UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

MICHAEL EDELSON, derivatively and on 

behalf of MERIDIAN BIOSCIENCE, INC.,

Plaintiff,

v.

JOHN A. KRAEUTLER, JAMES M. 

ANDERSON, DAVID C. PHILLIPS, 

DWIGHT E. ELLINGWOOD, JOHN C. 

MCILWRAITH, CATHERINE A. 

SAZDANOFF, and MELISSA A. LUEKE,

Defendants,

-andMERIDIAN BIOSCIENCE, INC., an Ohio

Corporation,

Nominal Defendant.

Case No. 

VERIFIED SHAREHOLDER 

DERIVATIVE COMPLAINT

DEMAND FOR JURY TRIAL

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By and through his undersigned counsel, Plaintiff Michael Edelson (“Plaintiff”) brings this 

shareholder derivative action on behalf of Nominal Defendant Meridian Bioscience, Inc. 

(“Meridian” or the “Company”) against certain current and/or former officers and directors of the 

Company for violations of law, including violation of Section 14(a) of the Securities Exchange 

Act of 1934 (the “Exchange Act”), breaches of fiduciary duties, unjust enrichment, and corporate 

waste, from at least March 25, 2016 to the present (the “Relevant Period”). Plaintiff makes these 

allegations upon personal knowledge as to those allegations concerning Plaintiff and, as to all other 

matters, upon the investigation of counsel, which includes, without limitation: (a) review and 

analysis of public filings made by Meridian and other related parties and non-parties with the U.S. 

Securities and Exchange Commission (“SEC”); (b) review and analysis of press releases and other 

publications disseminated by certain of the defendants and other related non-parties; (c) review of 

news articles, shareholder communications, and postings on Meridian’s website concerning the 

Company’s public statements; (d) pleadings, papers, and any documents filed with, and publicly 

available from, the related pending securities fraud class action, Forman v. Meridian

Bioscience, Inc., et al., No. 1:17-cv-00774-SJD (S.D. Ohio) (the “Securities Class Action”); and 

(e) review of other publicly-available information concerning Meridian and the Individual 

Defendants (defined below).

I. NATURE AND SUMMARY OF THE ACTION

1. Meridian is a life science company engaged in developing, manufacturing, selling,

and distributing clinical diagnostic test kits for certain gastrointestinal, viral, respiratory, and 

parasitic infectious diseases. According to the Company’s website, Meridian’s mission is to 

“efficiently apply [its] human, scientific, and financial resources to provide innovative high 

value products and technologies that improve the diagnosis and treatment of infectious diseases 

and metabolic disorders.”

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2. On March 24, 2016, Meridian announced that it had completed the acquisition of 

Magellan Biosciences, Inc. and its wholly-owned subsidiary Magellan Diagnostics, Inc. 

(collectively, “Magellan”) (the “Magellan Acquisition”). Following the Magellan Acquisition, the 

Individual Defendants caused Meridian to tout Magellan as “the leading provider of point-of-care 

lead testing systems”1 and a “10% grower” that was “running ahead of expectations...[and] 

essentially a turnkey for [Meridian].”

3. Throughout the Relevant Period, the Individual Defendants caused Meridian to 

extol the Company’s commitment to “enabl[ing] early diagnosis and treatment of common, acute 

medical conditions . . . and . . . better patient outcomes” underpinned by diagnostic products

providing “accuracy, simplicity and speed.” 

4. Notwithstanding the Individual Defendants’ assurances to the investing public that 

one of Meridian’s core products procured in the Magellan Acquisition, LeadCareII, “exceeded 

expectations” and was “expected to contribute to revenues” through prospective expansion into 

international markets, on May 17, 2017, the U.S. Food and Drug Administration (the “FDA”) 

issued a press release warning Americans about the inaccuracy of the Company’s lead tests, 

including LeadCareII. 

5. Indeed, in a joint press release with the Centers for Disease Control and Prevention, 

the FDA advised that it was “deeply concerned by [the] situation and [wa]s warning laboratories 

and health care professionals that they should not use any Magellan Diagnostics’ lead tests with 

blood drawn from a vein” in light of its findings that the Company’s tests for lead poisoning were 

potentially underestimating blood lead levels. 

 1 Emphasis added unless otherwise noted. 

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6. Despite the potentially lethal consequences of faulty lead testing, the Individual 

Defendants caused Meridian to report $28.1 million in revenues enabled by sales of the Company’s 

lead testing devices, concealing the colossal pecuniary, civil, and regulatory risk Meridian assumed 

through its sales and marketing of its products. These problems, as the Individual Defendants were 

well aware, would affect sales and revenue growth projections, making the Company’s public 

statements false and misleading.

7. The market reacted to the FDA’s revelations with a precipitous 8% stock drop, 

falling $1.30 per share to close at $13.45 per share on May 17, 2017, erasing millions of dollars in 

market capitalization. 

8. The Meridian Board of Directors (the “Board”) has not commenced, and will not 

commence, litigation against the Individual Defendants named in this Complaint, let alone 

vigorously prosecute such claims, because, among other things, a majority of the members of the 

Board are directly interested in the personal financial benefits challenged herein, that were not 

shared with Meridian shareholders, and/or face a substantial likelihood of liability to Meridian for 

breaching their fiduciary duties of loyalty and good faith by authorizing or failing to correct the 

false and misleading statements alleged herein, and/or lack independence. Accordingly, a pre-suit 

demand upon the Board was, and is, a useless and futile act. Thus, Plaintiff rightfully brings this 

action to vindicate the Company’s rights against its wayward fiduciaries and hold them responsible 

for the damages they have caused to Meridian.

II. JURISDICTION AND VENUE

9. Pursuant to 28 U.S.C. §1331 and Section 27 of the Exchange Act, this Court has 

jurisdiction over the claims asserted herein for violations of Section 14(a) of the Exchange Act and 

SEC Rule 14a-9 promulgated thereunder. This Court has supplemental jurisdiction over the 

remaining claims under 28 U.S.C. §1367.

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10. The Court also has jurisdiction over all causes of action asserted herein pursuant to 

28 U.S.C. §1332 in that Plaintiff and defendants are citizens of different states, and the amount in

controversy exceeds $75,000, exclusive of interest and costs. This action is not a collusive action 

designed to confer jurisdiction on a court of the United States that it would not otherwise have. 

11. This Court has jurisdiction over each defendant because each defendant is either a 

corporation that conducts business in, and maintains operations within, this District or is an

individual with sufficient minimum contacts with this District so as to make the exercise of

jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.

12. Venue is proper under 28 U.S.C. §1391 because Meridian maintains offices within 

this District, a substantial portion of the transactions and wrongs complained of herein occurred in 

this District, and defendants have received substantial compensation in this District by doing 

business here and engaging in numerous activities that had an effect in this District.

III. THE PARTIES

13. Plaintiff is a current shareholder of Meridian stock and has continuously held shares 

of Meridian stock since 2008. Plaintiff resides in Georgia.

14. Nominal Defendant Meridian is an Ohio corporation with its principal executive 

offices located in Cincinnati, Ohio. The Company’s common stock is traded on the NASDAQ

under the ticker symbol “VIVO.” As of November 30, 2017, the Company has approximately 

42.22 million shares outstanding. 

15. Defendant John A. Kraeutler (“Kraeutler”) has been the Company’s Chief 

Executive Officer (“CEO”) since 2008 and Chairman of the Board since 2014. Prior to that, 

Kraeutler had been the President and Chief Operating Officer of Meridian since 1992. Kraeutler 

is a defendant in the Securities Class Action. Kraeutler received $1,952,900 in total compensation 

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from Meridian in 2015 and $1,358,430 in total compensation from Meridian in 2016. Kraeutler is 

a citizen of Ohio. 

16. Defendant Melissa A. Lueke (“Lueke”) has been the Company’s Vice President, 

Chief Financial Officer, and Secretary since 2001, and was appointed Executive Vice President 

in 2009. Defendant Lueke is a defendant in the Securities Class Action. Lueke received 

$493,090 in total compensation from Meridian in 2015 and $599,053 in total compensation from 

Meridian in 2016. Lueke is a citizen of Kentucky.

