PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 16-3607

________________

AUSTIN J. WILLIAMS; MARK SILVERSTEIN,

Individually and on behalf of all others similarly situated

v.

GLOBUS MEDICAL, INC.; DAVID C. PAUL; RICHARD 

A. BARON; DAVID M. DEMSKI; STEVEN M. PAYNE

 Austin J. Williams,

 Appellant

 

_______________________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action No. 2-15-cv-05386)

District Judge: Honorable: Wendy Beetlestone

______________

ARGUED: April 5, 2017

Before: CHAGARES, SCIRICA, and FISHER, 

Circuit Judges
2

(Opinion Filed: August 23, 2017)

Jacob A. Goldberg [ARGUED]

Keith R. Lorenze

Rosen Law Firm

101 Greenwood Avenue

Suite 440

Jenkintown, PA 19046

Robert V. Prongay

Jason L. Krajcer

Charles H. Linehan

Glancy Prongay & Murray

1925 Century Park East

Suite 2100

Los Angeles, CA 90067

Counsel for Appellant

Cheryl W. Foung

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Barry M. Kaplan [ARGUED]

Gregory L. Watts

Wilson Sonsini Goodrich & Rosati

701 Fifth Avenue

Suite 5100

Seattle, WA 98104
3

Marc J. Sonnenfeld

Timothy D. Katsiff

Morgan Lewis & Bockius

1701 Market Street

Philadelphia, PA 19103

Counsel for Appellees

_________________

OPINION OF THE COURT

_________________

SCIRICA, Circuit Judge

In the spring of 2014, Globus Medical, Inc., a medical 

device company, terminated its relationship with one of its 

product distributors. Several months later, in August 2014, 

Globus executives alerted shareholders that sales growth had 

slowed, attributed this decline in part to the decision to 

terminate its contract with the distributor, and revised 

Globus’s revenue guidance downward for fiscal year 2014. 

The price of Globus shares fell by approximately 18% the 

following day. 

Globus shareholders contend the company and its 

executives violated the Securities Exchange Act and 

defrauded investors by failing to disclose the company’s 

decision to terminate the distributor contract and by issuing 

revenue projections that failed to account for this decision. 

The trial court dismissed the shareholders’ suit, and the 

shareholders appealed. We will affirm. 
4

I. BACKGROUND

A. Facts

Globus is a publicly traded medical device company 

that designs, develops, and sells musculoskeletal implants, 

particularly for individuals with spine disorders. Globus 

relies on both in-house sales representatives and independent 

distributors to sell its products to surgeons and surgical staff 

nationwide. Vortex Spine, LLC, was one of Globus’s 

independent distributors, serving as the exclusive distributor 

for Globus’s spine implant products in certain portions of 

Louisiana and Mississippi. Vortex signed its initial 

Exclusive Distributorship Agreement with Globus in 2004, 

and the parties renewed the agreement in 2008 and 2010. The 

2010 agreement was scheduled to expire on December 31, 

2013.

Globus’s statements and actions in the wake of the 

December 31, 2013, expiration of the agreement have become 

the focus of this case. Plaintiffs allege that Globus decided to 

terminate its partnership with Vortex around the time of the 

expiration of the agreement. This was in line with the 

company’s strategy to increase its reliance on in-house sales 

representatives in the hopes of controlling commission costs 

and strengthening its control over its sales team. Nonetheless, 

Globus extended the existing distributorship agreement for 

four months—through April 2014—and allegedly told Vortex 

the companies would use this period to negotiate terms for a 

new distributorship agreement. Plaintiffs contend Globus 

instead used this period to establish a new in-house sales 

position to cover the geographic territory being handled by 

Vortex.
5

On February 26, 2014—in the midst of the period 

covered by the extension of the agreement with Vortex—

Globus Chief Financial Officer Richard A. Baron projected 

“sales in the range of $480 million to $486 million, earnings 

per fully diluted share of $0.90 to $0.92 per share” for fiscal 

year 2014 during an earnings conference call. A51. A few 

weeks later, on March 14, 2014, Globus filed its 2013 10-K 

with the Securities & Exchange Commission. In a section of 

the 10-K titled “Risks Related to Our Business and Our 

Industry,” Globus cautioned, “If we are unable to maintain 

and expand our network of direct sales representatives and 

independent distributors, we may not be able to generate 

anticipated sales.” A46. The risk disclosure added:

