For the second time in the past year, a Minnesota federal judge has dismissed a securities class action lawsuit against client Cardiovascular Systems Inc. (CSI), once again siding with an Orrick team’s arguments that there is no factual basis to sustain the allegations of securities fraud.
In a 17-page ruling issued today, U.S. District Judge Donovan Frank dismissed an amended lawsuit against St. Paul, Minn.-based CSI, a medical device company. The judge last year similarly dismissed the class action, finding the plaintiffs failed to plead with particularity that CSI had made any material misstatements or omissions concerning its sales practices sufficient to support securities fraud claims. The judge at that time dismissed the case without prejudice, allowing the plaintiffs to amend their complaint – but today’s order took the emphatic step of dismissing the case with prejudice.
The 2017 amended complaint focused on alleged illegal referral marketing practices to claim CSI inflated revenues and earnings to shareholders, basing the claims largely on a previously resolved employee whistleblower case. The judge agreed with our team’s argument that the plaintiffs failed to adequately plead that alleged misstatements or omissions were made with the requisite knowledge or intent for a securities fraud claim. “The competing inferences (from the plaintiffs’ allegations) are either that these were isolated incidents or part of more widespread misconduct,” the judge wrote. “The Court concludes that the more plausible explanation is that the conduct was isolated. Plaintiffs have therefore failed to state a claim because they cannot show that Defendants knew about the … violations or were severely reckless in discovering them.”
Former Partner Rob Stern led Orrick’s CSI team, which included associate
Emily Luken, former partner Michael Tu and former associates Blake Osborne and Daniel Streim.