An order was issued by Judge Sarah Evans Barker on Wednesday in the Southern District of Indiana Indianapolis Division. The amended complaint had been filed by plaintiff Sandra Hunter and Marla Strappe (both individually and on behalf of all others similarly situated) against defendants Elanco Animal Health Incorporated (EAH) and its affiliated officers.
EAH “develops, manufactures, and markets animal health products for both companion animals, such as dogs and cats, and food animals, i.e., cattle and poultry.” The plaintiffs were investors in EAH and filed the class action at hand for alleged federal securities violations.
The plaintiffs had specifically alleged that the defendants “engaged in a scheme to deceive and defraud investors of the true value of [EAH’s] common stock in violation of federal securities law.” The defendants allegedly artificially boosted their earnings and growth and made false and misleading representations about EAH’s growth and financial standing. These behaviors, the plaintiffs assert, led to an artificial inflation of EAH’s stock.
EAH responded to the plaintiffs’ complaint by filing a motion to dismiss. EAH reasoned that the plaintiffs had failed to state a claim and had also failed to meet the heightened pleading standards that are required to allege specific securities violations.
The plaintiffs’ complaint contended that the difference between EAH’s two claims about their financial performance was attributable to fraud. EAH, in one claim, had cast themselves in a favorable light. In a later claim, they revealed that “things are less rosy.” Judge Barker stated that the plaintiffs’ complaint offered no further specifications of fraud past the differences of the two statements regarding EAH’s financial condition, and that statements alone do not constitute fraud. Rather, the plaintiffs needed to point to concrete facts that would indicate there was intentional misrepresentation on the part of the defendants.
The court expands on this, stating that “fraud by hindsight” is not an actionable offense as the plaintiffs have argued. Ultimately, the Court sided with the defendants, agreeing that the plaintiffs’ respective claims failed and did not meet the heightened pleading standards that accompany allegations of securities violations. The defendants’ motion to dismiss was granted, meaning that the plaintiffs’ complaint was dismissed without prejudice. The plaintiffs will be allowed 45 days to amend their complaint as necessary.