We face significant challenges and risks in 

managing our geographically dispersed 

distribution network and retaining the 

individuals who make up that network. If any 

of our direct sales representatives were to leave 

us, or if any of our independent distributors 

were to cease to do business with us, our sales 

could be adversely affected. Some of our 

independent distributors account for a 

significant portion of our sales volume, and if 

any such independent distributor were to cease 

to distribute our products, our sales could be 

adversely affected. In such a situation, we may 

need to seek alternative independent distributors 

or increase our reliance on our direct sales 

representatives, which may not prevent our 

sales from being adversely affected.

A47. 
6

Globus met with Vortex’s founder and manager on 

April 18, 2014. Globus leadership notified him that Globus 

had designated a new in-house sales representative to handle 

distribution for the geographic territory covered by Vortex. 

Globus proposed a new agreement with Vortex which would 

require Vortex to turn over its customers to Globus in 

exchange for a royalty payment and would require Vortex’s 

sales representatives to become Globus employees. Vortex 

rejected the proposed terms.

Approximately ten days later, on another earnings 

conference call, CFO Baron again projected Globus would 

achieve $480 to $486 million in sales, with $0.90 to $0.92 

earnings per fully diluted share for fiscal year 2014—

estimates identical to those he projected in February 2014. 

The next day, April 30, 2014, Globus filed with the SEC its 

Quarterly Report on Form 10-Q for the period ended March 

31, 2014. In a section titled “Quantitative and Qualitative 

Disclosure About Market Risk,” Globus stated, “We have 

evaluated the information required under this item that was 

disclosed in our 2013 Annual Report on Form 10-K and there 

have been no significant changes to this information.” A49–

50.

Months later, on August 5, 2014, Globus issued a press 

release announcing its results for the second fiscal quarter of 

2014 and revising its revenue guidance. According to the 

release, Globus “now expect[ed] full year net sales to be in 

the range of $460 to $465 million” but added that its earnings 

per share guidance “remained unchanged.” A53. In an 

earnings conference call held the same day, Globus Chief 

Operating Officer David M. Demski explained that “domestic 

sales growth in the quarter was below our historical 
7

standards” attributing this development, in part, to the fact 

that “early in the quarter we made the decision not to renew 

our existing contract with a significant U.S. distributor, 

negatively impacting our sales.” A53. Demski observed that 

the company “understood the risks to our short-term results.” 

A53. Globus shares fell $4.05 per share (17.9%) in the wake 

of the revised revenue guidance to close at $18.51 per share 

on August 6, 2014. Ultimately, at the fiscal year’s end, 

Globus announced it had achieved $474.4 million in sales, 

with earnings per share at $0.97—meaning sales for the fiscal 

year ultimately finished just 1.17% below the initial 

projection made in February 2014 and earnings per share 

exceeded the projection by 5.4%.

B. Procedural History

Plaintiff Mark Silverstein filed this action in the 

United States District Court for the Eastern District of 

Pennsylvania on September 29, 2015, on behalf of “all those 

who purchased or otherwise acquired Globus securities traded 

on the New York Stock Exchange [between February 26, 

2014 and August 5, 2014] and were damaged upon the 

revelation of the alleged corrective disclosure.” A54. On 

January 14, 2015, the District Court granted the motion of 

Austin J. Williams to be appointed lead plaintiff as the person 

most capable of adequately representing the class.1

 

