• Ninth Circuit Reinstates Putative Class Action Against Real Estate Syndicator, Holding That Complaint’s Fraud Disclaimer Did Not Waive Securities Act Claim That Opinion Statements Were Subjectively False

  06/17/2025

  On June 10, 2025, the United States Court of Appeals for the Ninth Circuit reinstated a putative class action asserting claims under the Securities Act of 1933 against a real estate syndicator, one of its executives, and investment funds managed by the syndicator. Pino v. Cardone Cap., LLC, —F.4th—, 2025 WL 1642422 (9th Cir. 2025). Plaintiff alleged misrepresentations were made in certain real estate investment offering materials but affirmatively disclaimed that defendants had engaged in fraud. As discussed in our prior post, the Ninth Circuit had previously reversed the district court’s dismissal of plaintiff’s original complaint, holding that defendants were adequately alleged to be “sellers” for purposes of Section 12(a)(2) of the Securities Act and had also directed the district court to grant plaintiff leave to replead. After plaintiff filed a further amended complaint, the district court again dismissed the action with prejudice. The Ninth Circuit again reversed, holding that plaintiff adequately alleged that the challenged opinion statements were subjectively false and that this argument was not waived by plaintiff’s affirmative allegation disclaiming fraud. Further, the Court held that the executive’s failure to disclose a publicly filed letter from the SEC that directed defendants to remove certain information from their offering materials was a potentially actionable omission even though the SEC’s letter was publicly filed because constructive knowledge could not fulfill Section 12(a)(2)’s actual knowledge requirement.

  The allegations concerned defendants’ real estate syndication business, through which defendants acquired real estate properties, pooled them, and made them available for investment by unaccredited retail investors pursuant to the 2015 U.S. JOBS Act. The funds made offerings to investors pursuant to Regulation A of the Securities Act, which exempts smaller public offerings from SEC registration but still requires offerings to be filed with and qualified by the SEC. Id. at *2. Plaintiff, who invested in the funds in 2019, contended that a fund executive made misleading opinion statements in social media posts as to the funds’ projected internal rate of return and as to disbursements the funds would make to investors, in addition to misleading statements about who had the obligation to pay the funds’ debts. Id. at *2–3. Plaintiff also alleged that the executive misleadingly omitted from those social media communications the fact that he had received a letter from the SEC asking him to remove the internal rate of return and distribution projections from the offering circular because those projections lacked backing. Id. at *3.

  The Ninth Circuit first held that plaintiff had not waived the argument that the offering materials contained subjectively false statements of opinion, even though plaintiff’s complaint disclaimed that defendants engaged in fraud. In assessing the Supreme Court’s decision in Omnicare, Inc. v. Laborers Dist. Council Const. Indus. Pension Fund, 575 U.S. 175 (2015), the Ninth Circuit explained that the Supreme Court had held, in the context of a claim under Section 12 of the Securities Act, that an investor “need not prove that the issuer acted with any intent to deceive or defraud” in order to state a claim, Omnicare, 575 U.S. at 175, and that plaintiffs in Omnicare had disavowed “any allegation that could be construed as alleging fraud or intentional or reckless misconduct.” 2025 WL 1642422, at *4. In Pino, however, plaintiff only disavowed any allegation in the complaint that could be construed as alleging fraud. Id. The Ninth Circuit held that it was “the absence of claims of subjective disbelief, rather than the absence of fraud claims specifically, that doomed plaintiffs’ claims” in Omnicare. Id. at *3 (emphasis in original). Plaintiff in Pino, the Court explained, had sufficiently alleged the executive subjectively disbelieved the challenged statements even while disavowing claims of “fraud.” Id. In particular, the Court accepted the argument that the executive’s failure to push back on the SEC’s request to remove statements about the funds’ projected internal rate of return and disbursements, despite having contested other requests the SEC made, plausibly suggested the executive did not believe the statements about the funds’ internal rate of return and disbursements. Id.

  The Ninth Circuit then explained that although the SEC letter that was the basis of the omission claim was publicly available, constructive knowledge of a publicly available document is not enough to preclude a claim under Section 12(a)(2). Id. at *5. Rather, such a claim would be precluded only if plaintiff had actual knowledge of the allegedly omitted information. The Ninth Circuit emphasized that a defendant must proffer definitive factual proof a plaintiff actually knew of the alleged omission. Id.

  Category: Misstatement/Omission
  

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• Pino v. Cardone Cap., LLC