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First Circuit Partially Revives Putative Class Action Against Consumer Robotics Company
06/30/2026On June 5, 2026, the United States Court of Appeals for the First Circuit reversed in part a decision from the United States District Court for the District of Massachusetts dismissing a putative securities fraud class action against a consumer robotics company (the “Company”) and certain former and current executives (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. Premca Extra Income Fund LP v. Angle, et al., No. 25-1192 (1st Cir. June 5, 2026). Plaintiff alleged that from February 13, 2023, through January 29, 2024, defendants made numerous misleading statements and omissions regarding the status of the Company’s intended merger with another company. In reversing in part, the First Circuit held that the district court correctly dismissed the amended complaint with respect to all alleged misstatements or omissions except for one—which the Court held was actionable and supported an inference of scienter.
According to the operative complaint, in August 2022, the Company announced its agreement to merge with a large online retailer (the “Acquiring Company”), and the two companies spent the following eighteen months seeking clearance from domestic and international antitrust regulators, including the Federal Trade Commission (the “FTC”) and the European Commission (the “EC”) in the European Union. The complaint further alleged that the Acquiring Company had repeatedly refused to provide the EC with information about how its search engine worked, despite the Company publicly announcing that the parties had been cooperating with regulators. Plaintiff alleged that the EC then proceeded into “Phase II” of its antitrust investigation before ultimately issuing a statement of objections to the merger. Further, despite allegedly having knowledge of the EC’s antitrust concerns, the Company filed a modified merger proxy statement on August 24, 2023, in which it predicted that “all applicable regulatory approvals [would] be obtained.” On January 29, 2024, after pushback from various antitrust authorities, the parties allegedly issued a joint press release announcing that they had mutually agreed to terminate the merger. The same day, the Company allegedly announced layoff plans and that its CEO had stepped down. Plaintiff alleged that these revelations caused the Company’s stock price to drop.
The district court dismissed the complaint with prejudice, holding that plaintiff failed to adequately plead falsity or scienter. In so holding, the district court declined to credit alleged confidential witness statements demonstrating that the Company’s senior leadership allegedly recognized that the merger would fail regulatory review prior to issuing public statements, finding these allegations were not sufficiently particularized. The district court further found the alleged misstatements regarding the Acquiring Company’s cooperation with regulators and the status of the regulatory approval process not actionable, and concluded that plaintiff had in any event failed to plead a strong inference of scienter.
The First Circuit analyzed the challenged statements chronologically, addressing (i) statements prior to the August 24, 2023, modified proxy statement; (ii) the August 24, 2023, proxy statement; and (iii) statements after the August 24, 2023, proxy statement.
First, with respect to the pre-August 24, 2023, alleged statements, the Court addressed three alleged statements in which the Company described itself and the Acquiring Company as continuing to “work cooperatively” with regulators. The First Circuit held that, even assuming those statements were false, they did not give rise to a strong inference of scienter. The Court explained that any argument that the Individual Defendants possessed the requisite scienter “presumes that they held a robust understanding of ‘cooperation,’ one defined by an inflexible obligation to provide regulators with all requested information on demand.” The Court further explained that the merger agreement required only “reasonable best efforts” to obtain regulatory approval, and to supply information as “reasonably practicable.” This language left room for “give-and-take” and “hardball” between the merging parties and the regulators. The Court concluded that plaintiff’s allegations amounted to a reasonable disagreement over the meaning of “cooperate,” which could not give rise to a strong inference of scienter.
Second, the Court addressed the August 24, 2023, modified proxy statement, in which defendants allegedly stated that they “expect[ed] that all applicable regulatory approvals [would] be obtained.” Diverging from the district court, which had found the Company’s risk disclosures accurate and declined to find this statement actionable, the First Circuit held that this statement of expectation was an opinion that could constitute a misleading misstatement because it omitted material contrary information. Specifically, the Court emphasized that the prediction failed to disclose the Acquiring Company’s ongoing refusal to provide the EC with information about its search engine, which was central to the EC’s publicly expressed and thus known concerns following its announcement to elevate the matter to a rare Phase II investigation. The First Circuit reasoned that disclosure of those omitted facts could have “significantly altered the total mix of information” available to investors by undermining the Company’s message of reassurance. The Court further added that the Company’s boilerplate risk disclosures did not cure the omission, reasoning that generalized warnings do not give a company a “free pass to deceive investors about a specific risk.”
Having found that plaintiff adequately pled falsity with respect to the modified proxy statement, the Court analyzed and determined that the complaint adequately alleged a strong inference of scienter. The Court noted that plaintiff alleged the Company was a declining business that was counting on the merger to improve its financial footing and held that this supported an inference that the Individual Defendants were paying close attention to the regulatory review. The Court emphasized that the Company’s chief legal officer had allegedly twice reported to the Individual Defendants that the Acquiring Company was not sharing search-engine information requested by the EC. The Court held that, despite this knowledge, the Individual Defendants predicted approval without disclosing that information.
Third, the Court addressed the post-August 24, 2023, alleged statements in which the Company provided updates on the ongoing regulatory process but did not predict regulatory approval—all of which plaintiff alleged were misleading because the Company did not disclose that: (i) the Acquiring Company had failed to cooperate; (ii) the Company had begun to formulate plans for the business without the merger; and (iii) the Company had ultimately stopped holding integration meetings with the Acquiring Company. The Court held that none of these alleged misstatements were actionable because the Company was under no duty to disclose the additional developments plaintiff identified. The Court explained that Section 10(b) prohibits only omissions that render affirmative statements misleading “half-truths,” and that the complaint did not adequately allege that the Acquiring Company remained uncooperative, or that the Company’s contingency planning or the cessation of integration meetings rendered the status updates misleading.
Having found that plaintiff plausibly alleged that alleged misstatements in the modified proxy statement are actionable under Section 10(b), the Court likewise revived plaintiff’s derivative Section 20(a) control person liability claim against the Individual Defendants and remanded the case to the District Court for further proceedings.
Securities Litigation