1 The Private Securities Litigation Reform Act amended the 

Securities Exchange Act to provide that “[n]ot later than 90 

days” after notice to shareholders of the pending securities 

action, “the court shall consider any motion made by a 

purported class member in response to the notice, . . . and 

shall appoint as lead plaintiff the member or members of the 
8

By stipulation of the parties, plaintiffs filed an 

Amended Complaint on February 19, 2016. The Amended 

Complaint names as defendants Globus, Globus CEO David 

C. Paul, Globus CFO Richard A. Baron, Globus COO David 

M. Demski, and Globus Chief Accounting Officer Steven M. 

Payne. The Amended Complaint alleges the 2013 10-K, 2014 

1Q 10-Q, and related earnings calls violated §§ 10(b) and 

20(a) of the Securities Exchange Act and Rule 10b-5 

promulgated under that Act by the Securities and Exchange 

Commission.

 On March 28, 2016, Globus filed a motion to dismiss 

the Amended Complaint. The District Court granted that 

motion and dismissed all claims against all defendants by 

Memorandum and Order dated August 25, 2016. Plaintiff 

filed a motion for reconsideration, which the District Court 

denied on September 12, 2016. This timely appeal followed.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction under Section 27 of 

the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, and 

28 U.S.C. §§ 1331 and 1337. We have jurisdiction over the 

appeal from a final order granting a motion to dismiss under 

Federal Rule of Civil Procedure 12(b)(6) under 28 U.S.C. § 

 

purported plaintiff class that the court determines to be most 

capable of adequately representing the interests of class 

members[.]” 15 U.S.C. § 78u-4(a)(3)(B)(i). The statute 

provides a rebuttable presumption that the most adequate 

plaintiff is the person that “in the determination of the court, 

has the largest financial interest in the relief sought by the 

class.” 15 U.S.C. § 78u-4(a)(3)(B)(iii)(bb).
9

1291. “We exercise plenary review over the order dismissing 

the complaint, as well as the District Court’s interpretation of 

securities law.” Morrison v. Madison Dearborn Capital 

Partners III L.P., 463 F.3d 312, 314 (3d Cir. 2006). 

III. ANALYSIS

A. Legal Standard

Section 10(b) of the Securities Exchange Act of 1934 

prohibits any person “[t]o use or employ, in connection with 

the purchase or sale of any security . . . any manipulative or 

deceptive device or contrivance in contravention of such rules 

and regulations as the [Securities and Exchange] Commission 

may prescribe . . . .” 15 U.S.C. § 78j(b). Rule 10b-5, 

promulgated by the Securities and Exchange Commission 

under the Exchange Act, makes it unlawful:

(a) To employ any device, scheme, or artifice to 

defraud,

(b) To make any untrue statement of a material 

fact or to omit to state a material fact necessary 

in order to make the statements made, in the 

light of the circumstances under which they 

were made, not misleading, or

(c) To engage in any act, practice, or course of 

business which operates or would operate as a 

fraud or deceit upon any person, 

in connection with the purchase or sale of any 

security.

17 C.F.R. § 240.10b-5. 
10

To state a claim for relief under section 10(b), a 

plaintiff must plead facts demonstrating that (1) 

the defendant made a materially false or 

misleading statement or omitted to state a 

material fact necessary to make a statement not 

misleading; (2) the defendant acted with 

scienter; and (3) the plaintiff’s reliance on the 

defendant’s misstatement caused him or her 

injury.

Cal. Pub. Emps.’ Ret. Sys. v. Chubb Corp., 394 F.3d 126, 143 

(3d Cir. 2004).

All securities fraud claims are subject to Rule 9(b), 

which requires plaintiff to “state with particularity the 

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 

9(b). In addition, the Public Securities Litigation Reform Act 

(PSLRA) imposes two heightened pleading requirements 

above the normal Rule 12(b)(6) standard. First, “the 

complaint must specify each allegedly misleading statement, 

why the statement was misleading, and if an allegation is 

made on information and belief, all facts supporting that 

belief with particularity.” Institutional Investors Grp. v. 

