At a hearing on April 29, 2016, Judge John G. Koeltl of the United States District Court for the Southern District of New York issued an order and final judgment approving Lead Plaintiff Plumbers & Pipefitters National Pension Fund’s proposed $11 million settlement in the securities class action litigation against Defendants Orthofix International N.V. (NASDAQ: OFIX) (“Orthofix”) and three of its officers, Robert S. Vaters, Brian McCollum, and Emily Buxton in Plumbers & Pipefitters Nat’l Pension Fund v. Orthofix Int’l N.V., No.: 1:13-cv-05696-JGK (S.D.N.Y.). Judge Koeltl’s April 29 ruling finally resolved securities fraud claims asserted under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended by the Private Securities Litigation Reform Act (the “PSLRA”), by the Lead Plaintiff against Defendants for alleged material misrepresentations and omissions in the Company’s financial statements.
The settlement benefits a class of persons and entities who purchased Orthofix common stock between March 2, 2010 and July 29, 2013 (the “Class Period”). Cohen Milstein serves as Lead Counsel in this class action.
Orthofix, a medical device company headquartered in Curacao, Netherlands Antilles, designs, develops, manufactures, markets, and distributes medical equipment used principally by musculoskeletal medical specialists for spine and orthopedic applications. The complaint in this case charged Orthofix and certain of its officers and directors with violations of the Exchange Act. Specifically, the complaint alleged that, during the Class Period, defendants issued materially false and misleading statements regarding the Company’s financial performance and future prospects, misrepresenting or failing to disclose the following adverse facts, which Lead Plaintiff alleged were known to defendants or recklessly disregarded by them: (a) certain revenues recognized during 2011 and 2012 should not have been recognized or should not have been recognized during the periods in which they were recognized; (b) Orthofix’s previously issued consolidated financial statements as of and for the fiscal years ended December 31, 2011 and December 31, 2012 (as well as the interim quarterly periods within such years), and for the interim quarterly period ended March 31, 2013, should not have been relied upon; (c) Orthofix’s financial statements during 2011, 2012, and the first quarter of 2013 were materially false and misleading and violated generally accepted accounting principles and Orthofix’s publicly disclosed policy of revenue recognition; (d) Orthofix’s Forms 10-Q and 10-K for fiscal years 2011 and 2012, as well as for the first quarter of 2013, failed to disclose then presently known trends, events or uncertainties associated with the Company’s revenues that were reasonably likely to have a material effect on Orthofix’s future operating results; (e) Orthofix’s disclosure controls and procedures over financial reporting were materially deficient and its representations concerning them during the Class Period, including certifications issued by defendants, were materially false and misleading; and (f) as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company’s financial performance and outlook during the Class Period.
On July 29, 2013, Orthofix issued a press release announcing, among other things, that it was delaying the release of its financial results for the second quarter of 2013 and that additional time was needed to review matters relating to revenue recognition for prior periods. In response to this announcement on July 29, 2013, the price of Orthofix shares declined from $27.40 per share to $22.71 per share, or by 17%, on July 30, 2013, on extremely heavy trading volume. Then, on August 6, 2013, Orthofix issued a press release stating that it would restate its financial statements for fiscal years 2011 and 2012 and the first quarter of 2013.
Because of the discovery stay imposed by the PSLRA, which bars discovery until a lead plaintiff prevails against a defendant’s motion to dismiss, Cohen Milstein conducted a substantial pre-filing fact investigation into the Class’ claims against Orthofix. Cohen Milstein attorneys reviewed numerous SEC filings and public statements made by Orthofix and its officers; researched market data, Company promotional materials, and various news reports; and interviewed nearly 60 percipient fact witnesses. On May 15, 2014, Cohen Milstein filed an amended complaint, and then filed a second amended complaint on July 21, 2014, which was sustained against Defendants’ motions to dismiss as to all but one defendant who was dismissed. After a period of substantial document discovery, during which Cohen Milstein reviewed over 4.5 million pages of documents obtained from Orthofix and approximately a dozen non-parties who had done business with Orthofix, Lead Plaintiff and Defendants exchanged mediation briefs on their respective claims and defenses, which included Lead Plaintiff’s presentation of more than 100 exhibits in support of the Class’ claims. This case posed significant logistical obstacles during investigation and discovery because much of the information relevant to the case—internal Company documents, witnesses, and news reports—were in six foreign languages and located in nine different countries on four different continents. Nonetheless, Cohen Milstein succeeded in mounting a strong case that ultimately resulted in a favorable settlement for the Class.
On September 29, 2015, Lead Plaintiff and Defendants engaged in a day-long mediation and continued afterward to conduct arms-length settlement negotiations. Cohen Milstein’s efforts to pursue Lead Plaintiff’s claims and obtain adequate relief for the Class ultimately resulted in the $11 million all-cash Settlement that received final approval by the Court on April 29, 2016. Cohen Milstein is currently overseeing the implementation of the Court-approved Plan of Allocation, pending Court approval of a motion for distribution.
Lead Plaintiff and the Class are represented by Daniel S. Sommers, Carol V. Gilden, and S. Douglas Bunch, all of Cohen Milstein.