backOn July 10, 2023, the Eleventh Circuit affirmed the district court’s dismissal of a security class action brought by lead plaintiff Carpenters Pension Fund of Illinois against biotechnology company MiMedx Group, Inc., certain of its former executives, and its former auditor, Cherry Bekaert LLP. Plaintiff alleged claims under Section 10(b) of the Exchange Act and SEC Rule 10b-5. Specifically, plaintiff asserted that MiMedx engaged in improper revenue recognition practices and that Cherry Bekaert, as MiMedx’s auditor, failed to conduct its audits in accordance with PCAOB standards and with appropriate professional skepticism. The district court dismissed the case based on plaintiff’s lack of standing and failure to adequately allege a corrective disclosure sufficient to demonstrate loss causation.
On appeal, the Eleventh Circuit vacated the district court’s holding that plaintiff lacked Article III standing, but affirmed the conclusion that loss causation was not adequately pled. Noting that, to reveal a previously concealed truth, a corrective disclosure must necessarily contain new information, the Eleventh Circuit agreed that the alleged corrective disclosures occurring prior to the plaintiff’s sale of its MiMedx stock merely repeated information already known to the market and thus failed to demonstrate loss causation.
The case is Carpenters Pension Fund of Illinois v. MiMedx Group, Inc., et al., No. 22-10633 (11th Cir. July 10, 2023). MiMedx is represented by Alston & Bird, LLP and Sidley Austin, LLP; the former MiMedx CFO is represented by Fellows La Briola, LLP; the former MiMedx CEO and COO are represented by Taylor English Duma LLP; Carpenters Pension Fund of Illinois is represented by Robbins Geller Rudman & Dowd, LLP and Herman Jones, LLP; and Cherry Bekaert LLP is represented by McGuireWoods, LLP and Ballard Spahr, LLP. A copy of the Order is attached.
