MACOMB COUNTY EMPL. RET. SYS. V. ALIGN TECHNOLOGY, INC., No. 21-15823 (9th Cir. 2022)
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Plaintiff alleged that corporate executives at Align Technology, Inc., a medical device manufacturer best known for selling “Invisalign” braces, misrepresented their company's prospects in China.
The Ninth Circuit affirmed the district court’s dismissal of the securities fraud class action under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5. The court rejected as unsupported Defendants’ argument that their statements could not be considered false at the time they were made because Plaintiff did not allege sufficient facts to make plausible the inference that the rate of Align’s growth in China had begun to decline significantly when the challenged statements were made. The court concluded that former employees’ reports, viewed alongside circumstantial evidence of the short period of time between the twelve challenged statements and the downturn of Align’s prospects in China, sufficiently supported the inference that Align’s growth in China had slowed materially when the statements were made.
The court held that the district court correctly found that six of the challenged statements were non-actionable “puffery,” which involves vague statements of optimism expressing an opinion that is not capable of objective verification. The district court also correctly found that the remaining six statements did not create a false impression of Align’s growth in China and so were not actionable. Having determined that all of the challenged statements were nonactionable, the panel declined to reach issues of scienter and control-person or insider-trading liability.
Court Description: Securities Fraud. The panel affirmed the district court’s dismissal of a securities fraud class action under §§ 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 and Rule 10b-5. Plaintiff alleged that corporate executives at Align Technology, Inc., a medical device manufacturer best known for selling “Invisalign” braces, misrepresented their company's prospects in China. The panel rejected as unsupported defendants’ argument that their statements could not be considered false at the time they were made because plaintiff did not allege sufficient facts to make plausible the inference that the rate of Align’s growth in China had begun to decline significantly when the challenged statements were made. The panel concluded that former employees’ reports, viewed alongside circumstantial evidence of the short period of time between the twelve challenged statements and the downturn of Align’s prospects in China, sufficiently supported the inference that Align’s growth in China had slowed materially when the statements were made. MACOMB CERS V. ALIGN TECHNOLOGY 3 The panel held that the district court correctly found that six of the challenged statements were non-actionable “puffery,” which involves vague statements of optimism expressing an opinion that is not capable of objective verification. The district court also correctly found that the remaining six statements did not create a false impression of Align’s growth in China and so were not actionable. Having determined that all of the challenged statements were non- actionable, the panel declined to reach issues of scienter and control-person or insider-trading liability. The panel rejected the argument that because Align touted positive facts about China, the company had a duty to disclose negative facts in order to make the statements not misleading.
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