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Southern District Of New York Grants Motion To Dismiss Securities Class Action Against Medical Device Manufacturing Company
11/03/2026On October 19, 2026, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York granted a motion to dismiss a putative securities fraud class action against a contract medical device manufacturing company (the “Company”), and certain of its current and former officers (the “Individual Defendants”), alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder. Pembroke Pines Pension Fund for Firefighters & Police Officers v. Integer Holdings Corp., No. 1:25-cv-10251 (S.D.N.Y. Oct. 19, 2026). In granting the motion to dismiss, the Court held that plaintiff failed to plead any actionable misstatements or omissions, or a strong inference of scienter.
According to the operative complaint, the Company’s most significant growth area involved its manufacturing of electrophysiology (“EP”) devices, which are used to diagnose and treat heart arrhythmias. In particular, the Company was allegedly building EP devices using a newer technology known as pulsed field ablation (“PFA”). Plaintiff alleged that the Company was the sole manufacturer of PFA devices for one of its major customers and that the Company produces devices for this customer exclusively at a single plant in Mexico. Plaintiff further alleged that, during the putative class period, defendants touted EP growth and PFA “tailwinds,” the Company’s product diversification, and its visibility into customer demand, while concealing manufacturing problems at the Mexican plant. According to the complaint, the customer allegedly returned all the initial units it received of the device, placed no orders for 2025, and shut down the device’s production line in the middle of 2025. Plaintiff further alleged that the Company’s CEO sold most of his Company shares in May 2025, one week after the Company announced his retirement. Plaintiff contends that the truth emerged on October 23, 2025, when the Company’s then-COO disclosed that the Company expected 2026 sales of three new products, two of which were EP products, to decline. Plaintiff alleged that this, along with the Company’s purported negative sales outlook, allegedly caused the stock price to decline.
The Court first examined falsity with respect to a series of allegedly positive statements made by the Company, including statements that its EP business was growing at 1.5 times the market rate. The Court held that these statements accurately described the Company’s then-current or past performance, which reflected double-digit year-over-year sales growth in its cardio and vascular segment throughout the class period. The Court explained that because the federal securities laws “do not create an affirmative duty to disclose any and all material information,” and because defendants never stated or suggested that the alleged manufacturing issues did not exist, the alleged omission of those issues was not materially misleading.
The Court also held that statements describing PFA as a “tailwind” and the Company as “well-positioned” to support its customers amounted to inactionable puffery. In addition, the Court held that the Company’s revenue projections were forward-looking statements protected by the PSLRA’s Safe Harbor. In so holding, the Court reasoned that the Company’s cautionary language warned of “interruptions in [the Company’s] manufacturing operations” and of the Company’s outsized dependence on a limited number of customers.
Finally, the Court held that plaintiff failed to sufficiently plead that the Company was critically dependent on the EP device, because the Company met its sales forecasts throughout 2025 even though plaintiff allege that the Company’s device was “effectively dead” by early 2025.
The Court next addressed falsity with respect to the Company’s alleged statements about its diversification and its visibility into customer demand. Plaintiff alleged that the Company stated that “there’s no single program that’s a meaningful driver of the entire company.” The Court held this statement was not actionable, because the Company met its 2025 sales targets despite the device’s alleged collapse, and because the Company attributed its alleged reduced 2026 guidance to three products, including a non-EP product. As to visibility, the Court found that plaintiff did not allege that the Company’s reported order book figures were false. The Court thus held that plaintiff improperly equated visibility into current orders with a guarantee of future orders, which the Company never stated or implied. The Court also held that a July 2024 alleged statement that the Company had seen no meaningful change in customer expectations was not rendered false by changes in customer demand that allegedly occurred a year later.
Turning to scienter, the Court first addressed the complaint’s allegations regarding motive. The Court acknowledged that the Company’s former CEO sold nearly all his stock for a large profit; however, the Court emphasized that the sale occurred one week after the Company announced his retirement, and the most plausible inference was that the CEO sold as a “normal and expected” consequence of his retirement. The Court also noted that the sale occurred nearly six months before the alleged corrective disclosure, and that no other defendant allegedly sold stock during the class period.
The Court similarly held that the complaint failed to sufficiently plead circumstantial evidence to establish scienter. The Court held that even if the alleged accounts of two former employees at the Mexico plant supported an inference that defendants knew of the manufacturing issues and chose not to disclose them voluntarily, the former employees were not alleged to have any knowledge of sales or projections for the Company’s overall EP product line, which was the subject of defendants’ alleged statements.
Having found that plaintiff failed to adequately plead an underlying Section 10(b) claim, the Court dismissed plaintiff’s control person liability claim against the Individual Defendants under Section 20(a). The Court accordingly dismissed the complaint with prejudice.
Securities Litigation