2015). Among other things, the Ninth Circuit held that, notwithstanding Omnicare’s reference to a plaintiff’s fraud disclaimer in explaining its rejection of a Securities Act claim, disclaimers limited to fraud are, standing alone, insufficient to defeat a Section 12(a)(2) misstatement claim.
Background
Defendants Grant Cardone, Cardone Capital LLC, Cardone Equity Fund V LLC and Cardone Equity Fund VI LLC (collectively “Cardone”) offer real estate investments to unaccredited investors and advertise those investments on Instagram and YouTube. Plaintiff Luis Pino, an unaccredited investor in the Cardone funds, filed a putative class action against Cardone under the Securities Act based on misstatements and omissions in Cardone’s real estate investment offering materials, particularly those communicated through social media. Pino brought claims under Section 12(a)(2) of the Securities Act against Cardone and under Section 15 against Grant Cardone and Cardone Capital.
Pino alleges that Cardone made misleading opinion statements in Instagram posts and YouTube videos regarding the performance of the Cardone funds—specifically as to an advertised 15 percent internal rate of return (IRR) and related distribution projections. Pino additionally alleges that Cardone failed to disclose to would-be investors a letter from the U.S. Securities and Exchange Commission (SEC) to Cardone asking them to remove the IRR and distribution projections from its offerings because they lacked sufficient support. Pino’s complaint included a fraud waiver disclaiming “any allegation in th[e] complaint that could be construed as alleging fraud.”
Section 12(a)(2) provides a cause of action for securities offered or sold using prospectuses or oral communications that contain material misstatements or omissions and requires that a claimant demonstrate both subjective falsity (i.e., the speaker did not hold the professed belief) and objective falsity (i.e., the belief is objectively untrue). In dismissing Pino’s putative class action complaint with prejudice, the District Court held that Pino had waived subjective falsity by disclaiming “any and all allegations of fraud” in the operative complaint. The District Court also held that the complaint failed to plausibly allege subjective and objective falsity because it did not allege either that Cardone subjectively disbelieved the IRR and distribution projections or that those projections were objectively untrue.
In addition, the District Court held that Pino’s misleading omissions claim failed because the SEC letter requesting that Cardone remove the IRR and distribution projections was publicly available on the SEC’s online database. Lastly, the District Court held that Pino’s material misstatement claim concerning Cardone’s purported debt obligations associated with the funds was not actionable because it failed to satisfy Section 12(a)(2)’s materiality requirement.
On appeal, a three-judge panel of the Ninth Circuit reversed the District Court’s ruling on multiple grounds and remanded the matter to the District Court.
The Ninth Circuit’s Analysis
In reversing the District Court’s ruling on Pino’s misleading opinion claim, the Ninth Circuit held that Pino’s fraud disclaimer did not waive the Section 12(a)(2) misstatement claim regarding the IRR and distribution projections and that Pino had sufficiently alleged subjective and objective falsity. With respect to Pino’s fraud disclaimer, the Ninth Circuit acknowledged that it had not yet dealt directly with the impact of a fraud waiver in the context of a Section 11 or Section 12 claim under the Securities Act. It proceeded to address the issue directly and rejected the District Court’s reliance on Omnicare, in which the Supreme Court referenced a fraud disclaimer to support its holding that the complaint had failed to allege a viable Section 11 claim:
The two sentences to which [plaintiffs] object are pure statements of opinion… . And the [plaintiffs] do not contest that [defendant]’s opinion was honestly held. Recall that their complaint explicitly “exclude[s] and disclaim[s]” any allegation sounding in fraud or deception… . What the [plaintiffs] instead claim is that [defendant]’s belief turned out to be wrong… . But that allegation alone will not give rise to liability under [Section] 11’s first clause because, as we have shown, a sincere statement of pure opinion is not an “untrue statement of material fact,” regardless whether an investor can ultimately prove the belief wrong.
