On March 19, 2025, Judge Charles E. Fleming of the United States
District Court for the Northern District of Ohio dismissed a
putative class action asserting claims under the Securities
Exchange Act of 1934 and the Securities Act of 1933 against a
medical services company, certain of its executives, the
underwriters in its initial and secondary public offerings, and
certain private equity firms alleged to have sold stock in those
offerings. In re Sotera Health Co. Sec. Litig., No.
1:23-cv-143, 2025 WL 860897 (N.D. Ohio Mar. 19, 2025). Plaintiffs
alleged that the company made misrepresentations in connection with
the use of ethylene oxide ("EO") in its medical device
sterilization business. The Court held that plaintiffs failed to
adequately allege any misrepresentations and dismissed the action
with prejudice.
With respect to the Exchange Act claims, the Court held that
plaintiffs failed to allege with particularity that the
company's statements regarding permit and regulatory compliance
were false, and the company otherwise had no affirmative duty to
disclose alleged compliance issues. Id. at *26–27.
The Court further concluded that the company's generalized
statements concerning its confidence in its compliance efforts were
non-actionable statements of opinion and corporate optimism.
Id. at *28.
In addition, the Court rejected plaintiffs' allegations of
misrepresentations related to litigation filed against the company
in connection with EO exposure. The Court explained that the
company's statements that it planned to "vigorously defend
itself" against those claims, and the fact that it did not
take a contingency reserve relating to those lawsuits, were not
misleading given that investors had ample information about the
lawsuits, and, further, that the challenged statements largely
amounted to non-actionable opinions. Id. at *28–30.
The Court further concluded that certain more specific statements
denying factual claims in connection with the litigation were
protected by the PSLRA's safe harbor for forward-looking
statements accompanied by meaningful cautionary
language—including statements noting that the cases would
ultimately be decided by a jury, that there was risk involved, and
that the company might have to appeal. Statements regarding the
company's commitment to health and safety were held to be
non-actionable puffery. The Court further noted that the company
described EO emissions capture as an ongoing effort, and plaintiffs
did not allege that the company was not actually making those
efforts. Id. at *30–31.
The Court likewise dismissed plaintiffs' claims based on
alleged violations of Items 303, 105, and 307 of Regulation S-K.
The Court explained that allegations under Item 303 (relating to
"known trends or uncertainties") and Item 105 (requiring
disclosure of material risk factors) could not be based merely on
information that is "knowable," but must be based on
"actual, present knowledge." Id. at *34. The
Court concluded that plaintiffs' claims based on Item 303 and
Item 105 failed to allege "actual knowledge of imminently
certain risk" and instead improperly assumed that defendants
"should have known" of the "certainty of future
risks coming to fruition." Id. at *35. Finally, the
Court rejected plaintiffs' claim based on Item
307—challenging certain executives' certification that
controls were in place—because plaintiffs failed to plausibly
allege any actionable misrepresentations regarding those controls.
Id. at *35–36.
With respect to plaintiffs' claims under Sections 11 and
12(a)(2) of the Securities Act, the Court held that these claims
sounded in fraud and were therefore subject to the same heightened
pleading standard as the Exchange Act claims. Despite
plaintiffs' efforts to list the Securities Act allegations in a
separate section of the compliant and to disclaim fraud in that
section, the same parallel factual allegations—often
word-for-word identical—were the foundation of both sets of
claims. Id. at *20–22. The Court therefore
concluded, for similar reasons as with the Exchange Act claims,
that plaintiffs failed to adequately allege any misstatement or
omission in the company's offering materials. Id. at
*37–38.
Moreover, the Court rejected plaintiffs' allegations in
connection with Items 303 and 105 against the underwriters of the
company's initial public offering ("IPO") and
secondary public offering ("SPO"). While plaintiffs
argued that the underwriters were "responsible for ensuring
the truthfulness and accuracy of the various statements contained
in or incorporated by reference into the IPO Offering Materials and
SPO Offering Materials," the Court held that this was
insufficient to meet the "actual knowledge" standard
necessary to impose liability under Items 303 and 105. Id.
at *39.
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