17. Defendant James M. Anderson (“Anderson”) has been a Director of the Company 

since 2009. Anderson received $99,551 in total compensation from Meridian in 2015 and 

$96,283 in total compensation from Meridian in 2016. During the Relevant Period, Anderson 

served as a member of the Audit Committee, the Nominating and Corporate Governance 

Committee, and was the Chair of the Compensation Committee. Anderson is a citizen of Ohio.

18. Defendant David C. Phillips (“Phillips”) has been a Director of the Company 

since 2000. Anderson received $104,051 in total compensation from Meridian in 2015 and 

$106,033 in total compensation from Meridian in 2016. During the Relevant Period, Anderson 

was the Chair of the Audit Committee and served as a member of the Compensation Committee. 

Phillips is a citizen of Ohio.

19. Defendant Dwight E. Ellingwood (“Ellingwood”) has been a Director of the 

Company since 2014. Ellingwood received $89,301 in total compensation from Meridian in 2015 

and $87,283 in total compensation from Meridian in 2016. During the Relevant Period, 

Ellingwood was the Chair of the Nominating and Corporate Governance Committee. Ellingwood

is a citizen of Ohio.

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20. Defendant John C. McIlwraith (“McIlwraith”) has been a Director of the Company 

since 2015. McIlwraith received $43,665 in total compensation from Meridian in 2015 and 

$82,283 in total compensation from Meridian in 2016. During the Relevant Period, McIlwraith

served as a member of the Compensation committee and the Nominating and Corporate 

Governance Committee. McIlwraith is a citizen of Ohio.

21. Defendant Catherine A. Sazdanoff (“Sazdanoff”) has been a Director of the 

Company since 2015. Sazdanoff received $43,665 in total compensation from Meridian in 2015 

and $78,033 in total compensation from Meridian in 2016. During the Relevant Period, Sazdanoff 

served as a member of the Audit committee. Sazdanoff is a citizen of Illinois.

22. Defendants identified in ¶¶ 15-21 are sometimes referred to herein as the 

“Individual Defendants.”

23. Defendants identified in ¶¶ 15, 17-21 are sometimes referred to herein as the 

“Director Defendants.”

24. Defendants identified in ¶¶ 17-18, 21 are sometimes referred to herein as the “Audit 

Committee Defendants.”

25. As directors and/or officers of Meridian, the Individual Defendants either knew, 

consciously disregarded, were reckless and grossly negligent in not knowing, or should have 

known the adverse, non-public information about the Company’s business, operations, prospects, 

internal controls, and financials, including the Company’s marketing and sales practices, product 

quality, and safety and regulatory practices because of their access to internal corporate documents

and clinical data, conversations and connections with one another as well as other corporate 

officers and employees, attendance at Board meetings, and committee meetings thereof, as well as 

reports and other information provided to them in connection therewith. The Individual 

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Defendants either participated in, caused, failed to correct, and/or failed to take action to remedy 

the harm inflicted upon Meridian through, inter alia, the issuance of the improper statements 

disseminated via press releases, SEC filings, and other means to the press, securities analysts, and 

Meridian stockholders.

IV. FACTUAL ALLEGATIONS

26. Meridian is a fully-integrated life science company that manufactures, markets, and 

distributes a broad range of innovative diagnostic test kits, purified reagents, and 

biopharmaceutical-enabling technologies. According to its website, the Company’s products 

“provide accuracy, simplicity and speed” for the early diagnosis and treatment of common medical 

conditions, such as infections and lead poisoning. Meridian has strong market positions in the 

areas of gastrointestinal and upper respiratory infection, and blood lead level testing.

27. Meridian’s primary source of revenue is the Company’s Diagnostics Segment, 

which provided 74% of the Company’s consolidated net revenues for fiscal 2016, and 71% of the 

Company’s consolidated net revenues for fiscal 2017. 

28. The Company’s diagnostic products are used outside of the human body and require 

little or no special equipment. Meridian actively markets its products to hospitals, reference 

laboratories, research centers, physicians’ offices, and diagnostics manufacturers in more than 

60 countries around the world.

29. In early 2016, the Individual Defendants caused Meridian to vote on and 

consummate the acquisition of Magellan from an investor group including Ampersand Capital 

Partners as the majority owner, along with Abingworth, Tekla Capital Management and Boston 

Community Venture Fund. The Individual Defendants caused Meridian to finance the purchase 

price of $66 million using a combination of cash on hand and a $60 million five-year term loan. 

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30. During the Relevant Period, the Individual Defendants caused Meridian to issue 

statements assuring the investing public that Meridian was committed to providing “accurate and 

simple-to-use tests for rapid diagnoses [which] enabl[e] appropriate treatment,” concealing the 

colossal pecuniary, civil, and regulatory risk Meridian assumed through sales and marketing of its 

lead tests. These problems, as the Individual Defendants were well aware, would affect sales and 

revenue-growth projections, making the Company’s public statements false and misleading.

V. THE INDIVIDUAL DEFENDANTS CAUSED MERIDIAN TO MAKE 

MATERIALLY FALSE AND MISLEADING STATEMENTS DURING THE 

RELEVANT PERIOD

31. Throughout the Relevant Period, the Individual Defendants caused the Company to 

make false and misleading statements, and failed to disclose material adverse facts about the 

Company’s business, product integrity, operations, and prospects, which were known to the 

Individual Defendants and/or recklessly disregarded by them. 

32. On April 28, 2016, Meridian common stock was trading as high as $21.49 per share 

in intraday trading.

33. On March 24, 2016, the Individual Defendants caused Meridian to file a Form 8-K 

with the SEC announcing it had consummated the Magellan Acquisition. The Form 8-K 

incorporated by reference a press release issued by the Company the same day, which touted 

Magellan as a “pioneer” of FDA-cleared products for the testing of blood to diagnose lead 

poisoning in children and adults. The press release stated, in pertinent part: 

Today, Magellan is the leading provider of point-of-care lead testing systems with 

placements in more than 6,500 physician offices and clinics nationwide. Its 

position in pediatric offices is particularly strong. LeadCare® II, the only CLIAwaived lead testing system, enables physician practices to enhance the quality of 

care, improve patient compliance and convenience, and reduce costs. Magellan's 

LeadCare Ultra® and Plus® systems are designed for use in hospitals and reference 

labs. 

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Magellan has a robust product development pipeline and plans to introduce a third 

generation platform that will include a menu of additional high value CLIAwaived pediatric tests including, but not limited to, lead testing. Magellan's 

talented team of executives and employees led by Amy Winslow, President and 

Chief Executive Officer of Magellan, will continue to manage the business, which 

will remain in its current location and facility.

From a strategic perspective, the acquisition of Magellan provides (i) an important 

point-of-care capability, (ii) ready-made access and expansion of certain of 

Meridian's products into the pediatric market, (iii) expansion of Magellan's 

products into international markets where Meridian has a presence, 

(iv) opportunities within Meridian's hospital market as hospitals acquire physician 

office practices, and (v) a new growth driver as the importance of lead testing and 

remediation in the United States and global community becomes better 

understood.

* * *

John A. Kraeutler, Chairman and Chief Executive Officer of Meridian, commented, 

“A key underpinning of our diagnostic growth strategies has been to address ‘test 

and treat’ opportunities by applying highly accurate and simple-to-use tests for 

rapid diagnoses, thereby enabling appropriate treatment. Because elevated lead 

levels can cause serious developmental impairment, especially in young children, 

the need for broad testing and fast remediation of the contaminated environment 

is acute. Magellan has maintained a clear focus on developing and marketing 

test systems that are well recognized for their accuracy and ease-of-use. Further, 

the Magellan test systems are now in use by more than 10,000 pediatricians, 

primarily in the U.S. We believe that there is excellent growth potential in 

Magellan Diagnostics on its own, both with the existing products and the pending 

new product pipeline.