Avaya, Inc., 564 F.3d 242, 252 (3d Cir. 2009) (internal 

quotations omitted) (citing 15 U.S.C. § 78u-4(b)(1)). Second, 

the complaint must “with respect to each act or omission 

alleged to violate this chapter, state with particularity facts 

giving rise to a strong inference that the defendant acted with 

the required state of mind.” 15 U.S.C. § 78u-4(b)(2)(A). 

Accordingly, “[f]ailure to meet the threshold pleading 

requirements demanded by [Rule 9(b) and the PSLRA] 

justifies dismissal apart from Rule 12(b)(6).” Cal. Pub. 

Emps.’ Ret. Sys., 394 F.3d at 145.
11

B. Application

Plaintiffs’ claims can be divided into two categories: 

challenges to historical statements, namely the risk 

disclosures found in Globus’s 2013 10-K and 2014 1Q 10-Q; 

and challenges to forward-looking statements, namely the 

sales and earnings projections made in the February and April 

earnings conference calls. We address each category in turn.

1. Historical Statements

The District Court held that plaintiffs failed to plead 

actionable omissions from Globus’s risk disclosures because 

Globus had no duty to disclose either its decision to terminate 

its relationship with Vortex or the completed termination of 

that relationship. Plaintiffs argue the District Court erred 

because the absence of that information rendered the risk 

disclosures materially misleading. We disagree and conclude 

there was no duty to disclose. 

 “[Section] 10(b) and Rule 10b-5(b) do not create an 

affirmative duty to disclose any and all material information. 

Disclosure is required under these provisions only when 

necessary ‘to make . . . statements made, in light of the 

circumstances under which they were made, not misleading.’” 

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 44 (2011) 

(quoting 17 C.F.R. § 240.10b–5(b)). “Silence, absent a duty 

to disclose, is not misleading under Rule 10b-5.” Basic Inc. 

v. Levinson, 485 U.S. 224, 239 n.17 (1988). As we have 

previously held, “[e]ven non-disclosure of material 

information will not give rise to liability under Rule 10b-5 

unless the defendant had an affirmative duty to disclose that 
12

information.” Oran v. Stafford, 226 F.3d 275, 285 (3d Cir. 

2000). The duty to disclose arises “when there is insider 

trading, a statute requiring disclosure, or an inaccurate, 

incomplete or misleading prior disclosure.” Id. at 285–86. 

Plaintiffs contend Globus’s omission of its decision to 

terminate its relationship with Vortex falls into the final 

category because, without that information, Globus’s existing 

risk disclosures were inaccurate, incomplete, or misleading. 

Globus’s risk disclosures in the 2013 10-K and 2014 1Q 10-Q 

warned that the loss of an independent distributor could have 

a negative impact on sales—but it omitted to warn investors, 

plaintiffs argue, that Globus had in fact lost an independent 

distributor.

Once a company has chosen to speak on an issue—

even an issue it had no independent obligation to address—it 

cannot omit material facts related to that issue so as to make 

its disclosure misleading. Kline v. First W. Gov’t Sec., Inc., 

24 F.3d 480, 490–91 (3d Cir. 1994) (“[E]ncompassed within 

that general obligation [to speak truthfully] is also an 

obligation or ‘duty’ to communicate any additional or 

qualifying information, then known, the absence of which 

would render misleading that which was communicated.”) 

(internal citation omitted). Consistent with this principle, 

courts are skeptical of companies treating as hypothetical in 

their disclosures risks that have already materialized. 

For example, in In re Harman International Industries, 

Inc. Securities Litigation, the United States Court of Appeals 

for the District of Columbia Circuit considered a company—a 

manufacturer of information and entertainment systems for 

automobiles—that touted its considerable inventory of 
13

personal navigational devices (PNDs) while also warning 

generally that its sales depended on its ability to develop new 

products in a competitive market. 791 F.3d 90, 103–04 (D.C. 