575 U.S. at 186.
The Ninth Circuit explained that although Omnicare referenced a fraud waiver, the plaintiffs in that case had not argued subjective disbelief at all. In Omnicare, therefore, it was “the absence of claims of subjective disbelief, rather than the absence of fraud claims specifically, that doomed plaintiffs’ claims.” The Ninth Circuit therefore found that a “fair reading of Omnicare is consistent with Pino’s argument that disclaiming fraud alone does not foreclose an entirely separate [Section] 12(a)(2) misstatement cause of action,” particularly given that Section 12(a)(2) claims of untrue statements of fact and misleading omissions do not require proof of an intent to deceive or defraud.
The Ninth Circuit also found relevant distinctions between Pino’s disclaimer and the disclaimer in Omnicare. Whereas the plaintiffs’ disclaimer in Omnicare was broad, disclaiming “any allegation that could be construed as alleging fraud or intentional or reckless misconduct,” Pino’s disclaimer was much narrower, disclaiming only “any allegation in th[e] complaint that could be construed as alleging fraud.”
Apart from its discussions of the fraud disclaimer, the Ninth Circuit found that Pino had adequately alleged subjective and objective falsity as required under Section 12(a)(2). The Ninth Circuit, applying the plaintiff-friendly deferential standard required at the motion-to-dismiss stage, found that Cardone’s uncontested acquiescence to the SEC’s request to remove its IRR projections from the offerings evinced a subjective disbelief by Cardone as to the veracity of those projections in the first place, thereby satisfying the pleading threshold for subjective falsity under Section 12(a)(2). As for objective falsity, the Ninth Circuit found that Pino’s allegations that projections were untrue when made—namely, that Cardone’s projections lacked a basis, that no prior funds had performed to this level, and that the properties associated with the real estate funds had not yet been purchased—were adequate to survive a motion to dismiss.
With respect to Cardone’s material omission claim regarding the projected IRR and distributions, the Ninth Circuit found that Pino’s allegations regarding Cardone’s failure to disclose the SEC letter were sufficient under Omnicare. The Ninth Circuit explained that constructive knowledge does not bar recovery for Section 12 claims and that Cardone’s argument (and the District Court’s finding) regarding the sufficiency of the SEC letter’s public availability were a “backhanded effort to get around” that rule. According to the Ninth Circuit, that truthful information may be publicly available elsewhere cannot relieve a defendant from liability for a statement’s misleading omission of that information.
Lastly, the Ninth Circuit found that the District Court erred in concluding that an allegedly misleading statement regarding a debt obligation (that Cardone was responsible for the debts of the Cardone funds) was not material. In reaching that decision, the Ninth Circuit rejected Cardone’s argument that the debt was immaterial because it was only a small percentage of the total costs of running the Cardone funds. The Ninth Circuit found that the potential change in costs related to the assignment of debt obligations could alter the “total mix” of available information for would-be investors and, therefore, Pino had alleged facts sufficient to satisfy the materiality threshold at the motion-to-dismiss stage.
Takeaways
Pino is a warning to issuers defending against Section 12(a)(2) claims in the post-Omnicare landscape: A plaintiff’s disclaimer of fraud alone will not defeat a Section 12(a)(2) claim, at least not in the Ninth Circuit. This warning is especially relevant where a complaint contains a narrow fraud disclaimer as opposed to the type of broader disclaimer at issue in Omnicare, which encompassed not only fraud but also “intentional or reckless misconduct.” Pino is also an important reminder that, within the Ninth Circuit, an omissions claim will not fail solely where the plaintiff investor could have learned the allegedly omitted information by consulting other publicly available information.
Cardone has not yet signaled whether it will seek a panel rehearing or rehearing en banc of the decision, but for now, Pino is established law in the Ninth Circuit. It remains to be seen whether courts in other jurisdictions will follow suit. Issuers (and their counsel) therefore would do well to monitor such developments and carefully scrutinize any disclaimer allegations in order to prepare adequate defenses. Issuers also would be well advised to carefully craft statements to investors that appropriately account for otherwise publicly available information and to be wary of defending against omissions claims by over-reliance on the public nature of that omitted information.
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