34. On April 29, 2016, the Individual Defendants caused Meridian to file a Form 8-K 

with the SEC announcing its financial results for the second fiscal quarter and six months ended 

March 31, 2016. The Form 8-K incorporated by reference a press release issued by the Company 

the same day, which stated, in pertinent part: 

Finally, during the latter weeks of the quarter we completed the acquisition of 

Magellan Diagnostics, the market leader in blood lead testing. Magellan achieved 

$16 million in revenues in the prior calendar year and is on pace for growth of 

8% this year. Lead testing has become increasingly topical due primarily to reports 

of contaminated public water systems.

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35. Then, on October 20, 2016, the Individual Defendants caused Meridian to file a 

Form 8-K with the SEC announcing its preliminary financial results for the fiscal year and fourth 

quarter ended September 30, 2016. The Form 8-K incorporated by reference a press release issued 

by the Company the same day, which stated, in pertinent part:

Meridian Bioscience, Inc. Comments on Preliminary Fiscal 2016 Operating 

Results and Provides Fiscal 2017 Revenue and Earnings Guidance

CINCINNATI, October 18, 2016 (GLOBE NEWSWIRE) — Meridian

Bioscience, Inc. (NASDAQ: VIVO) today announced that based on preliminary 

results, it expects revenues for fiscal year 2016, ended on September 30, 2016, to 

be approximately $196 million, an increase of 1% compared to the prior year.

Diluted earnings per share are expected to be $0.75 to $0.76, including costs related 

to acquisition activity and costs associated with the reorganization of Diagnostics 

sales and marketing leadership (in the aggregate, $1.7 million after tax or 

$0.04 diluted earnings per share). This compares to diluted earnings per share of 

$0.85 in fiscal 2015.

These preliminary results reflect fourth quarter revenues of approximately 

$47 million. Our fourth quarter revenues reflect a combination of ongoing 

competitive pressures during the quarter within the C. difficile and food product 

families, distributor order patterns, and the timing of respiratory season stocking 

orders within the core diagnostics business. Despite these negative factors, we 

experienced continued growth in our H. pylori product family and benefited from 

the addition of revenues from our March 2016 acquisition of Magellan Diagnostics.

Life Science revenues were flat for the quarter due to a large immunoassay 

component order that was shipped in the third quarter versus the fourth quarter at 

the customer's request. The resulting revenue shortfalls produce the shortfall in 

earnings compared to guidance. Our recent acquisition of Magellan has gone 

well. Magellan performed above revenue expectations and is expected to be a 

penny dilutive to earnings per share for the six months since the acquisition, also 

better than expected.

* * *

Magellan Diagnostics, acquired in March of 2016 and included in our 

Diagnostics Segment, has exceeded expectations thus far. For fiscal 2017, we 

are expecting low double-digit revenue growth on a normalized annual basis 

from continued success in placing the LeadCare II platform in the domestic 

market. Expansion into international markets, including China following the 

recent CDFA approval of LeadCare II, is expected to contribute to revenues and 

may generate revenue upside. Capitalizing on the increased awareness of lead 

poisoning, we also expect to begin selling into OB/GYN offices.

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36. On November 10, 2016, the Individual Defendants caused Meridian to file a 

Form 8-K with the SEC announcing its financial results for the fiscal year and fourth quarter ended 

September 30, 2016. The Form 8-K incorporated by reference a press release issued by the 

Company the same day, which stated, in pertinent part: 

Magellan Diagnostics, acquired in March 2016, has exceeded our expectations 

in satisfying the demand for testing children for elevated blood lead levels. The 

focus on this topic is expected to continue as the impact of elevated levels continues 

to be recognized as an important cause of developmental issues in young children. 

Recently, we have introduced the Magellan products to the global markets with a

very positive response. This business unit is expected to report low-double-digit 

organic growth in fiscal 2017 with the potential for upside performance.

37. On November 29, 2016, the Individual Defendants caused Meridian to file its 

Form 10-K for the fiscal year ended September 30, 2016 (the “2016 10-K”). Regarding the 

Company’s Diagnostics Segment, the Individual Defendants caused the Company to state that 

“[Meridian’s] diagnostic products provide accuracy, simplicity and speed; enable early diagnosis 

and treatment of common, acute medical conditions; and provide for better patient outcomes at 

reduced costs.”

38. The 2016 10-K contained certifications pursuant to the Sarbanes-Oxley Act of 2002

(“SOX”) that were signed by Defendants Kraeutler and Lueke, stating that the financial

information contained in the 2016 10-K was accurate and disclosed all material changes to the

Company’s internal control over financial reporting. In addition to being signed by Defendants 

Kraeutler and Lueke, the 2016 10-K was signed by Director Defendants Anderson, Ellingwood, 

McIlwraith, Phillips, and Sazdanoff.

39. On December 14, 2016, the Individual Defendants caused Meridian to file its 

2017 Proxy with the SEC for the Company’s Annual Meeting of the Shareholders held on 

January 25, 2017 (the “2017 Proxy”). In the 2017 Proxy, the Individual Defendants solicited 

shareholder votes to, among other things, reelect Defendants Anderson, Ellingwood, Kraeutler, 

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McIlwraith, Phillips, and Sazdanoff to the Board, conduct an advisory vote on executive 

compensation, and reapprove the material terms for payment of performance-based incentive 

compensation under the Meridian Bioscience, Inc. 2012 Stock Incentive Plan. The Individual 

Defendants negligently issued materially-misleading statements with respect to these solicited 

votes. Plaintiff disclaims any claim of fraud or knowing wrongdoing in connection with the 

misleading statements in the 2017 Proxy. 

40. In support of reelecting Defendants Anderson, Ellingwood, Kraeutler, McIlwraith, 

Phillips, and Sazdanoff, the 2017 Proxy claimed that: (i) the Board was engaged in active riskoversight of the Company, including focusing on the risk in the Company’s operations and 

finances; and (ii) the Audit Committee exercised oversight of the Company’s financial statements, 

and therefore the financial statements were appropriate for the Board to approve to include in the 

Company’s Annual Report. In particular, the 2017 Proxy stated that the Board must consider risk 

assessment and management:

The Board’s Role in Risk Oversight

The Board of Directors, as a whole and also at the Committee level, plays a key 

role in operational risk oversight at Meridian and works with management to 

understand the risks the Company faces, the steps that management is taking to 

manage those risks and the level of risk appropriate for the Company in light of its 

overall business strategy. The Board approves the high level strategies, financial 

plans and policies of Meridian, setting the tone and direction for the appropriate 

levels of risk-taking within the organization.

While overall responsibility for risk oversight rests with the Board, it is the Audit 

Committee that has been given the primary responsibility of monitoring and 

evaluating the adequacy of management’s risk assessment and risk management 

practices. This role is carried out through its charter-mandated responsibilities 

related to Meridian’s (i) overall financial risks and exposures; (ii) financial 

statement risks and exposures; (iii) financial reporting processes; (iv) compliance 

with ethics policies, such as the Code of Ethics, Employee Complaint Policy, 

Security Trading Policies and the Foreign Corrupt Practices Act Policy; and 

(v) compliance with governmental and legal regulations, including those contained 

within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to 

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the full Board and works closely with management to update the full Board, as 

necessary, on matters identified through these Committee risk oversight roles.

41. Regarding the Company’s executive compensation, the 2017 Proxy indicated that 

“in recognition of completing the acquisition of Magellan, a number of employees, including four 

[Named Executive Officers] were granted time-based stock options vesting 25% per year.” 

42. The 2017 Proxy also incorporated by reference the 2016 10-K, which stated that 

“[Meridian’s] diagnostic products provide accuracy, simplicity and speed; enable early diagnosis 

and treatment of common, acute medical conditions; and provide for better patient outcomes at 

reduced costs.”