Cir. 2015). But the company did not disclose to investors that 

much of its PND inventory had already been rendered 

obsolete by new technology, forcing the company to cut its 

prices and reducing its sales revenue. The District of 

Columbia Circuit suggested the company’s general warnings 

about product obsolescence could be misleading and 

emphasized, “there is an important difference between 

warning that something ‘might’ occur and that something 

‘actually had’ occurred.” Id. at 103.

Similarly, in the United States Court of Appeals for the 

Ninth Circuit, a government intelligence and surveillance 

contractor was sued after its revenue dropped by 25% 

following the cancellation of several contracts. Berson v. 

Applied Signal Tech., Inc., 527 F.3d 982 (9th Cir. 2008). The 

contracts at issue were subject to “stop-work” orders—which 

immediately stop payment to the company and often signal 

eventual cancellation of the contract—but the company 

included revenue from these contracts as part of its “backlog” 

of work the company had contracted to do, but had not yet 

performed. The company warned that “future changes in 

delivery schedules and cancellations of orders” might mean 

sales for the year would not match the full backlog value, but 

the court found the company’s representations could be 

misleading. Id. at 986. The company’s warning, the court 

held, “speaks entirely of as-yet-unrealized risks and 

contingencies. Nothing alerts the reader that some of these 

risks may already have come to fruition, and that what the 

company refers to as backlog includes work that is 

substantially delayed and at serious risk of being cancelled 
14

altogether.” Id.; see also Siricusano v. Matrixx Initiatives, 

Inc., 585 F.3d 1167, 1181 (9th Cir. 2009) (finding actionable 

a statement that “speaks about the risks of product liability 

claims in the abstract, with no indication that the risk ‘may 

already have come to fruition.’”), aff’d 563 U.S. 27 (2011). 

We agree that a company may be liable under Section 

10b for misleading investors when it describes as hypothetical 

a risk that has already come to fruition. But this is not such a 

case. In the 2013 10-K filed in March 2014, and incorporated 

by reference in the 2014 1Q 10-Q a month later, Globus 

warned, “if any of our independent distributors were to cease 

to do business with us, our sales could be adversely affected.” 

A47. The risk actually warned of is the risk of adverse effects 

on sales—not simply the loss of independent distributors 

generally. Accordingly, the risk at issue only materialized—

triggering Globus’s duty to disclose—if sales were adversely 

affected at the time the risk disclosures were made.

Plaintiffs have not plead that Globus’s sales were 

adversely affected by the decision to terminate Vortex at the 

time the risk disclosures were made. The 2013 10-K was 

filed in March 2014, while Vortex was still distributing 

Globus’s products under the four-month extension of the 

existing distributorship agreement. Nothing in the Amended 

Complaint suggests sales had decreased at that time. The 

2014 1Q 10-Q was filed on April 30, 2014—less than two 

weeks after Vortex rejected Globus’s proposed terms for a 

new agreement. Plaintiffs have not pleaded facts sufficient to 

show that Globus’s sales were adversely affected within that 

short window. To the contrary, plaintiffs allege Globus had 

spent months preparing to end its relationship with Vortex 

and had an in-house sales representative prepared to take over 
15

the territory previously covered by Vortex. Nothing in the 

Amended Complaint permits the inference that Globus was 

aware of adverse effects on sales prior to the August 5, 2014, 

earnings conference call when the company revised its 

revenue projections. 

Accordingly, this case is unlike the materialization of 

risk cases cited by plaintiffs, in which the adverse effects at 

issue had in fact been realized. In Harman, at the time of the 

company’s general warnings about the need to develop new, 

competitive products, the obsolescence of its PNDs had 

already led to a reduction in prices and missed sales targets. 

