Insulet (NSDQ:PODD) plans to fork over $19.5 million to settle a class action lawsuit brought by the Arkansas Teacher Retirement System, the City of Bristol Pension Fund and the City of Omaha Police and Fire Retirement System, according to court documents.
The lawsuit alleged that Insulet misrepresented the success of its OmniPod Eros roll-out in 2013, which eventually caused shares in the company to plummet. The insulin-delivery device had a number of manufacturing problems when it was launched five years ago, which the plaintiffs argued were kept hidden from investors.
In court documents announcing the settlement, the plaintiffs noted that although they believe their claims hold merit, they would have faced significant risks establishing liability in the case. Insulet argued that the manufacturing problems and quality issues they found in 2013 are commonly experienced by medical device companies that are launching products and that the defects were not evidence of a more pervasive problem with the product.
The plaintiffs also acknowledged that they faced significant risks in establishing damages. They would have had to prove loss causation – a causal relationship between the decline in Insulet’s stock price and the company’s alleged false statements. Insulet argued that the plaintiffs couldn’t establish loss causation because the decline in stock price on the dates in question were due to other factors and that the stock price reactions were not statistically significant.
The plaintiff’s lawsuit was brought against Insulet in June of 2016 on behalf of investors who bought the company’s common stock between May 7, 2013 and April 30, 2015. In August of 2016, Insulet asked the U.S. district court in Massachusetts to dismiss the case. The two parties went back and forth until March last year, when the court denied Insulet’s request to dismiss.
The groups first engaged in private mediation in July of 2017, but found that they could not agree to settlement terms. It wasn’t until the end of November that they finally landed on agreeable terms.