• Western District Of Michigan Grants Motion To Dismiss Securities Class Action Against Food Safety Company

  09/01/2026

  On August 10, 2026, Chief Judge Hala Y. Jarbou of the United States District Court for the Western District of Michigan granted a motion to dismiss a putative securities fraud class action against a food safety company (the “Company”), its then-President and CEO, and its then-CFO (collectively, “Defendants”), 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.  Operating Engineers Construction Industry and Miscellaneous Pension Fund, et al. v. Neogen Corporation, et al., No. 1:25-cv-802 (W.D. Mich. Aug. 10, 2026).  The Court held that the challenged statements were either not materially false or misleading, constituted inactionable puffery or forward-looking statements protected by the PSLRA safe harbor, or were not accompanied by sufficient allegations of scienter. 

  In 2022, the Company acquired another company’s  (the “Target”) food safety business for $5.3 billion, intending to become a “global leader in food security.”  The acquisition required integrating back-office IT systems—particularly a CRM system and an ERP system—as well as relocating manufacturing of the Target’s product lines to the Company’s facilities.  The Company entered transition services agreements with the Target under which it paid escalating fees for the Target to maintain systems and manufacturing until the Company could take over, meaning delays in integration would impair profitability.  Plaintiffs alleged that Defendants made false or misleading statements about the progress of integration across three areas: the CRM system, the ERP implementation, and the manufacturing of acquired product lines.  When the Company reported order-fulfillment delays and disappointing earnings in April 2024, its stock dropped 9%; in April 2025, after the termination of the Company’s CEO and reporting production challenges, the stock dropped 29%; and further disclosures in June 2025 regarding manual product assembly caused additional declines.

  In granting the motion, the Court addressed each category of challenged statements in turn.  As to the CRM integration, the Court found that the complaint adequately alleged a false statement: the CEO’s January 2023 claim that the Company had “combined CRM systems on day two” and that “all the sales teams” could identify common customers was contradicted by a former sales employee who could never access the Target’s customer data throughout his tenure.  However, the Court held that plaintiffs failed to plead scienter because there were no allegations that anyone discussed the CRM issue with the CEO or other senior executives, no insider trading, and no disregard of current information—and that the CEO’s general desire to protect his position was insufficient because such a desire is shared by all corporate officers.  As to the ERP implementation, the Court found that early statements the system was “on track” were inactionable opinions about soft information that could not be proven or disproven.  The Court also determined that later statements that the system was “fully operational” were not materially false because Defendants repeatedly disclosed “inefficiencies” causing shipping delays and backlogs; that statements indicating the issues were “effectively resolved” were not contradicted because remaining backlogs were attributable to manufacturing problems rather than ERP failures; and that Defendants’ repeated public disclosures of ERP problems undercut any inference of scienter throughout.

  As to the manufacturing integration, the Court found that Defendants’ statements were either entirely consistent with plaintiffs’ own allegations—for instance, representations that the “relocation” of equipment was complete while production was still “ramping up” aligned with allegations that machinery was in place but experiencing failures—or constituted forward-looking statements protected by the PSLRA safe harbor.  General statements about “good progress” and “improving efficiency” were inactionable puffery.  Importantly, Defendants affirmatively disclosed that production was at approximately half of historic levels and that reduced output had adversely impacted revenue, which undermined any inference of fraudulent intent.

  Because plaintiffs failed to allege a primary violation under Section 10(b) or Rule 10b-5, the Court also dismissed the Section 20(a) control-person claims against the individual Defendants.

  Categories: Control Person Liability,  Exchange Act,  Falsity,  Misstatement/Omission,  PSLRA,  Puffery,  Safe Harbor,  Scienter
  

Links & Downloads

• NEOGEN