43. In a press release issued January 25, 2017, the Individual Defendants caused 

Meridian to reveal its negative first quarter 2017 and 2016 fiscal year financial results, amend its 

formerly-issued revenue forecast for the 2017 fiscal year downwards, and state that the Board had

reduced the annual indicated dividend rate (the “January 25, 2017 Press Release”). Kraeutler 

ascribed the negative quarterly results to revenue declines in Meridian’s Americas diagnostic 

business, Meridian’s largest profit driver, across all major product categories, “due to customer 

buying patterns and general weakness overall.” Notably, the Individual Defendants continued to 

tout the Magellan business unit as yielding a “strong performance” and indicated they were “very 

pleased with the trends in . . . [the Company’s] Magellan Diagnostics business unit[].” The 

January 25, 2017 Press Release failed to disclose any information about quality deficiencies or 

regulatory investigations involving the Company’s lead tests, and continued to extol the 

Company’s diagnostic tests as “provid[ing] accuracy, simplicity and speed in the early diagnosis 

and treatment of common medical conditions, such as infections and lead poisoning.” 

44. Following this news, Meridian stock dropped during intraday trading on

January 25, 2017, by 22%, to close at $12.80 per share.

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45. On April 27, 2017, the Individual Defendants caused Meridian to file a Form 8-K 

with the SEC announcing its financial results for the fiscal quarter ended March 31, 2017. The 

Form 8-K incorporated by reference a press release issued by the Company the same day, which 

assuaged any market concern following the January 25, 2017 Press Release by announcing record 

revenues of $16.4 million and 20% growth (the “April 27, 2017 Press Release”). The April 27, 

2017 Press Release stated, in pertinent part: “. . .[Magellan] revenues increased 17%. . .we are 

encouraged by this quarter’s revenues and net earnings [and] look forward to reporting more 

progress on our growth initiatives. . .”

46. Throughout the Relevant Period, the Individual Defendants’ concealment of the 

truth regarding the lead tests, as well as the false and misleading statements made by them or which 

they caused the Company to make regarding the Company’s business, operations, and prospects

caused the Company’s stock to trade at artificially-inflated prices throughout the Relevant Period, 

with the common stock reaching a high of $21.49 per share on April 28, 2016.

VI. REASONS THE INDIVIDUAL DEFENDANTS’ STATEMENTS WERE

IMPROPER

47. The true facts, which were known or recklessly disregarded by the Individual 

Defendants during the Relevant Period but concealed from the investing public, were as follows:

the Company was knowingly selling lead tests which were inaccurate and 

exposed the Company to colossal pecuniary, civil, and regulatory risk;

Meridian’s marketing and sales of its lead tests directly contradicted the 

Company’s purported commitment to delivering “highly accurate” tests for “rapid 

diagnoses [which] enable[] appropriate treatment,” exposing Meridian to potential civil 

liability and reputational harm;

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the Individual Defendants’ repeated claims that the Magellan product 

portfolio, which included Magellan’s lead tests, was a “10% grower,” in tandem with their 

strong assurances that high-value products that enable improved and accurate diagnoses 

were central tenets in Meridian’s business operations, concealed from the investing public

the enormous risk Meridian assumed through its sales and marketing of its lead tests; and

as a result of the foregoing, the Company’s public statements were 

materially false and misleading at all relevant times.

48. As a result of the Individual Defendants’ false and misleading statements and 

omissions, Meridian shares traded at artificially-inflated prices during the Relevant Period. Once 

the true facts regarding the Company’s financial prospects and future business prospects began to 

emerge, the Company’s stock price fell dramatically, erasing millions of dollars market 

capitalization.

VII. THE TRUTH EMERGES

49. On May 17, 2017, just weeks after the Company touted Magellan’s increased 

revenues in the April 27, 2017 Press Release, the FDA issued a press release cautioning Americans 

about the inaccuracy of the Company’s lead tests:

The U.S. Food and Drug Administration and Centers for Disease Control and 

Prevention are warning Americans that certain lead tests manufactured by 

Magellan Diagnostics may provide inaccurate results for some children and 

adults in the United States. The CDC recommends that parents of children 

younger than six years (72 months) of age, and currently pregnant women and 

nursing mothers who have been tested for lead exposure consult a health care 

professional about whether they should be retested.

“The FDA is deeply concerned by this situation and is warning laboratories and 

health care professionals that they should not use any Magellan Diagnostics’ 

lead tests with blood drawn from a vein,” said Jeffrey Shuren, M.D., director of 

the FDA’s Center for Devices and Radiological Health. “The agency is 

aggressively investigating this complicated issue to determine the cause of the 

inaccurate results and working with the CDC and other public health partners to 

address the problem as quickly as possible.”

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The FDA’s warning is based on currently available data that indicate Magellan lead 

tests, when performed on blood drawn from a vein, may provide results that are 

lower than the actual level of lead in the blood. Currently, the FDA believes the 

issue may date back to 2014. The warning includes all four of Magellan 

Diagnostics’ lead testing systems: LeadCare; LeadCare II; LeadCare Plus; and 

LeadCare Ultra. At this time, all LeadCare systems can be used with blood from a 

finger or heel stick, including the LeadCare II system - a system found in many 

doctors’ offices and clinics. In addition, some laboratories offer other methods of 

lead testing, which are not believed to be affected at this time.

The CDC is recommending that health care professionals retest children younger 

than six years (72 months) of age at the time of this alert (May 17, 2017) if their 

test was conducted using blood drawn from a vein using any Magellan 

Diagnostics’ LeadCare System tests and received a result of less than 

10 micrograms per deciliter (μg/dL). The CDC also recommends that women, who 

are currently pregnant or nursing and were tested in this manner while pregnant or 

nursing, get retested. Other adults who are concerned about their risk or the risk to 

an older child should speak to their health care professional about whether they 

should be retested.

“We understand that parents of children and others affected by this problem will be 

concerned about what this means for their health,” said Patrick Breysse, Ph.D., 

director of the CDC’s National Center for Environmental Health. “While most 

children likely received an accurate test result, it is important to identify those 

whose exposure was missed, or underestimated, so that they can receive proper 

care. For this reason, because every child’s health is important, the CDC 

recommends that those at greatest risk be retested.”

Lead exposure can affect nearly every system in the body, produces no obvious 

symptoms, and frequently goes unrecognized, potentially leading to serious health 

issues. Lead poisoning is particularly dangerous to infants and young children. 

While recommendations for lead screening differ from state to state, all states 

require children to be screened for lead exposure. Some adults are also at risk for 

lead exposure, including those who work around products or materials that contain 

lead.

The FDA, an agency within the U.S. Department of Health and Human Services, 

promotes and protects the public health by, among other things, assuring the safety, 

effectiveness, and security of human and veterinary drugs, vaccines and other 

biological products for human use, and medical devices. The agency also is

responsible for the safety and security of our nation’s food supply, cosmetics, 

dietary supplements, products that give off electronic radiation, and for regulating 

tobacco products.

CDC works 24/7 protecting America’s health, safety and security. Whether 

diseases start at home or abroad, are curable or preventable, chronic or acute, stem 

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from human error or deliberate attack, CDC is committed to respond to America’s 

most pressing health challenges.

50. On this news, the price per share of Meridian’s common stock fell $1.30, or 

over 8%, to close at $13.45 per share on May 17, 2017.

51. On May 22, 2017, at the UBS Global Healthcare Conference, Defendant Kraeutler

disclosed that the Individual Defendants were aware of potential problems associated with its 

blood lead tests as early as 2014:

[T]he news that came out of Magellan, one of our subsidies last week, was a little 

disconcerting. We had, in 2014, before we own Magellan, we'd advised the FDA 

that when testing for blood lead, blood collected in a Vacutainer tube could cause 

problems and we put a remedial step in there.

If you look at lead testing across the United States, most of it is done by fingerstick 

or heelstick, none of that has been affected by this. But the FDA believes that the 

data that is supporting the remedial step on venous blood is insufficient. So we 

have agreed with them that we will continue to work together and we will begin to 

move those customers that were using tubed blood to fingerstick.

52. Then, on July 13, 2017, the FDA issued a statement entitled “Alberto 

Gutierrez, Ph.D., Director, Office of In Vitro Diagnostics and Radiological Health, FDA’s Center 

for Devices and Radiological Health on the status of FDA’s investigation into inaccurate results 

from certain lead tests,” citing objectionable conditions it observed during an inspection of the 

Company’s lead test facility:

On May 17, the U.S. Food and Drug Administration warned Americans that 

Magellan Diagnostics’ LeadCare test systems performed on blood drawn from the 

vein (venous) may provide inaccurate results.

