Overview
On April 29, 2016, Judge John G. Koeltl of the United States District Court for the Southern District of New York issued an order granting final approval to an $11million settlement.  an alleged securities fraud class action against Orthofix International N.V. and three of its officers.
Investors alleged that Orthofix, an orthopedic medical device company headquartered in Curacao, Netherlands Antilles, made material misrepresentations and omissions about the company’s financial performance and future prospects in the company’s financial statements.
Cohen Milstein served as Lead Counsel in this class action.
Case Background
The complaint charged Orthofix and certain of its officers and directors with violations of the Securities Exchange Act. Specifically, the complaint alleged that, during the Class Period (March 2, 2010 and July 29, 2013), 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:
- 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;
- 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;
- 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;
- 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;
- 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
- 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.
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 countries on four continents. Nonetheless, Cohen Milstein succeeded in mounting a strong case that ultimately resulted in a favorable settlement for the Class.