Plumbers & Pipefitters Local Union 719 Pension Fund v. Zimmer Holdings Inc.

Zimmer manufactures orthopaedic reconstructive devices. One product, a replacement hip socket, was subject to a report of high failure rates. Zimmer announced preliminary findings in 2008, attributed the failures to improper surgical technique, stopped selling the product in the U.S. while preparing new instructions for implantation, and returned the item to the market. Owners of Zimmer stock sued, claiming that the problem was poor design or quality control, that Zimmer pretended otherwise to avoid hurting the price of its stock, and that Zimmer delayed revealing quality-control problems at its plant until after its 2008 quarterly report and earnings call. Zimmer had projected 10% to 11% revenue growth for the year and net earnings of $4.20 to $4.25 per share; months later it cut this projection to 8.5% to 9% growth and net earnings of $4.05 to $4.10 per share. The district court dismissed under the pleading standards of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. 78u-4. The Seventh Circuit affirmed, holding that plaintiffs failed to establish scienter. The FDA has never concluded that the product was defectively designed or made and never issued a warning or caution; quality control issues at pharmaceutical and medical-device producers are endemic. View "Plumbers & Pipefitters Local Union 719 Pension Fund v. Zimmer Holdings Inc." on Justia Law