At that time, our first priority was to warn laboratories, health care professionals 

and people who may have been impacted by this issue. We also launched an 

aggressive investigation to determine the cause of the inaccurate results and 

promised to continue to communicate as we learned more about the issue.

As part of our investigation, we inspected Magellan Diagnostics’ facility in North 

Billerica, Massachusetts. Today, we are releasing the report issued at the 

conclusion of the inspection, which includes several inspectional observations that 

may be violations of federal law. We are carefully reviewing the evidence collected 

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during the inspection to determine if there have been violations of federal law and 

whether further action is warranted.

The FDA takes these observations and the risks these tests may have posed to 

patients very seriously and continues to encourage people to follow the FDA’s and 

Centers for Disease Control and Prevention’s recommendations from May 17. 

As we continue our investigation into the cause of the inaccurate results, the FDA 

will continue to provide updates on our findings and any changes to our 

recommendations.

The FDA, an agency within the U.S. Department of Health and Human Services, 

protects the public health by assuring the safety, effectiveness, and security of 

human and veterinary drugs, vaccines and other biological products for human use, 

and medical devices. The agency also is responsible for the safety and security of 

our nation’s food supply, cosmetics, dietary supplements, products that give off 

electronic radiation, and for regulating tobacco products.

53. The same day, the FDA issued Meridian a Form 483 for observations it made 

during its inspection. An FDA Form 483 is issued to company management at the conclusion of 

an FDA inspection when an FDA investigator has observed any conditions that in their judgment 

may constitute violations of the Food Drug and Cosmetic (“FD&C”) Act and related Acts.

54. On July 27, 2017, PiperJaffray published a report entitled “Underweight: FDA 

Releases Magellan Observation Summary; Our Thoughts on the Matter.” The report cited nine 

observations found by the FDA in its investigation observation summary “ranging from design 

validation, risk documentation, [Standard Operating Procedures] for corrective/preventative 

actions as well as failure to report design changes and customer complaints to FDA” and noted 

that the FDA was reviewing evidence to “determine if there have been violations of federal law 

and whether further action is warranted.”

55. Then, on October 23, 2017, the FDA issued a warning letter to the Company

(“October 23, 2017 FDA Warning Letter”), revealing, inter alia, that Magellan’s LeadCareII and 

LeadCare Ultra Systems were adulterated under Section 501(f)(1)(B) of the Federal Food, Drug, 

and Cosmetic Act, 21 U.S.C. §351(f)(1)(B), because the Company firm did not have an approved 

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application for premarket approval (“PMA”) to introduce the tests into commercial distribution. 

The warning letter also cited the LeadCare Ultra System’s “potential for falsely low and falsely 

high test results” and warned that failure to take immediate corrective action could result in 

regulatory action by the FDA including, but not limited to, seizure, injunction, and civil money 

penalties.

56. On this news, the price of Meridian common and preferred stock dropped

precipitously, with the common stock trading as low as $14.45 per share in intraday trading on

October 24, 2017, and closing down more than $.70 per share, a more than 4% decline from its 

close of $15.20 per share on October 23, 2017.

VIII. DUTIES OF THE INDIVIDUAL DEFENDANTS

A. Fiduciary Duties

57. By reason of their positions as officers, directors, and/or fiduciaries of Meridian,

and because of their ability to control the business and corporate affairs of Meridian, the Individual 

Defendants owed, and owe, the Company and its shareholders fiduciary obligations of trust, 

loyalty, good faith, and due care, and were, and are, required to use their utmost ability to control 

and manage Meridian in a fair, just, honest, and equitable manner. The Individual Defendants 

were, and are, required to act in furtherance of the best interests of Meridian and its shareholders 

so as to benefit all shareholders equally, and not in furtherance of their personal interest or benefit.

58. Each director and officer of the Company owes to Meridian and its shareholders 

the fiduciary duty to exercise good faith and diligence in the administration of the affairs of the 

Company and in the use and preservation of its property and assets, and the highest obligations of 

fair dealing.

59. The Individual Defendants, because of their positions of control and authority as 

directors and/or officers of Meridian, were able to, and did, directly and/or indirectly, exercise 

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control over the wrongful acts complained of herein. Because of their advisory, executive, 

managerial, and directorial positions with Meridian, each of the Individual Defendants had 

knowledge of material, non-public information regarding the Company. In addition, as officers 

and/or directors of a publicly-held company, the Individual Defendants had a duty to promptly 

disseminate accurate and truthful information with regard to the Company’s financial and business 

prospects so that the market price of the Company’s stock would be based on truthful and accurate 

information.

60. To discharge their duties, the officers and directors of Meridian were required to 

exercise reasonable and prudent supervision over the management, policies, practices, and controls 

of the Company. By virtue of such duties, the officers and directors of Meridian were required to, 

among other things:

a) exercise good faith to ensure that the affairs of the Company were 

conducted in an efficient, business-like manner so as to make it possible to provide the 

highest quality performance of their business;

b) exercise good faith to ensure that the Company was operated in a diligent, 

honest, and prudent manner, and complied with all applicable federal and state laws, rules, 

regulations, and requirements, and all contractual obligations, including acting only within 

the scope of its legal authority; and

c) when put on notice of problems with the Company’s business practices and 

operations, exercise good faith in taking appropriate action to correct the misconduct and 

prevent its recurrence.

B. Audit Committee Duties

61. In addition to these duties, the members of the Audit Committee owed specific 

duties to Meridian under the Audit Committee’s Charter, including duties to review and approve 

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quarterly and annual financial statements and earnings press releases, and to ensure that the 

Company had appropriate and effective internal controls over financial reporting.

62. Specifically, according to the Company’s Audit Committee Charter, the Audit 

Committee has primary responsibilities to:

• Review the Company’s annual financial statements, financial press releases, and 

any reports or other financial information submitted to the SEC, including any certification, 

report, opinion, or review rendered by the independent accountants. This information 

should be sent to the Committee at least 24 hours before filing or release;

• Discuss with management and the independent public accountants the Company’s 

risk assessment and management policies and procedures relating to the financial 

statements and the financial reporting process and conduct an inquiry of management and 

the independent public accountants regarding any significant business or financial risks 

and exposures;

• Oversee risks and exposures relating to the financial statements and the financial 

reporting process and the Company’s policies and procedures for monitoring and 

mitigating such risks and exposures;

• Prepare a Report of the Audit Committee, or such other disclosure, that complies 

with federal securities laws and any applicable stock exchange or other listing standards 

for transmission to shareholders through the annual Proxy Statement;

• Review with management and the Company’s counsel, any legal or regulatory 

matter that could have a significant impact on the Company’s financial statements, with 

significant legal matters considered to be those with potential exposure of greater than 

$500,000;

• Periodically consult with the independent public accountants out of the presence of 

management about internal controls, the fullness and accuracy of the Company’s financial 

statements, and the adequacy/capability of financial staff given the business and changes 

in operations; and

• Discuss with the independent accountants any major risk areas, critical accounting 

policies employed by the Company and any preferred accounting policies that differ from 

those being employed by the Company.

63. Upon information and belief, the Company maintained an Audit Committee 

Charter during the Relevant Period that imposed the same, or substantially and materially the same 

or similar, duties on the members of the Audit Committee as those set forth above.

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C. Control, Access, and Authority

64. The Individual Defendants, because of their positions of control and authority as 

directors and/or officers of Meridian, were able to, and did, directly and/or indirectly, exercise 

control over the wrongful acts complained of herein, as well as the contents of the various public 

statements issued by Meridian.

65. Because of their advisory, executive, managerial, and directorial positions with 

Meridian, each of the Individual Defendants had access to adverse, non-public information about 

the financial condition, operations, and improper representations of Meridian.

66. At all times relevant hereto, each of the Individual Defendants was the agent of 

each of the other Individual Defendants and of Meridian, and was at all times acting within the 

course and scope of such agency.