791 F.3d at 107 (“by April, inventory obsolescence was 

becoming a problem; by September it had fully materialized 

into a serious problem effecting Company revenues”) 

(internal citations omitted). Similarly, in Berson, the court 

noted that stop-work orders—like those that were not 

disclosed by the company in conjunction with its backlog 

report—“immediately interrupt the company’s revenue 

stream.”2 527 F.3d at 986. Accordingly, the circumstances in 

 

2

In re Facebook, Inc. IPO Securities & Derivative Litigation 

is also illustrative. 986 F. Supp. 2d 487 (S.D.N.Y. 2013). 

Facebook’s risk disclosures warned that increased mobile 

usage might negatively affect the company’s revenue, but the 

court found the plaintiffs had sufficiently plead that the 

disclosure was misleading. It explained, “Facebook’s 

Registration Statement did not disclose that increased mobile 

usage and the Company’s product decisions had already had a 

negative impact on the Company’s revenues and revenue 

growth. The Company’s purported risk warnings 

misleadingly represented that this revenue cut was merely 
16

these cases differ from the circumstances here because 

plaintiffs have not plead that Globus was already 

experiencing an adverse financial impact at the time of the 

risk disclosures.

Nor have plaintiffs sufficiently pleaded that a drop in 

sales was inevitable. Plaintiffs suggest Globus should have 

known that its sales would be adversely affected by the 

company’s decision to end its relationship with Vortex based 

on the company’s experience with “distributor turnover” in 

2010. Plaintiffs note that defendant Paul acknowledged that 

it took “almost two years” to get Globus back to the same 

level financially in the wake of that turnover. A48–49. But

the Amended Complaint provides no details about the 

“distributor turnover” in 2010, including how many 

distributors were involved, whether the distributor or 

distributors involved were of comparable significance to 

Globus’s sales as Vortex was, whether the turnover was 

expected, and what, if any, contingencies were in place at the 

time of the distributor turnover. Absent this information, we 

cannot conclude that Globus and its executives should have 

expected a similar financial impact from its decision to 

terminate its relationship with Vortex as from the 2010 

“distributor turnover.”

Because plaintiffs have failed to adequately plead that 

the risk about which Globus warned—the risk of adverse 

effects on sales as a result of the loss of a single independent 

distributor—had actually materialized at the time of either the 

2013 10-K or the 2014 1Q 10-Q, Globus had no duty to 

 

possible when, in fact, it had already materialized.” Id. at 

516.
17

disclose its decision to terminate its relationship with Vortex, 

and the risk disclosures were not materially misleading. We 

will affirm the District Court’s dismissal of the claims based 

on historical statements.

2. Forward-Looking Statements

Plaintiffs contend Globus and its executives violated 

Section 10(b) and Rule 10b-5 by issuing revenue projections 

in February and April 2014 that failed to account for the 

company’s decision to terminate its relationship with Vortex. 

The District Court dismissed these claims because it found 

that plaintiffs failed to plead facts sufficient to show that the 

revenue projections were false when made, or in the 

alternative, the challenged statements were entitled to the 

protection of PSLRA’s safe harbor.

a. Falsity

Because plaintiffs allege that the revenue projections at 

issue were false or misleading, their allegations must meet the 

“[e]xacting pleading requirements” of the PSLRA. City of 

Edinburgh Council v. Pfizer, Inc., 754 F.3d 159, 168 (3d Cir. 

2014) (alteration in original, internal quotations omitted). “In 

addition to requiring plaintiffs to specify each statement 

alleged to have been misleading, . . . the PSLRA directs 

plaintiffs to specify ‘the reason or reasons why the statement 

is misleading.’” Calif. Pub. Emps., 394 F.3d at 145 (quoting 

15 U.S.C. § 78u–4(b)(1)). These “true facts” allegations 

cannot rely exclusively on hindsight, but must be sufficient to 

show that the challenged statements were “actionably 

unsound when made.” See In re Burlington Coat Factory 

Sec. Litig., 114 F.3d 1410, 1430 (3d Cir. 1997); see also In re 
18

NAHC, Inc. Sec. Litig., 306 F.3d 1314, 1330 (3d Cir. 2002) 

(“To be actionable, a statement or omission must have been 

misleading at the time it was made; liability cannot be 

imposed on the basis of subsequent events.”). Accordingly, 

“it is not enough merely to identify a forward-looking 

statement and assert as a general matter that the statement 

was made without a reasonable basis.” Burlington, 114 F.3d

at 1429. Instead, plaintiffs were required to plead factual 

allegations that show the projections were “made with either 

(1) an inadequate consideration of the available data or (2) the 

use of unsound forecasting methodology.” Id. 

