Law360 Highlights Robbins Geller Win in Dentsply Securities Fraud Case

Allegations of “Channel Stuffing” by Former Executives

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May 8, 2024

A court in the Southern District of New York recently denied a bid to dismiss a securities fraud class action brought against Dentsply Sirona Inc. – the world’s largest manufacturer of dental products – and certain of its former executives. The case involves an alleged “channel stuffing” scheme, which allegedly enabled Dentsply to meet certain financial targets and conceal ongoing product defects and supply chain disruptions.  

Robbins Geller Rudman & Dowd LLP represents lead plaintiffs City of Birmingham Retirement and Relief System, El Paso Firemen & Policemen’s Pension Fund, and Wayne County Employees’ Retirement System in this class action pending before United States District Judge Arun Subramanian of the United States District Court for the Southern District of New York. 

The Case Against Dentsply 

Plaintiffs allege that, entering the second half of 2021, product quality issues and severe supply chain shortages threatened Dentsply’s ability to meet its sales targets for the second half of 2021. Nevertheless, Dentsply executives informed investors that the company was doing well.  

Plaintiffs allege that in reality, Dentsply was allegedly inflating its sales by offering outsized incentives to its distributor partners to convince them take on more inventory – a practice known as “channel stuffing.” Dentsply then concealed the incentives by failing to properly account for them. The complaint alleges that the channel stuffing and improper accounting allowed Dentsply to meet certain financial expectations and conceal the supply chain disruptions and product quality issues.    

The alleged fraud began to unravel in 2022, when Dentsply reported disappointing earnings for several quarters, replaced various key executives, and announced an internal investigation into its business and accounting practices. In November 2022, the company publicly acknowledged that the channel stuffing and improper accounting allowed Dentsply to meet financial analyst expectations in the second half of 2021. The company also restated its financial results for FY21 and 3Q21 and admitted that it had not properly accounted for the incentives given to distributors. The company’s stock price dropped significantly with these announcements, harming investors. 

Motion to Dismiss Denied  

On May 1, 2024, Judge Subramanian denied in large part Dentsply’s motion to dismiss the investors’ securities fraud suit. The court noted that the complaint identifies numerous actionable statements made to investors, including statements about the “strength and sustainability of the company’s earnings” and the strength of demand for certain of its key products.  

The court also found that the complaint’s allegations raised a strong inference of scienter. For example, the court found that Dentsply’s executive compensation packages supported a strong inference of scienter on the part of the former CEO and CFO because the complaint drew a “direct link” between the executives’ compensation and the alleged fraud. The court highlighted allegations that Dentsply executives allegedly made millions in bonus compensation as a result of the fraud – and “the company just barely hit the thresholds necessary for bonuses.”  

Robbins Geller attorneys representing the class include Samuel H. Rudman, David A. Rosenfeld, Luke O. Brooks, Hillary B. Stakem, and Nicole Q. Gilliland 

Read more about the Dentsply case in Law360: https://www.law360.com/securities/articles/1832000/dental-supply-co-must-face-suit-over-covid-era-woes 

About Robbins Geller 

Robbins Geller Rudman & Dowd LLP is one of the world’s leading complex litigation firms, representing plaintiffs in securities fraud, shareholder derivative, antitrust, corporate takeover, and consumer fraud and privacy cases. With 200 lawyers in 10 offices, Robbins Geller is one of the world’s largest plaintiffs’ firms, and the Firm’s attorneys have obtained many of the largest securities, antitrust, and consumer class action recoveries in history.  

Over the last decade, our Firm has been ranked #1 on the ISS Securities Class Action Services law firm rankings for six out of the last ten years for securing the most monetary relief for investors. In the last four years, Robbins Geller recovered $6.6 billion for investors in securities-related class action cases – over $2.2 billion more than any other law firm during that time. The Firm secured the largest-ever securities fraud class action settlement — $7.2 billion — in In re Enron Corp. Securities Litigation.  

For media inquiries, please contact media@rgrdlaw.com or call (619) 338-3821.

San Antonio Fire and Police Pension Fund v. Dentsply Sirona Inc., No. 1:22-cv-06339, Opinion and Order (S.D.N.Y. May 1, 2024).   

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