D. Reasonable and Prudent Supervision

67. To discharge their duties, the officers and directors of Meridian were required to 

exercise reasonable and prudent supervision over the management, policies, practices, and controls 

of the financial affairs of the Company. By virtue of such duties, the officers and directors of 

Meridian were required to, among other things:

ensure that the Company complied with its legal obligations and 

requirements, including acting only within the scope of its legal authority and 

disseminating truthful and accurate statements to the investing public;

conduct the affairs of the Company in an efficient, business-like manner so 

as to make it possible to provide the highest-quality performance of its business, to avoid 

wasting the Company’s assets, and to maximize the value of the Company’s stock;

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properly and accurately guide investors and analysts as to the true financial 

and business prospects of the Company at any given time, including making accurate 

statements about the Company’s business and financial prospects and internal controls;

remain informed as to how Meridian conducted its operations, and, upon 

receipt of notice or information of imprudent or unsound conditions or practices, make 

reasonable inquiry in connection therewith, and take steps to correct such conditions or 

practices and make such disclosures as necessary to comply with securities laws; and

ensure that Meridian was operated in a diligent, honest, and prudent manner 

in compliance with all applicable laws, rules, and regulations.

IX. BREACHES OF DUTIES

68. Each Individual Defendant, by virtue of his position as a director and/or officer, 

owed to Meridian and its shareholders the fiduciary duty of loyalty and good faith and the exercise 

of due care and diligence in the management and administration of the affairs of Meridian, as well 

as in the use and preservation of its property and assets. The conduct of the Individual Defendants 

complained of herein involves a knowing and culpable violation of their obligations as directors 

and officers of Meridian, the absence of good faith on their part, and a reckless disregard for their 

duties to Meridian and its shareholders that the Individual Defendants were aware or should have 

been aware posed a risk of serious injury to Meridian.

69. The Individual Defendants each breached their duties of loyalty and good faith by 

issuing, or causing the Company to issue, false and/or misleading statements that misled 

shareholders into believing that disclosures related to the Company’s financial and business 

prospects were truthful and accurate when made.

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X. CONSPIRACY, AIDING AND ABETTING, AND CONCERTED ACTION

70. In committing the wrongful acts alleged herein, the Individual Defendants have 

pursued, or joined in the pursuit of, a common course of conduct, and have acted in concert and 

conspired with one another in furtherance of their wrongdoing. The Individual Defendants further 

aided and abetted and/or assisted each other in breaching their respective duties.

71. During all times relevant hereto, the Individual Defendants collectively and 

individually initiated a course of conduct that was designed to mislead shareholders into believing 

that the Company’s business and financial prospects were better than they actually were. In 

furtherance of this plan, conspiracy, and course of conduct, the Individual Defendants collectively 

and individually took the actions set forth herein.

72. The purpose and effect of the Individual Defendants’ conspiracy, common 

enterprise, and/or common course of conduct was, among other things, to: (a) disguise the 

Individual Defendants’ violations of law, including breaches of fiduciary duties and unjust 

enrichment; and (b) disguise and misrepresent the Company’s actual business and financial 

prospects.

73. The Individual Defendants accomplished their conspiracy, common enterprise, 

and/or common course of conduct by causing the Company to purposefully, recklessly, or 

negligently release improper statements. Because the actions described herein occurred under the 

authority of the Board, each of the Individual Defendants was a direct, necessary, and substantial 

participant in the conspiracy, common enterprise, and/or common course of conduct complained 

of herein.

74. Each of the Individual Defendants aided and abetted and rendered substantial 

assistance in the wrongs complained of herein. In taking such actions to substantially assist the 

commissions of the wrongdoing complained of herein, each Individual Defendant acted with 

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knowledge of the primary wrongdoing, substantially assisted the accomplishment of that 

wrongdoing, and was aware of his or her overall contribution to and furtherance of the wrongdoing.

XI. DAMAGES TO MERIDIAN

75. As a result of the Individual Defendants’ wrongful conduct, Meridian disseminated 

false and misleading statements and omitted material information to make such statements not 

false and misleading when made. The improper statements have devastated Meridian’s credibility.

Additionally, Meridian is the subject of the Securities Class Action. Meridian has been, and will 

continue to be, severely damaged and injured by the Individual Defendants’ misconduct.

76. As a direct and proximate result of the Individual Defendants’ actions as alleged 

above, the Company’s market capitalization has been substantially damaged, losing millions of 

dollars in value as a result of the conduct described herein.

77. Further, as a direct and proximate result of the Individual Defendants’ conduct, 

Meridian has expended, and will continue to expend, significant sums of money. Such 

expenditures include, but are not limited to:

costs incurred in investigating and defending Meridian and certain officers 

in the Securities Class Action, plus potentially millions of dollars in settlement or to satisfy 

an adverse judgment;

costs incurred in connection with addressing the concerns raised in the 

October 23, 2017 FDA Warning Letter regarding Magellan’s LeadCareII and LeadCare 

Ultra Systems, and any fallout therefrom, including, but not limited to, civil money 

penalties as well as revenues lost due to the FDA warning;

costs incurred from compensation and benefits paid to the Individual 

Defendants, which compensation was based, at least in part, on the Company’s artificiallyinflated stock price; and

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costs incurred from the loss of the Company’s customers’ confidence in 

Meridian and its products. 

78. Moreover, these actions have irreparably damaged the Company’s corporate image 

and goodwill. For at least the foreseeable future, Meridian will suffer from what is known as the 

“liar’s discount,” a term applied to the stocks of companies who have been implicated in illegal 

behavior and have misled the investing public, such that the Company’s ability to raise equity 

capital or debt on favorable terms in the future is now impaired. Meridian has also suffered a loss 

of more than $280 million dollars in market capitalization as a direct result of the Individual 

Defendants’ wrongdoing alleged herein.

XII. DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

79. Plaintiff brings this action derivatively in the right and for the benefit of Meridian

to redress injuries suffered, and to be suffered, by Meridian, as a direct result of the Individual 

Defendants’ breaches of fiduciary duties and other violations of law. Meridian is named as a 

nominal defendant solely in a derivative capacity. 

80. Plaintiff will adequately and fairly represent the interests of Meridian in enforcing 

and prosecuting its rights.

81. Plaintiff has continuously been a Meridian shareholder at all relevant times,

including at the time of the Individual Defendants’ wrongdoing complained of herein. 

Specifically, Plaintiff has continuously been a shareholder of Meridian since 2008. 

82. Plaintiff did not make a pre-suit demand on the Board to pursue this action, because 

such a demand would have been a futile and wasteful act. 

83. Plaintiff has not made any demand on shareholders of Meridian to institute this 

action since such demand would be a futile and useless act for the following reasons:

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Meridian is a publicly-traded company with thousands of shareholders of 

record;

making demand on such a number of shareholders would be impossible for 

Plaintiff, who has no means of collecting the names, addresses, or phone numbers of 

Meridian shareholders; and

making demand on all shareholders would force Plaintiff to incur excessive 

expense and obstacles, assuming all shareholders could even be individually identified with 

any degree of certainty.

84. The Company has been directly and substantially injured by reason of the 

Individual Defendants’ breaches of their fiduciary duties to Meridian. Plaintiff, as a shareholder 

of Meridian, seeks damages and other relief on behalf of the Company, in an amount to be proven 

at trial.

85. At the time this action was commenced, the Board of Meridian consisted of the 

following six (6) directors: Director Defendants Kraeutler, Anderson, Phillips, Ellingwood, 

McIlwraith, and Sazdanoff. 

A. Demand is Futile as to All Director Defendants Because the Director Defendants Face 

a Substantial Likelihood of Liability in Connection with the Company’s Pervasive

Misconduct

86. The Director Defendants face a substantial likelihood of liability for their breaches 

of fiduciary duties of loyalty and good faith and other misconduct. The Director Defendants were 

directors throughout the Relevant Period, and as such, had fiduciary duties to ensure the 

Company’s SEC filings, press releases, and other public statements and presentations on behalf of 

the Company concerning its financial and business prospects were accurate.

