Absence of "Hard Numbers" Scuttles Securities Fraud Claims

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The U.S. District Court for the Northern District of California dismissed securities fraud claims against a dental device maker based on the plaintiffs' failure to allege sufficient "hard numbers" showing that that the defendants knew their public statements were false when made.

Align Technology, Inc., a medical device company, had settled a lawsuit with a competitor and had—as part of the settlement—agreed to provide dental devices for the competitor's customers free of charge. In public statements issued after the settlement, Align asserted that its business prospects were positive and that the company was "positioned to generate significant top line growth." The company's stock price fell sharply when it later announced that it was shifting its priorities from generating new business to handling a backlog of orders related to the settlement. Investors sued Align for securities fraud under Section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5, alleging that the company and its officers had knowingly made material misrepresentations and omissions in public statements regarding the company's performance.

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