• District of Arizona Dismisses With Prejudice Putative Class Action Against Semiconductor Manufacturer

  08/11/2026

  On July 23, 2026, Judge Susan M. Brnovich of the United States District Court for the District of Arizona dismissed with prejudice a putative securities class action against a semiconductor manufacturer (the “Company”) and its CEO and CFO (“Individual Defendants” and, together, “Defendants”), asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5.  Jeffery S. Lew, et al. v. ON Semiconductor Corporation, et al., No. CV-24-00594-PHX-SMB (D. Ariz. July 23, 2026).  Plaintiffs claimed that Defendants made eight allegedly misleading statements about the Company’s long-term supply agreements (“LTSAs”), which the Company allegedly utilized to ensure predictable revenues and to lock-in volumes and pricing.  The Court found that plaintiffs failed to plead that any statement was actionably false, holding each was either inactionable puffery or not misleading, and that the complaint also failed to plead scienter adequately. 

  Following the COVID-19 pandemic, the semiconductor industry allegedly experienced a surge in demand, prompting customers to place duplicate orders with suppliers and then cancel their alternative orders once one was fulfilled.  To combat this practice, the Company allegedly introduced LTSAs beginning in 2021 that specified minimum purchase commitments and product pricing.  Plaintiffs alleged that Defendants heavily touted the LTSAs as binding agreements that ensured predictable revenues, locked-in volumes and pricing, and always generated “win-win” outcomes for the Company.  However, according to Plaintiffs—who relied in part on an alleged confidential witness—the LTSAs were amended frequently and often not enforced against customers who cancelled orders or refused to place required orders.

  Plaintiffs challenged eight statements, which the Court grouped into two categories:  (1) four oral statements made during earnings calls and investor conferences; and (2) four written statements in press releases and SEC filings incorporating language from the Company’s 2022 Form 10-K.

  As to the first category, the Court held that statements made by Individual Defendants characterizing the LTSAs as providing “very, very predictable” revenue outlooks, generating “win-win” outcomes, and being “ironclad” and “legally binding” were inactionable puffery.  The Court held that these statements were “transparently aspirational” and thus not capable of objective verification.  For example, the Court observed that what constituted a “win-win” outcome was “subjective.” 

  As to the second category, the Court held that the Form 10-K language, which described the Company’s customer contracts as including “firmly committed amounts” subject to LTSAs, was not misleading because the same disclosure expressly cautioned that total sales estimates “could be influenced by” modifications to customer agreements, among other factors.  The Court observed that the qualifying language effectively undermined plaintiffs’ theory as the Company’s own disclosures acknowledged the very modifications on which plaintiffs’ claims were predicated.

  Finally, the Court held that even if the alleged misstatements were actionable, plaintiffs failed to plead a strong inference of scienter.  Plaintiffs’ allegations about board materials reflecting escalating LTSA compliance concerns, according to the Court, did not give rise to a strong inference scienter because it was logical for the Company’s board to discuss LTSA compliance and associated risks given the nature of those contracts.  The Court also declined to permit plaintiffs to rely on post-class period statements or the alleged corrective disclosure to satisfy the scienter pleading requirements.  The Court rejected plaintiffs’ attempt to invoke the core operations doctrine, noting that the theory is viable only if plaintiffs first pleaded falsity, which they had not.  Finally, observing that plaintiffs failed to provide any particularized facts suggesting Defendants were aware of information that rendered their statements false or misleading at the time they were made, the Court declined to infer scienter based on a holistic analysis of the allegations.

  Having previously afforded plaintiffs an opportunity to amend, the Court dismissed the action with prejudice.

  Categories: Exchange Act,  Misstatement/Omission,  Puffery,  Scienter
  

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• LEW V. ON SEMICONDUCTOR