87. Indeed, the Director Defendants were responsible for reviewing and approving the 

Company’s financial statements. By authorizing the false financial statements and public 

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statements alleged herein filed with the SEC during the Relevant Period, the Director Defendants 

were active participants in breaches of duties of good faith, candor, and loyalty, and have subjected 

the Company to lawsuits claiming violations of the federal securities laws. A director’s breach of 

the duty of candor is not entitled to protection under the business judgment rule. As a result, any 

demand upon the Director Defendants to bring suit against themselves would be a useless and 

futile act.

88. The Director Defendants caused and/or allowed the Company to engage in 

deliberately issuing false and misleading statements to mislead investors, and each of the Director 

Defendants face a substantial likelihood of liability for causing Meridian to engage in such illegal 

and unlawful conduct. As is described above, the Director Defendants either knew, or were 

reckless in not knowing, that the Company’s marketing and sales practices, product quality, and 

safety and regulatory practices exposed investors to colossal pecuniary loss and regulatory and 

legal risks. The business judgment rule protects a wide variety of business decisions but does not 

protect a corporation’s officers and directors from causing a company to engage in illegal and 

unlawful conduct.

89. As a result of the alleged misconduct described above, Defendants Kraeutler, 

Anderson, Phillips, Ellingwood, McIlwraith, and Sazdanoff (i.e., the whole Board) face a 

substantial likelihood of liability for their breaches of fiduciary duties, rendering any demand upon 

them futile. Moreover, this conduct is not entitled to the protections of the business judgment rule, 

which also independently excuses demand. 

90. Additionally, the Director Defendants were specifically responsible for ensuring 

Meridian had adequate internal controls regarding the Company’s compliance with federal and 

state rules and regulations regarding its business practices. Thus, the Director Defendants are 

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directly responsible for Meridian’ failure to adopt and implement such internal controls, and for 

the substantial damages Meridian is subject to in the ongoing lawsuits. As such, all the Director 

Defendants face a substantial likelihood of liability for the claims asserted herein. Demand is 

therefore futile.

91. Further, the Director Defendants specifically voted on, and caused the Company to 

consummate, the Magellan Acquisition, exposing the Company to pecuniary, regulatory, and legal 

risks through acquisition and sales of Magellan’s lead tests. 

92. Further, Director Director Defendants Kraeutler, Anderson, Phillips, Ellingwood, 

McIlwraith, and Sazdanoff each signed the false and misleading 2016 10-K. The 2016 10-K was 

false and misleading because, inter alia, it touted Meridian’s diagnostic products as “provid[ing]

accuracy, simplicity and speed; enable early diagnosis and treatment of common, acute medical 

conditions; and provide for better patient outcomes at reduced costs,” which statements the 

Director Defendants either knew, or were reckless in not knowing, when made, were materially 

false and misleading or omitted material facts to make such statements not false and misleading. 

As a result, the Director Defendants face a substantial likelihood of liability for their breaches of 

fiduciary duties, rendering any demand upon them futile.

93. Indeed, the Director Defendants, knowingly and/or with reckless disregard 

reviewed, authorized, and/or caused the publication of materially false and misleading statements,

throughout the Relevant Period, that caused the Company’s stock to trade at artificially-inflated 

prices. 

94. Moreover, the Director Defendants also wasted corporate assets by paying 

improper compensation, bonuses, and severance to certain of the Company’s executive officers 

and directors. The handsome remunerations paid to wayward fiduciaries who proceeded to breach 

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their fiduciary duties to the Company was improper and unnecessary, and no person of ordinary, 

sound, business judgment would view this exchange of consideration for services rendered as fair 

or reasonable.

95. The Director Defendants’ making or authorization of false and misleading 

statements throughout the Relevant Period, failure to timely correct such statements, failure to take 

necessary and appropriate steps to ensure that the Company’s internal controls or internal auditing 

and accounting controls were sufficiently robust and effective (and/or were being implemented 

effectively), failure to take necessary and appropriate steps to ensure that the Audit Committee’s 

duties were being discharged in good faith and with the required diligence, and/or acts of corporate 

waste and abuse of control constitute breaches of fiduciary duties, for which the Director 

Defendants face a substantial likelihood of liability. If the Director Defendants were to bring a 

suit on behalf of Meridian to recover damages sustained as a result of this misconduct, they would 

expose themselves to significant liability. This is something they will not do. For this reason,

demand is futile.

B. Demand is Futile as to the Audit Committee Defendants

96. During the Relevant Period, Defendants Anderson, Phillips, and Sazdanoff served 

as members of the Audit Committee. Pursuant to the Company’s Audit Committee Charter, the 

Audit Committee Defendants were specifically responsible for, among other things, reviewing and 

approving quarterly and annual financial statements and earnings press releases, overseeing the 

Company’s internal controls over financial reporting, and discharging their other duties described 

herein. Despite these duties, the Audit Committee Defendants knowingly or recklessly reviewed 

and approved, or failed to exercise due diligence and reasonable care in reviewing and preventing 

the dissemination of, false and/or materially-misleading earnings press releases and quarterly and 

annual financial statements, and failed in their specific duties to ensure that the Company’s internal 

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controls over financial reporting were sufficient and that statements made by the Company 

regarding its business and financial prospects were accurate. Accordingly, the Audit Committee 

Defendants face a sufficiently substantial likelihood of liability for breach of their fiduciary duties 

of loyalty and good faith. Any demand upon the Audit Committee Defendants therefore is futile.

C. Demand is Futile as to Kraeutler for Additional Reasons

97. In addition to the reasons discussed herein as to why demand is futile as to all 

Director Defendants, demand is futile as to Defendant Kraeutler because he is not an independent 

director. 

98. Defendant Kraeutler also cannot disinterestedly consider a demand to bring suit 

against himself because he is named as a defendant in the Securities Class Action, which alleges 

he made many of the same misstatements described above in violation of the federal securities 

laws. Thus, if Kraeutler were to initiate suit in this action, he would compromise his ability to 

simultaneously defend himself in the Securities Class Action and would expose himself to liability 

in this action. Kraeutler will not do this. 

COUNT I

AGAINST THE INDIVIDUAL DEFENDANTS FOR VIOLATION OF SECTION 14(A) 

OF THE EXCHANGE ACT

99. Plaintiff incorporates by reference and realleges each and every allegation 

contained above, as though fully set forth herein, except any allegation of fraud. 

100. Section 14(a) of the Exchange Act, 15 U.S.C. §78n(a), provides:

“[i]t shall be unlawful for any person, by the use of the mails or by any means or 

instrumentality of interstate commerce or of any facility of a national securities 

exchange or otherwise, in contravention of such rules and regulations as the [SEC] 

may prescribe as necessary or appropriate in the public interest or for the protection 

of investors, to solicit or to permit the use of his name to solicit any proxy or consent 

or authorization in respect of any security (other than an exempted security) 

registered pursuant to section 78l of this title [15 U.S.C. § 78l].”

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101. Rule 14a-9, promulgated pursuant to Section 14(a) of the Exchange Act, provides 

that no proxy statement shall contain “any statement which, at the time and in the light of the 

circumstances under which it is made, is false or misleading with respect to any material fact, or 

which omits to state any material fact necessary in order to make the statements therein not false 

or misleading.” 17 C.F.R. §240.14a-9.

102. The Section 14(a) Exchange Act claims alleged herein are based solely on

negligence. They are not based on any allegation of reckless or knowing conduct by or on behalf 

of the Individual Defendants.

103. The Company’s 2017 Proxy violated Section 14(a) and Rule 14a-9 by 

misrepresenting or failing to disclose that the Company: (i) lacked sufficient compliance, review, 

and reporting programs to mitigate wrongdoing and apprise the Board of significant risks; (ii) was 

aware of existing material risks that could affect the Company; and (iii) failed to maintain adequate

risk management practices.

104. In the exercise of reasonable care, the Individual Defendants should have known 

that by misrepresenting or failing to disclose these material facts, the statements contained in the 

2017 Proxy were materially misleading. The misrepresentations and omissions were material to 

Plaintiff in voting on the matters set forth for shareholder determination in the 2017 Proxy, 

including, but not limited to, election of directors, executive compensation, and the material terms 

for payment of performance-based incentive compensation.

