Eastern District Of Wisconsin Dismisses With Prejudice Putative Class Action Against Energy Products Company

On April 30, 2026, Judge Brett H. Ludwig of the United States District Court for the Eastern District of Wisconsin granted a motion to dismiss a putative securities fraud class action against an energy products company (the “Company”), and its CEO and CFO (the “Individual Defendants”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.  City Pension Fund for Firefighters and Police Officers in the City of Tampa Bay v. Generac Holdings Inc., et al., No. 22-cv-1436 (E.D. Wis. Apr. 30, 2026).  In granting the motion, the Court held that plaintiffs failed to plead any actionable misstatements or omissions and, even if they had, failed to plead a strong inference of scienter.

According to the operative complaint, the Company is a publicly traded manufacturer of energy-related products, including power generators, solar power storage systems, and home electricity controls, whose business benefited substantially from increased consumer demand during the COVID-19 pandemic.  Plaintiffs alleged that, between April 29, 2021, and November 1, 2022 (the putative “Class Period”), the Company reported a host of accurate metrics concerning its business, but failed to disclose the following three purportedly “negative facts” necessary to prevent their reports from being misleading: (i) the rate at which the Company was closing sales for its home standby (“HSB”) generators was in steep decline; (ii) the Company’s “SnapRS” rapid shutdown device, a component of its “PWRcell” solar product, suffered from a widespread defect resulting in customer complaints, residential fires, and escalating warranty costs; and (iii) the Company’s solar product sales were highly concentrated in a single dealer—despite alleged statements emphasizing the breadth of its dealer network.  Plaintiffs did not allege that any affirmative statement or reported metric was inaccurate but instead pursued a fraudulent omission theory.  Plaintiffs alleged that the Company’s stock rose from $340 per share in April 2021 to $506 in November 2021 before falling to $106 by November 2, 2022, thus causing losses to investors.

The Court first addressed plaintiffs’ primary theory concerning the alleged nondisclosure of declining HSB close rates, relying on statements allegedly made on earnings calls during the Class Period.  The Court held that, read in context, none of the challenged statements—such as that the Company’s HSB business benefited from “megatrends” and that in-home consultations had increased again by May 4, 2022—created a materially misleading picture of the HSB business because defendants “affirmatively disclosed accurate metrics, made predictions about demand based on those accurate metrics, and repeatedly shared challenges facing their HSB generator business,” including elevated lead times, supply chain constraints, and installation capacity limitations.

The Court further held that the Company’s accurate statements about positive metrics for in-home consultations and dealer orders did not imply anything about how close rates were faring, noting that the Company’s CEO had “explicitly cautioned investors against making that assumption.”  The Court rejected plaintiffs’ arguments and explained that, unlike daily and monthly user metrics, indicia of declining close rates would not render statements about increased consultations implausible because the metrics are sequential rather than directly correlated.  The Court also rejected the contention that prior disclosure of close rates created an ongoing duty for the Company to continue disclosing them.

The Court next held that even if any of the alleged HSB statements were actionable, plaintiffs failed to plead particularized facts giving rise to a strong inference of scienter.  The Court explained that plaintiffs’ allegations rested on circumstantial factors “common to the leadership of almost any publicly traded company,” including control of corporate messaging, monitoring of core operations, performance-based compensation, and Class Period stock sales.  The Court rejected plaintiffs’ attempt to aggregate scienter allegations across three unrelated theories, observing that scienter must be pled with particularity as to each challenged statement.  The Court concluded that the competing inference—that the Individual Defendants believed installation capacity and long lead times, rather than close rates, were the Company’s principal challenges—was more compelling than any inference of fraud.

The Court next held that plaintiffs’ defect theory failed because the operative complaint did not plead with particularity that the Individual Defendants knew the scope or severity of the alleged defect at the time the alleged risk-factor statements and product-safety statements were made.  The Court found that allegations concerning a November 2021 report of a “potential defect” to the Consumer Product Safety Commission and the existence of a replacement program failed to establish defendants’ contemporaneous knowledge, particularly because the reporting threshold was “easily triggered” and plaintiffs failed to allege when the replacement program began or what proportion of replacements occurred during the Class Period.

Finally, the Court rejected plaintiffs’ concentration theory, holding that generalized statements about the breadth of the Company’s “clean energy installer network” and overall distribution partners were not rendered misleading by the omission of the fact that one dealer accounted for a significant share of solar sales.  Citing its prior dismissal decision, the Court held that “[o]mitting one detail—even a significant one—[does not] render the whole story inaccurate or misleading,” and that plaintiffs identified no binding authority imposing an affirmative duty to disclose dealer concentration.  The Court further held that, given solar energy’s modest contribution to overall revenue, the omission could not have significantly altered the total mix of information available to a reasonable investor.

Because plaintiffs had previously been afforded an opportunity to cure deficiencies identified in the Court’s prior order, the Court dismissed the amended complaint with prejudice.