Securities – Fraud – Merger

Where a securities fraud class action was brought following an abandoned merger, a judgment of dismissal should be reversed in part, as the complaint plausibly alleges that an opinion expressed in a modified proxy statement — that the defendant company expected regulatory approval for the merger — is actionable because it omitted important contrary information about European approval in circumstances that adequately suggest scienter.

“In August 2022, Amazon, Inc., the online retailer, and iRobot, Inc., a robotics company best known for inventing a popular robot vacuum cleaner called the Roomba, announced their intention to merge. Over the next approximately eighteen months, Amazon and iRobot sought clearance for the merger from domestic and international antitrust regulators. In January 2024, when approval from United States and European Union authorities seemed doubtful, Amazon and iRobot terminated their merger attempt.

“Following the abandoned merger, iRobot shareholders, led by Premca Extra Income Fund, LP (‘Premca’), brought a securities fraud class action against iRobot, Colin Angle, iRobot’s chief executive officer, and Julie Zeiler, iRobot’s chief financial officer. After Premca filed an amended complaint, the defendants moved to dismiss it for failing to state a claim, arguing that it neither identified a statement that contained an actionable material misrepresentation or omission nor adequately alleged scienter. The district court agreed on both fronts and dismissed the complaint with prejudice. …

“We now conclude that the district court correctly dismissed the amended complaint for all statements identified by Premca except for the August 24, 2023, modified proxy statement. As we explain, the amended complaint plausibly alleges that an opinion expressed in iRobot’s modified proxy statement — namely, that the company expected regulatory approval for the merger — is actionable because it omitted important contrary information about European approval in circumstances that adequately suggest scienter. …

“In its amended complaint, Premca relies heavily on information provided by CW2 and CW3 regarding Weinstein’s statements at senior leadership meetings. The individual defendants argue that we should ignore these allegations because they are inadequately pleaded allegations from confidential sources. We disagree. …

“… The modified proxy statement deserves separate consideration because it is the only statement within the class period where the company affirmatively offered a positive prediction about the outcome of the regulatory review process. Specifically, in this filing, the individual defendants claimed they ‘expect[ed] that all applicable regulatory approvals [would] be obtained’ and that ‘the merger [would] not violate the antitrust or foreign investment laws.’ The filing contained caveats, however, that such approvals were not assured. …

“Here, we conclude that the modified proxy statement’s prediction of regulatory success crosses the line and qualifies as a misleading statement. …

“The amended complaint also makes sufficient allegations to give rise to a strong inference of scienter. It paints a picture of iRobot as a declining company that was counting on the Amazon merger to improve its financial footing. …

“For these reasons, we conclude that Premca has plausibly alleged a §10(b) claim and a derivative §20(a) claim based on omissions from the optimistic predictions in the modified proxy statement. …

“For the reasons stated, we reverse the district court’s dismissal of the §10(b) and §20(a) claims based on the predictions of regulatory approval contained in the August 2023 modified proxy statement. We otherwise affirm the district court’s order.”

Premca Extra Income Fund LP v. Angle, et al. (Lawyers Weekly No. 01-118-26) (42 pages) (Aframe, J.) Appealed from a decision by Young, J., in the U.S. District Court for the District of Massachusetts. Christopher P.T. Tourek, with whom Joshua B. Silverman, Genc Arifi and Pomerantz LLP were on brief, for the plaintiff-appellant; Alisha Q. Nanda, with whom James R. Carroll, Rene H. DuBois and Skadden, Arps, Slate, Meagher & Flom were on brief, for the defendants-appellees (Docket No. 25-1192) (June 5, 2026).

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