In this case, plaintiffs’ allegations hinge on their 

conclusory assertion that Globus’s “announced forecast 

incorporated Vortex’s projected sales figures for the 

remainder of the 2014 fiscal year.” A51. To support this 

claim, plaintiffs draw numerous inferences based on 

statements made by Globus executives during the August 

2014 call explaining the revisions to the revenue guidance. 

First, they cite defendant Baron’s statement that “the decision 

not to renew the distributor, and the impact to pricing will 

affect our top line expectations. We now expect full year 

revenue to be in the range of $460 million to $465 million.” 

A327. This statement, they contend, shows Globus must 

have incorporated Vortex revenue into their earlier 

projections—otherwise they would not have needed to revise 

the revenue forecast downward. Further, because defendant 

Baron responded, “I don’t think we should comment on that,” 

when asked whether the revenue guidance would have been 

revised “if not for the distributor issue,” A336, plaintiffs 

contend we should infer the loss of Vortex’s revenue 

accounted for the full $20 million downward revision.

We agree with the District Court that these allegations 
19

fall short of the exacting pleading standards imposed by the 

PSLRA. Plaintiffs were required to plead “true facts” 

sufficient to show the February and April revenue projections 

were false or misleading when made. But instead of citing 

contemporaneous sources to show Globus knowingly 

incorporated Vortex revenue into those projections, plaintiffs 

rely on conjecture based on subsequent events. This is 

insufficient. See In re NAHC, 306 F.3d at 1330 (“[L]iability 

cannot be imposed on the basis of subsequent events.”); see 

also Burlington, 114 F.3d at 1430 (“Plaintiffs’ Complaint 

contains a number of vague factual assertions regarding the 

period prior to November 1, 1993, but plaintiffs have failed to 

link any of these allegations to their claim that the November 

1 forecast was actionably unsound when made.”). 

Even assuming plaintiffs’ conclusory assertions were 

sufficient to infer that Globus’s projections incorporated some 

revenue from Vortex, the Amended Complaint would still 

fail. Plaintiffs fail to plead specific facts regarding the 

amount of sales revenue from Vortex projected by Globus; 

how far short of the projections Vortex sales ultimately fell; 

and, how significant the shortfall was in the context of 

Globus’s sales overall. Without these facts, plaintiffs do not 

sufficiently plead that, at the time the projections were made, 

Globus failed to adequately account for the imminent change 

in distributorship and any resulting effect on sales. Absent 

these details, plaintiffs have done nothing more than “assert 

as a general matter that the [revenue projections were] made 

without a reasonable basis.” Burlington, 114 F.3d at 1429. 

Further, at the end of the fiscal year, Globus achieved 

$474.4 million in sales—just less than its initial projection of 

$480 million to $486 million—and earnings of $0.97 per 
20

share—compared to an initial projection of $0.90 to $0.92. In 

other words, Globus exceeded its projections for earnings per 

fully diluted share and missed its initial revenue projection by 

just 1.17%. While the ultimate touchstone is whether the 

projections were false or misleading when made, plaintiffs’ 

claim that the projections were impossible to achieve is 

undermined by the fact that the company ultimately 

substantially achieved the challenged projections. See Avaya, 

564 F.3d at 266–67. On these facts, we conclude plaintiffs 

have not adequately pleaded the revenue projections were 

false or misleading when made.

b. Safe Harbor

In the alternative, like the trial court, we find the 

challenged revenue projections are entitled to protection 

under the PSLRA’s safe harbor. The statute “immunizes 

from liability any forward-looking statement, provided that: 

the statement is identified as such and accompanied by 

meaningful cautionary language; or is immaterial; or the 

plaintiff fails to show the statement was made with actual 

knowledge of its falsehood.” Avaya, 564 F.3d at 254 (citing 

15 U.S.C. § 78u–5(c)). We find plaintiffs have failed to 

adequately plead that the revenue projections were made with 

actual knowledge of falsehood.

