Third Circuit Affirms Dismissal of Securities Class Action Against Globus Medical
On August 23, 2017, the U.S. Court of Appeals for the Third Circuit affirmed the dismissal of a securities class action filed against Globus Medical, a medical device company that designs, develops, and sells musculoskeletal implants, particularly for spine disorders. The complaint alleged that certain risk disclosures relating to the possible negative impact on revenues from the loss of distributors for Globus’ product were misleading because such a risk had already materialized when the company decided to terminate a significant distributor. The complaint also alleged that the company’s projections were false since they allegedly did not take into account the loss of revenue from the termination of the significant distributor. The Third Circuit held that the risk disclosures were not misleading because the plaintiff had failed to sufficiently allege that the termination of the distributor had any adverse effect on sales at the time the risk disclosures were made. Further, the Court of Appeals found that the plaintiff had failed to adequately allege that the challenged financial projections were misleading or what, if any, revenues of the terminated distributor were included in those projections. In addition, the court found the projections to be protected by the Private Securities Litigation Reform Act (PSLRA) safe harbor for forward looking statements.
Wilson Sonsini Goodrich & Rosati represented Globus, along with its CEO, CFO, COO, and Chief Accounting Officer, in the matter.
A shareholder filed the initial complaint on September 29, 2015, a lead plaintiff was appointed, and an amended complaint was filed on February 19, 2016. Judge Wendy Beetlestone of the U.S. District Court for the Eastern District of Pennsylvania granted Globus’s motion to dismiss on August 26, 2016, and entered judgment without leave to amend. The plaintiff appealed, and the Third Circuit affirmed.
The WSGR team that represented Globus in the matter was led by partners Barry Kaplan and Greg Watts and included Of Counsel Cheryl Foung, associate Christopher Petroni, and paralegals Diana Lopez, Shea Savage, and Naomi Pierce.
For more information, please refer to the Third Circuit's opinion.