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In re Stratasys Ltd. Shareholder Securities Litigation

United States Court of Appeals, Eighth Circuit

July 25, 2017

In re: Stratasys Ltd. Shareholder Securities Litigation
v.
Stratasys Ltd.; David Reis; Erez Simha; Bre Pettis; Jennifer Lawton Defendants-Appellees Albert Smelko, Jr., Individually and on Behalf of All Others Similarly Situated Plaintiff Macomb County Employees Retirement System; Mineworkers' Pension Scheme Plaintiffs-Appellants

          Submitted: March 9, 2017

         Appeal from United States District Court for the District of Minnesota - Minneapolis

          Before LOKEN, MURPHY, and BENTON, Circuit Judges.

          BENTON, Circuit Judge.

         Stratasys manufactures 3D printers, primarily for commercial use. Some of its shareholders brought a securities fraud action, claiming several promotional statements were knowingly false. The district court[1] determined that these statements were mere puffery and that the shareholders failed to sufficiently plead that Stratasys knew its statements were false when made. In re Stratasys Ltd., 2016 WL 3636992 (D. Minn. June 30, 2016) Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

         I.

         In August 2013, Stratasys acquired MakerBot Industries, LLC-a manufacturer of scaled-down desktop 3D printers-as an indirect, wholly owned subsidiary. According to Stratasys, this acquisition would allow it to expand into the emerging desktop 3D printer market.

         In January 2014, MakerBot introduced a new line of desktop 3D printers. called "5G printers." Each 5G printer had a "Smart Extruder" replaceable print head, which was designed to be swappable. Stratasys claimed these printers were "unmatched" in quality, reliability, ease of use, speed, and performance. They also made positive statements about MakerBot's past and future finances.

         Buyers of the 5G printers experienced significant issues with clogging due to the Smart Extruders. Sales for the 5G printers declined; many were returned. Stratasys stock dropped, prompting this securities fraud action.

         The shareholders claim both the quality and financial statements were misleading, and that Stratasys knew the 5G printers were essentially inoperable but still rushed them to market while publicly proclaiming their quality and reliability. The district court found that most of statements about the printers' quality were "mere puffery, " that any verifiable statements about speed were not adequately pled to be false, and that the shareholders failed to plead a strong inference of scienter. The shareholders appeal.

         II.

         This court reviews de novo the dismissal of a complaint for failure to state a claim. Florida State Bd. of Admin. v. Green Tree Fin. Corp., 270 F.3d 645, 661 (8th Cir. 2001). The Private Securities Litigation Reform Act ("PSLRA") imposes heightened pleading standards in securities-fraud cases. Id. at 656. This court must "disregard 'catch-all' or 'blanket' assertions that do not live up to the particularity requirements of the statute." Id. at 660.

         A.

         A securities fraud "plaintiff must show that the defendant made a statement that was misleading as to a material fact." Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 38 (2011) (internal quotation marks and emphases omitted). A fact is material "when there is a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the total mix of information made available." Id. (internal quotation marks omitted). An adequate complaint must "specify each statement ...


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