San Antonio Fire and Police Pension Fund v. Dentsply Sirona Inc.

Background

This is a securities-fraud lawsuit against Dentsply Sirona Inc. and other defendants. The plaintiffs allege that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5 by making misleading statements that concealed falling demand, supply-chain constraints, and defective products. The court had previously denied the defendants’ motion to dismiss. The plaintiffs then moved to certify a proposed class.

Class-certification standards

Under Federal Rule of Civil Procedure 23, a proposed class must satisfy four requirements: enough members that individual lawsuits are impractical, common legal or factual questions, representative claims typical of the class, and representatives and lawyers able to protect the class’s interests. The proposed class must also meet one of Rule 23(b)’s additional requirements. The relevant provision requires that common questions predominate over individualized questions and that a class action be the superior method for resolving the dispute. The plaintiffs had to prove each requirement by a greater-than-50-percent standard.

Rule 23(a) requirements

The defendants did not object to certification under Rule 23(a), and the court found that all four requirements were met. For numerosity, the court relied on evidence that more than 1,000 institutions held Dentsply stock, an average of 9.6 million shares traded weekly, and approximately 215 million shares were outstanding.

The court found common questions concerning whether the defendants made misleading statements or omissions, whether the alleged fraud was important enough to affect investors, and whether the defendants acted with the required fraudulent intent. The court found typicality because the proposed class members’ claims arose from the same alleged deceptive conduct and relied on similar legal arguments. It found adequacy because the plaintiffs’ claims were identical to those of the class members and the plaintiffs had actively pursued the case; the court also found that their lawyers were experienced securities-fraud litigators.

Rule 23(b)(3) requirements

The defendants’ principal objection concerned predominance. They argued that the plaintiffs’ damages model failed under Comcast Corp. v. Behrend because it could not reliably measure damages caused by the alleged misstatements.

The plaintiffs proposed an “out-of-pocket” model. According to the plaintiffs’ expert, this method calculates an investor’s damages by comparing the artificial inflation in the stock price when the investor bought the stock with the artificial inflation when the investor sold it. The court held that the model was sufficient at the class-certification stage because it measured damages tied to the plaintiffs’ single theory of liability: that misleading statements artificially inflated Dentsply’s stock price.

The court rejected the defendants’ arguments that the model did not properly account for the timing of disclosures, risks that were already known, allegedly concealed risks, confounding information, or a possible three-day event window. The court treated those arguments primarily as challenges to loss causation—the requirement that the alleged fraud caused the investors’ losses—or to the ultimate calculation of damages. The court explained that those issues generally concern the merits and need not be resolved before certification. It also noted that the defendants had not yet filed a motion for summary judgment or a challenge under the standards governing expert testimony.

The court separately found that common questions predominated because the case centered on common issues such as whether the defendants engaged in a fraudulent scheme, made material misstatements or omissions, acted with fraudulent intent, and injured investors. It also found that a class action was the superior method because it could efficiently provide a remedy to Dentsply’s many stockholders while avoiding inconsistent rulings and multiple lawsuits.

Order and effect

Judge Arun Subramanian granted the plaintiffs’ motion for class certification. The certified class consists of all persons and entities that purchased Dentsply publicly traded common stock between June 9, 2021, and November 13, 2022, inclusive, and were damaged as a result. The order excludes the defendants; Dentsply’s officers and directors during the relevant period; specified family members, representatives, heirs, successors, and assigns of the excluded individuals; and entities in which a defendant had or has a controlling interest.

The court appointed City of Birmingham Retirement and Relief System, El Paso Firemen & Policemen’s Pension Fund, and Wayne County Employees’ Retirement System as class representatives. It appointed Robbins Geller Rudman & Dowd LLP as class counsel and directed the clerk to terminate the plaintiffs’ class-certification motion from the docket.