The plaintiffs in a shareholder lawsuit filed against Intuitive Surgical (NSDQ:ISRG) appealed their case to the 9th Circuit after a lower court dismissed the case.
A group of shareholders, led by the Police Retirement Systems of St. Louis, argued that ISRG and its leadership issued misleading statements about the state of the company and the effects of the economic recession.
Judge Lucy Koh of the U.S. District Court for Northern California dismissed the complaints, ruling that the so-called misleading statements were either protected under Safe Harbor, general expressions of "corporate optimism," or not false.
The shareholders group had gathered a set of 31 allegedly false or misleading statements, taking them from past ISRG conference calls with investors and the company’s financial reports.
The plaintiffs alleged that ISRG "knew, but did not disclose, that: (1) the economic crisis was having a negative impact on the company; (2) Intuitive’s ability to sustain system placement growth, among both new accounts in the U.S. and to repeat purchasers, was reaching a saturation point; and (3) [da Vinci prostatectomy] growth was decelerating at a faster rate than disclosed, impacting the company’s ability to sustain recurring revenue growth," according to court documents.
The lawsuit, originally filed in August 2010, further claimed that ISRG stock dropped nearly 70%, from $305.61 on February 1, 2008, to $93.29 on January 23, 2009, because the company finally disclosed the true state of the market and that company executives had "reaped significant proceeds from insider sales" in the meantime.
Koh concluded that the clutch of suspect statements gathered by the plaintiffs were not legally false or misleading because they were "forward-looking" statements, which are protected under legal "safe harbor" rules for financial projections and sales forecasts. The court added that the projections were couched within cautionary statements, "and thus immunized by the safe harbor provision."
Other remarks were deemed "mere puffery" and "expressions of corporate optimism" that "no reasonable investor would rely on," she wrote, dismissing the case with prejudice late last month.
Last week the shareholders group submitted appealed to the 9th Circuit to reverse the dismissal.
