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Southern District Of New York Grants Motion To Dismiss Securities Class Action Against Cancer Diagnostics Company With Prejudice
04/23/2026On March 13, 2026, Judge Valerie Caproni of the United States District Court for the Southern District of New York granted with prejudice a motion to dismiss a securities fraud putative class action against a cancer diagnostics and information services company (the “Company”), and four of its former senior officers, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), and Rule 10b-5 promulgated thereunder. Goldenberg v. NeoGenomics, Inc., et al., No. 22-CV-10314 (S.D.N.Y. Mar. 13, 2026). In dismissing the complaint, the Court held that plaintiff failed to adequately plead falsity as to most of the alleged misstatements or omissions and that, for the narrow subset of alleged statements that would otherwise be actionable, plaintiff failed to sufficiently plead a strong inference of scienter.
Plaintiff alleged that the Company, a cancer diagnostics company that offers oncology tests, publicly attributed its growth to competitive strengths including testing turnaround times, the quality and breadth of its testing technology, and its ability to serve as a “one-stop-shop” for oncology testing. However, according to the complaint, during the purported class period of February 27, 2020, through April 26, 2022, the Company relied heavily on its Laboratory Collaborations and Implementations group (“LCI”)—a business unit that helped physician groups and hospitals set up basic in-house testing labs—but never publicly identified LCI as generating material growth, despite the fact that the division accounted for approximately 40% of the Company’s organic growth during the putative class period. Plaintiff alleged that while the LCI unit was lucrative, the Company became aware of potential violations of the federal Anti-Kickback Statute, which caused the Company to self-report to the Department of Health and Human Services. Plaintiff alleged that, when the Company finally disclosed that it was being investigated in November 2021, its stock price dropped 17.6%. Plaintiff further alleged that the Company and the individual defendants continued to assure investors that the inquiry would not have a meaningful impact on the Company’s revenue, despite the business continuing to decline. Plaintiff alleged that after the Company ultimately withdrew its annual financial guidance in March 2022, its stock fell an additional 29.8%.
In dismissing the complaint, the Court first addressed the issue of falsity. The Court categorized three groups of alleged misrepresentations: (1) those touting the Company’s testing turnaround times; (2) those touting the quality of the Company’s technology and its status as a “one-stop-shop” for testing; and (3) those concerning the scope and likely financial impact of a federal investigation into the LCI group. The Court first held that the alleged misrepresentations regarding turnaround time and the quality of the Company’s technology and status as a “one-stop-shop” were non-actionable. The Court found that plaintiff’s allegations, which were drawn almost entirely from thirteen confidential witnesses, were too vague, conclusory, and lacked temporal specificity under the heightened pleading standard to support a particularized inference that any of those statements were false or misleading when made. The Court declined to resolve whether those statements were independently nonactionable as puffery or protected by the PSLRA’s Safe Harbor, finding it unnecessary given the failure to plead falsity with particularity.
The Court held, however, that the LCI-related misrepresentations were sufficiently actionable. The Court held that defendants’ public assurances that the regulatory investigation was “linked to a small number of contracts and customers” and would not have a “meaningful impact” on revenue were actionable as misleading half-truths, because they omitted the outsize financial significance of those accounts and the fact that the investigation was precipitating the dismantling of one of the Company’s most significant revenue-generating business units. The Court observed that, by “commenting on revenue” in relation to the investigation, defendants “omitted to reveal the … elephant in the room” that one of its premier business groups was, as a result of the investigation, “imploding.”
The Court next considered the issue of scienter and held that plaintiff failed to plead a strong inference of scienter as to any of the alleged misstatements and omissions, including those concerning the LCI group. In addressing the first two categories of non-actionable statements, the Court held that the confidential witness allegations were too non-specific to establish what contradictory information, if any, defendants possessed at the time of the challenged statements. The Court noted that nearly all the scienter allegations on these topics either lacked a date or provided only an indefinite time period—and that “allegations about an unspecified time period cannot supply specific contradictory facts available to Defendants at the time of an alleged misstatement.”
Turning to the scienter allegations related to the LCI-related statements, the Court held that plaintiff’s core operations allegations, positing that defendants must have known about LCI’s financial impact, lacked particularized allegations of specific contradictory information available to defendants. The Court also held that plaintiff’s allegations regarding executive departures and a confidential witness’s alleged conversations with individual defendants failed to supply the requisite specificity required to establish scienter because the Court “should not be made to guess what ‘contradictory information’ (if any) was given to Defendants, and when.” The Court further noted that the Company had been repurchasing its own stock during the Class Period, an inference inconsistent with the allegation that defendants knew the Company’s stock price was artificially inflated.
Having found that plaintiff failed to adequately plead an underlying Section 10(b) claim, the Court dismissed plaintiff’s control-person liability claims under Section 20(a). The Court dismissed the complaint with prejudice, emphasizing that plaintiff had already had “two bites at the apple” and that the arguments made in response to the motion to dismiss gave “no indication that the Complaint’s defects are curable.”
