Teladoc Defeats Securities Class Action Arising From Livongo Acquisition, Revised FY 2022 Projections

Paul, Weiss achieved a significant victory for Teladoc Health, Inc., and several of its executives, obtaining a dismissal with prejudice of all claims asserted in a putative securities class action arising from Teladoc’s acquisition of Livongo Health and the company’s April 2022 revision of certain FY 2022 projections.

In their second amended complaint filed in the Southern District of New York, the plaintiffs alleged that the defendants falsely assured shareholders that Teladoc was successfully integrating Livongo, which Teladoc acquired in October 2020 for $18.5 billion. The plaintiffs also alleged that the defendants made misstatements concerning competition pressures within the virtual health care market that led to the company’s April 2022 announcement of revised FY 2022 revenue and adjusted EBITDA projections.

District Judge Denise Cote dismissed the case with prejudice for failure to plausibly plead that any of the alleged misstatements were false or misleading. As to the plaintiffs’ integration theory, Judge Cote held that most of the alleged misstatements were either nonactionable opinion or puffery. Judge Cote analyzed five alleged misstatements in more detail and concluded that they were not plausibly pled to be false or misleading, because they were not false when read in context and/or because the plaintiffs’ confidential witness allegations were not sufficiently tethered to the alleged misstatements to render them false. Judge Cote rejected the plaintiff’s argument that the defendants omitted to disclose difficulties integrating Livongo’s operations, noting that the company made “robust” disclosures and repeatedly warned the market that the integration was “complex.” The plaintiff’s competition theory fared no better, as Judge Cote held that the plaintiffs’ confidential witness allegations failed to contradict the relevant alleged misstatements, and that the plaintiffs failed to plead that most of the competition statements contained an embedded false factual statement or an implied false fact. Judge Cote also credited the defendants’ argument that the competition statements were nonactionable forward-looking statements because they were accompanied by cautionary language.

The Paul, Weiss team included litigation partners Daniel Kramer and Audra Soloway and counsel Caitlin Grusauskas and Matthew Stachel.