August 24, 2022
On August 17, 2022, Weil secured a decisive win for Elanco Animal Health, several of its senior executives, and certain members of its Board of Directors in a securities fraud class action pending in the U.S. District Court for the Southern District of Indiana, which granted defendants’ motion to dismiss all claims asserted against them.
Challenging nearly every public disclosure regarding “growth, revenue, and executive confidence” from the time of Elanco’s IPO in September 2018 through March 2020, the plaintiffs brought numerous claims under the federal securities laws, including claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 as well as claims for violations of Sections 11, 12(a), and 15 of the Securities Act of 1933. The plaintiffs alleged that these statements were false and misleading because Elanco used “unsustainable” channel stuffing practices to boost its revenues by selling product into its distribution channel in excess of end-user demand largely based on the accounts of four former employees.
In a 58-page order granting the defendants’ motion to dismiss, the court agreed with the defendants’ arguments that, among other things, the plaintiffs failed to allege that any of the statements at issue were false or misleading and that the complaint failed to adequately plead scienter or loss causation. In particular, the court held that there are “many contradictions between Plaintiffs’ theory of channel stuffing and the facts plead” in the complaint and Elanco’s extensive disclosures about its sales practices and distribution partners is “the opposite of an undisclosed scheme to defraud shareholders.”
The Weil team was led by Co-Head of Weil’s Securities Litigation practice John Neuwirth, Co-Head of Weil’s Complex Commercial Litigation and Appeals and Strategic Counseling practices Greg Silbert, and Securities Litigation partner Stacy Nettleton, and included counsel Justin D’Aloia and associate Gena Gonzales.