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Southern District Of New York Declines To Dismiss Putative Class Action Against Dental Product Company
01/27/2026On January 16, 2026, Judge Naomi Reice Buchwald of the United States District Court for the Southern District of New York largely denied a motion to dismiss a putative class action asserting claims under the Securities Exchange Act against a manufacturer of dental products and certain of its executives. In re Dentsply Sirona, Inc. Sec. Litig., ––F. Supp. 3d––, 2026 WL 124581 (S.D.N.Y. Jan. 16, 2026). Plaintiffs alleged that the company made misrepresentations with respect to the extent to which doctors were involved in treating patients who used the company’s dental aligner product, and also failed to timely report injuries the aligner caused to the Food and Drug Administration (“FDA”). The Court largely denied the motion to dismiss, holding that plaintiffs adequately alleged misrepresentations and scienter, while paring the claims slightly as to certain statements not attributable to the company or for which scienter was not adequately alleged.
The Court first examined plaintiffs’ allegations that the company falsely represented that treatment was “doctor-directed” and “overseen” “every step of the way” and that patients with complex treatment needs that made them poor candidates for the product would be screened out. Id. at *2. While defendants claimed that the statements regarding “doctor-directed” treatment were accurate because dentists prescribed patient treatment plans, the Court determined that the challenged statements were not limited merely to the patient onboarding process. Id. at *9. The Court highlighted that the dental aligner was advertised as “Doctor Directed Care. Licensed doctors and orthodontists with you every step of the way,” and that the company noted “dentists and orthodontists prescribe and oversee” care. Id. (emphasis in original). In addition, the Court found the statements were adequately alleged to be false for the additional reason that patient “treatment plans” were allegedly initially designed by “treatment planners in Costa Rica,” and could then be approved by a U.S.-based dentist. Id. at *10. The Court highlighted that dentists were allegedly compensated on a per case basis, that dentists approved 95% of the plans reviewed, and that even if a dentist rejected a treatment plan it would be reassigned to another dentist, such that a plan could be approved if two of three dentists reviewing the plan rejected it. Id. The Court held “this system” was adequately pleaded to be “not ‘doctor-directed’ in any substantive sense, but rather designed to maximize the number of prescriptions approved without any meaningful input by dentists or orthodontists.” Id.
In addition, the Court rejected defendants’ argument that certain statements were non-actionable puffery or opinion. For example, the Court held that statements about the company’s “conversion rate”—the percentage of patients who purchased the aligner after having been initially measured for it—were not mere puffery. Id. at *11–13. The Court explained that statements by executives noting they “thought” the company’s high conversion rate resulted from the company’s high-quality screening (or “funnel”), while framed as opinions, contained embedded facts—such as the company’s use of the “funnel”—which plaintiffs alleged were false because the conversion rate allegedly benefited because the company allegedly directed sales staff to overlook patient contraindications. Id. The Court also explained that statements such as that the company “believe[d]” it was in compliance with legal and regulatory requirements, including FDA reporting requirements, were actionable despite containing language of opinions, in light of the allegation that the company had access to logs showing thousands of injuries that were not reported to the FDA. Id. at *13.
The Court also rejected defendants’ argument that certain statements were protected forward-looking statements, holding that statements such as “we’re extremely competitive” and “we’re seeing positive developments” contained embedded statements of present fact. Id. While the Court agreed that the company’s statements that projected reduced sales would be offset by organic growth was forward-looking, the Court held this statement was still actionable because plaintiffs adequately alleged that the statement was made with actual knowledge of its falsity, given that it was made after the FDA became focused on the company’s failure to report injuries. Id. The Court further explained that these statements would not be protected because defendants had not identified “meaningful cautionary language,” given that there was a “specific, known, and existential threat to the business.” Id. at *13 n.22.
Addressing defendants’ arguments that certain statements were not actionable because they could not be attributed to the company, the Court held that statements in an investment advisory report reflecting an interview company executives gave to the analyst that wrote the report were actionable because the statements “clearly originated from defendants.” Id. at *14. But the Court concluded that statements made by a dentist affiliated with the company could not be attributed to the company because she was not an employee with authority to speak on the company’s behalf. Id.