105. The Company was damaged as a result of the Individual Defendants’ material 

misrepresentations and omissions in the 2017 Proxy.

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COUNT II

AGAINST THE INDIVIDUAL DEFENDANTS FOR BREACHES OF FIDUCIARY 

DUTIES

106. Plaintiff incorporates by reference and realleges each and every allegation 

contained above, as though fully set forth herein.

107. The Individual Defendants owed, and owe, Meridian fiduciary obligations. By 

reason of their fiduciary relationships, the Individual Defendants owed, and owe, Meridian the 

highest obligation of good faith, fair dealing, loyalty, due care, reasonable inquiry, oversight, and 

supervision.

108. In addition, the Individual Defendants had a duty to act in the best interests of the 

Company and its shareholders, and not to act in furtherance of their own self-interests.

109. As alleged in detail herein, each of the Individual Defendants (and particularly the 

Audit Committee Defendants) had a duty to ensure that Meridian disseminated accurate, truthful,

and complete information to its shareholders.

110. The Individual Defendants violated and breached their fiduciary duties of good 

faith, fair dealing, loyalty, due care, reasonable inquiry, oversight, and supervision.

111. The Individual Defendants each knowingly, recklessly, or negligently approved the 

issuance of false statements that misrepresented and failed to disclose material information 

concerning the Company. These actions could not have been a good faith exercise of prudent 

business judgment to protect and promote the Company’s corporate interests.

112. Additionally, as is also alleged herein, each of the Individual Defendants had a 

fiduciary duty to, among other things, exercise good faith to ensure that the Company’s disclosures 

were complete and accurate, and, when put on notice of problems with the Company’s business 

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practices and operations, exercise good faith in taking appropriate action to correct the misconduct 

and prevent its recurrence.

113. As executive officers of Meridian and members of the Meridian Board, the 

Individual Defendants were directly responsible for authorizing, permitting the authorization of, 

or failing to monitor, the practices which resulted in violations of the law as alleged herein. Each 

of them had knowledge of, actively participated in, and/or approved of, or acquiesced in, the 

wrongdoings alleged herein, or abdicated his/her responsibilities with respect to these 

wrongdoings. The alleged acts of wrongdoing have subjected Meridian to unreasonable risks of 

loss and expenses.

114. Yet, the Individual Defendants willfully ignored the obvious and pervasive 

problems with Meridian’s marketing and sales practices, product quality, and safety and regulatory 

practices, and failed to make a good faith effort to correct the problems or prevent their recurrence.

115. As a direct and proximate result of the Individual Defendants’ failure to perform 

their fiduciary obligations, Meridian has sustained significant damages. As a result of the 

misconduct alleged herein, the Individual Defendants are liable to the Company.

116. By reason of the foregoing, Meridian was damaged.

117. Plaintiff, on behalf of Meridian, has no adequate remedy at law.

COUNT III

AGAINST THE INDIVIDUAL DEFENDANTS FOR UNJUST ENRICHMENT

118. Plaintiff incorporates by reference and realleges each and every allegation 

contained above, as though fully set forth herein.

119. By their wrongful acts and omissions, the Individual Defendants were unjustly 

enriched at the expense of, and to the detriment of, Meridian.

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120. The Individual Defendants were unjustly enriched as a result of the compensation 

they received while breaching their fiduciary duties owed to Meridian.

121. Plaintiff, as a shareholder and representative of Meridian, seeks restitution from the 

Individual Defendants, and seeks an order from this Court disgorging all profits, benefits, and other 

compensation obtained by the Individual Defendants from their wrongful conduct and fiduciary 

breaches.

122. By reason of the foregoing, Meridian was damaged.

123. Plaintiff, on behalf of Meridian, has no adequate remedy at law.

COUNT IV

AGAINST THE INDIVIDUAL DEFENDANTS FOR WASTE OF CORPORATE ASSETS

124. Plaintiff incorporates by reference and realleges each and every allegation 

contained above, as though fully set forth herein.

125. The Individual Defendants breached their fiduciary duties by failing to properly 

supervise and monitor the adequacy of Meridian’ internal controls, by issuing, causing the issuance 

of, and/or failing to correct the false and misleading statements identified herein, and by allowing 

the Company to engage in an illegal, unethical, and improper course of conduct, which was 

continuous, connected, and on-going throughout the Relevant Period. It resulted in continuous, 

connected, and on-going harm to the Company.

126. As a result of the misconduct described above, the Individual Defendants wasted 

corporate assets by: (a) paying excessive compensation, bonuses, and termination payments to 

certain of its executive officers; (b) awarding self-interested stock options to certain officers and 

directors; and (c) incurring potentially millions of dollars of legal liability and/or legal costs to 

defend the Individual Defendants’ unlawful actions.

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127. As a result of the waste of corporate assets, the Individual Defendants are liable to 

the Company.

128. By reason of the foregoing, Meridian was damaged.

129. Plaintiff, on behalf of Meridian, has no adequate remedy at law.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff demands judgment as follows: 

A. Against all Defendants for the amount of damages sustained by the Company as a 

result of Defendants’ wrongdoing as alleged herein;

B. Directing Meridian to take all necessary actions to reform and improve its corporate 

governance and internal procedures to comply with applicable laws, and to protect Meridian and 

its shareholders from a repeat of the damaging events described herein, including, but not limited 

to, putting forward for shareholder vote resolutions for amendments to the Company’s By-Laws 

or Articles of Incorporation and taking such other action as may be necessary to place before 

shareholders for a vote the following corporate governance proposals or policies:

• a proposal to strengthen the Board’s supervision of operations and compliance with 

applicable state and federal laws and regulations;

• a proposal to strengthen the Company’s internal reporting and financial disclosure 

controls;

• a proposal to develop and implement procedures for greater shareholder input into 

the policies and guidelines of the Board;

• a proposal to ensure the accuracy of the qualifications of Meridian directors, 

executives, and other employees;

• a proposal to require an independent Chairman of the Board;

• a provision to permit the shareholders of Meridian to nominate three candidates for 

election to the Board;

• a proposal to strengthen the Company’s procedures for the receipt, retention, and 

treatment of complaints received by the Company regarding internal controls; and

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• a provision to appropriately test and then strengthen the Company’s internal 

operational control functions.

C. Awarding to Meridian restitution from the Individual Defendants, and each of them, 

and ordering disgorgement of all profits, benefits, and other compensation obtained by the 

Individual Defendants;

D. Awarding to Plaintiff the costs and disbursements of the action, including 

reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses; and

E. Granting such other and further relief as the Court deems just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

DATED: December 6, 2017 LANDSKRONER GRIECO MERRIMAN, LLC

s/Paul Grieco

PAUL GRIECO (#0064729)

1360 West 9th Street, Suite 200

Cleveland, OH 44113

Telephone: (216) 522-9000

Facsimile: (216) 522-9007

Email: paul@lgmlegal.com

JOHNSON FISTEL, LLP

Frank J. Johnson

Kristen L. O’Connor

600 West Broadway, Suite 1540

San Diego, CA 92101

Telephone: (619) 230-0063

Facsimile: (619) 255-1856

Email: frankj@johnsonfistel.com

kristeno@johnsonfistel.com

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JOHNSON FISTEL, LLP

Michael I. Fistel, Jr.

Murray House

40 Powder Springs Street

Marietta, GA 30064

Telephone: (470) 632-6000

Facsimile: (770) 200-3101

Email: michaelf@johnsonfistel.com

Attorneys for Plaintiff Michael Edelson

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VERIFICATION

I, Michael Edelson, verify that I have reviewed the foregoing Verified Shareholder

Derivative Complaint, and that the allegations as to me are true and correct and that the other 

allegations upon information and belief are true and correct.

Dated: December 4, 2017

_________________________________

(Signature of Michael Edelson)

DocuSign Envelope ID: AD80A8F5-9E20-4032-A2F9-62DF0D8CF89A Case: 1:17-cv-00825-SJD Doc #: 1 Filed: 12/06/17 Page: 40 of 40 PAGEID #: 40