The PSLRA requires plaintiffs in securities class 

actions to “state with particularity facts giving rise to a strong 

inference that the defendant acted with the required state of 

mind.” 15 U.S.C. § 78u–4(b)(2). To meet this standard, “an 

inference of scienter must be more than merely plausible or 

reasonable—it must be cogent and at least as compelling as 

any opposing inference of nonfraudulent intent.” Tellabs, 
21

Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 314 

(2007). 

Plaintiffs primarily point to three facts in asking us to 

infer actual knowledge of falsity on the part of Globus and its 

executives: (1) during the August 5, 2014, call explaining the 

revisions to the sales projections, COO Demski stated that the 

company “understood the risks to our short-term results” 

when it terminated its relationship with Vortex, A53; (2) 

during that same call, CEO Paul and CFO Baron 

acknowledged that they recalled Globus’s 2010 experience 

with “distributor turnover” and the two-year period it took to 

get the company “back to where [it was],” A45–46; and (3) 

the nature of the market for spinal implant products and the 

importance of goodwill between salespeople and customers. 

From these facts, it may be plausible to infer that 

Globus knew or should have known that ending its 

relationship with Vortex could have some effect on its sales. 

But, as the District Court correctly noted, actual knowledge 

that sales from one source might decrease is not the same as 

actual knowledge that the company’s overall sales projections 

are false. Silverstein v. Globus Medical, Inc., No. 15-5386, 

2016 WL 4478826, at *8 (E.D. Pa. Aug. 25, 2016) (“But 

simply knowing that the loss of a distributor may cause a drop 

in sales does not mean that Globus failed to account for this 

drop in its projections.”). Plaintiffs have not pleaded any 

facts to support their claim that Globus incorporated 

anticipated revenue from Vortex in its projections. Indeed, 

given plaintiffs’ allegations regarding Globus’s extensive, 

months-long planning for the end of its relationship with 

Vortex—including the company’s broad strategy to transition 

its sales force from independent distributors to in-house sales 
22

representatives and the fact that a new in-house sales 

representative was in place to take over Vortex’s geographic 

territory before the relationship was terminated—the more 

plausible inference from the Amended Complaint is that 

Globus accounted for the change in strategy when it devised 

its sales projections for the year. Globus’s later revision of 

those projections does not sufficiently show that Globus knew 

the projections were false when made—particularly when 

Globus ultimately achieved sales for the fiscal year within 

1.17% of the original, challenged projection and exceeded its 

projection for earnings per share. Absent facts giving rise to 

a strong inference of scienter, Globus’s forward-looking 

revenue projections are entitled to the protection of the 

PSLRA safe harbor. 

3. Section 20(a) Claims

Section 20(a) of the Securities Exchange Act permits 

plaintiffs to bring a cause of action against individuals who 

control a corporation that has violated Section 10(b). 15 

U.S.C. § 78t(a). “[L]iability under Section 20(a) is derivative 

of an underlying violation of Section 10(b) by the controlled 

person.” Avaya, 564 F.3d at 252. Because we affirm the 

dismissal of plaintiffs’ claims under Section 10(b), we also 

affirm the District Court’s dismissal of their Section 20(a) 

claims.

IV. CONCLUSION

For these reasons, plaintiffs have failed to adequately 

plead any violation of the Securities Act on the part of Globus 

or its controlling officers. We will affirm the District Court’s 

dismissal of all claims.