Turning to scienter, the Court first explained that, while a profit motive alone is insufficient to establish scienter, the fact that individual defendant bonuses were tied to the company’s performance and revenue driven from aligner sales was a “relevant, though not dispositive, factor, when considered together with other allegations.” Id. at *15. The Court also determined that it was “reasonable to infer” that defendants had an “incentive to conceal the injuries” because of the “self-evident” impact the injuries could have on the company and employees’ jobs. Id.
The Court also found circumstantial evidence of scienter with respect to various statements the company made. The Court rejected defendants’ argument that the individual defendants could not have known that their statements about “doctor-directed” treatment were false—in the absence of receiving specific reports to the contrary—because the executives themselves repeatedly boasted that their treatments were overseen by doctors. Id. at *16. The Court also noted that statements made by a competitor that had received judicial scrutiny (similar to the scrutiny applied by the Court in this case) were also known to the executives, and in that context it would have been “reckless, at a minimum” to make similar statements without investigation. Id. And the Court further noted that these executives plausibly had access to databases showing customer complaints about lack of medical advice and customer service employees providing such advice to patients. Id.
The Court similarly rejected defendants’ argument that the executives lacked access to data reflecting patient injuries. Id. The Court held plaintiffs plausibly alleged the executives had both access to databases tracking injuries and received regular reports regarding such injuries. Id. While defendants contended that the complaint needed to allege what specifically was reported to the executives, the Court emphasized that the thousands of injuries belatedly reported to the FDA made any misstatements or omissions about such injuries reckless. Id. at *17. The Court noted that “if a meeting held with the CEO ‘to discuss injuries,’ did not discuss these injuries, one can rightly wonder what was discussed.” Id. (emphasis in original). And the Court emphasized that plaintiffs’ allegations that a sales executive had instructed employees to sell the aligner to patients even if they were contraindicated, in addition to the fact that that executive made it clear this directive was not one that he developed, also supported scienter. Id.
The Court held, however, that plaintiffs failed to allege scienter with respect to statements that the company was increasing the number of treatment planners it retained, because plaintiffs failed to allege a “reporting mechanism, meetings, or other germane facts supporting a strong inference that defendants knew the statements to be false.” Id. at *18. The Court also determined that plaintiffs failed to establish scienter in connection with the company’s projected future growth, noting that the company did grow before it began reporting injuries the aligner caused to the FDA. Id.
With respect to scienter tied to individual defendants, the Court noted that plaintiffs failed to establish the company’s former CFO acted with scienter. Id. The Court pointed out the former CFO had departed before many of the events alleged in the complaint occurred, before many of the alleged misstatements were made, and that the allegations attributed to the CFO arose from different facts and allegations about sales practices not at issue in the case. Id. at *19. The Court contrasted these allegations to the allegations involving the other executives who made the alleged misstatements at issue, who had held themselves out as knowledgeable about the matters of which they spoke, and who had allegedly attended meetings in which information contrary to the challenged statements was allegedly discussed. Id. The Court also observed that many of these executives left the company just as the company began to retroactively report the injuries associated with the aligner to the FDA, which the Court held “bolsters the inference of scienter.” Id. at *20.
In addition, the Court held that plaintiffs adequately alleged that defendants’ efforts to conceal the thousands of injuries that patients suffered from use of the aligner constituted a fraudulent scheme in violation of Rule 10b-5 under the Exchange Act. Id. at *20. The Court emphasized that “[c]oncealing facts from regulators is ‘something more’ than merely a misstatement or omission.” Id. The Court also noted that it “would be reluctant to view the use of NDAs, lobbying, or the provision of inaccurate information to patients as ‘schemes’ in isolation,” but that “these measures, combined with the withholding of patient injury reports from the FDA, helped keep regulators, investors, and patients in the dark.” Id.
