Williams v. Globus Medical, Inc., No. 16-3607 (3d Cir. 2017)Annotate this Case
Globus, a publicly-traded medical device company, terminated its relationship with one of its distributors, Vortex, in keeping with a policy of moving toward in-house sales. Several months later, in August 2014, Globus executives alerted shareholders that sales growth had slowed, attributed the decline in part to the decision to terminate its contract with Vortex, and revised Globus’s revenue guidance downward for fiscal year 2014. The price of Globus shares fell by approximately 18% the following day. Globus shareholders contend the company and its executives violated the Securities Exchange Act, 15 U.S.C. 78j(b) and Rule 10b-5 and defrauded investors by failing to disclose the company’s decision to terminate the distributor contract and by issuing revenue projections that failed to account for this decision. The Third Circuit affirmed dismissal of the case. Globus had no duty to disclose either its decision to terminate its relationship with Vortex or the completed termination of that relationship. Plaintiffs did not sufficiently plead that a drop in sales was inevitable; that the revenue projections were false when made; nor that that Globus incorporated anticipated revenue from Vortex in its projections.