In re Boston Scientific Corporation Securities Litigation

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

In re BOSTON SCIENTIFIC )

CORPORATION SECURITIES )

LITIGATION ) CIVIL ACTION NO.

) 20-12225-DPW

)

)

)

MEMORANDUM AND ORDER

December 20, 2022

I. BACKGROUND............T .A .B .L .E . O .F . .C .O .N .T .E .N .T .S . ...................... 5

A. The Parties ............................................. 5

B. Factual Background ...................................... 7

1. The Early Lotus Valve Recalls and Delays ............... 9

2. Launch in the United States ........................... 11

3. The Launch as Reported by Boston Scientific ........... 11

4. Boston Scientific Terminates the Lotus Valve Platform . 13

5. Failures of the Lotus Launch Revealed after the Class

Period .................................................... 15

6. Allegations of Executive Defendant False Statements ... 19

a. Mr. Mahoney’s Alleged Misstatements ................. 19

b. Mr. Ballinger’s Alleged Misstatements ............... 21

c. Ms. Lisa’s Alleged Misstatements .................... 21

d. Mr. Fitzgerald’s Alleged Misstatements .............. 22

e. Mr. Brennan’s Alleged Misstatements ................. 23

f. Mr. McCarthy’s Alleged Misstatements ................ 24

g. Dr. Meredith’s Alleged Misstatements ................ 24

7. Allegations of Executive Defendant Scienter ........... 25

a. Executive Defendant Knowledge throughout the Class

Period................................................... 25

b. Boston Scientific’s Need to Raise Funds to Keep Up with

Its Debts................................................ 27

c. Executive Defendant Conduct throughout the Class Period

28

C. Development of Challenged Amended Complaint by Plaintiff 31

II. STANDARD OF REVIEW........................................ 31

III. COUNT I - VIOLATION OF SECTION 10(b) AND RULE 10b-5...... 33

A. Applicable Legal Standard .............................. 33

B. Material Misstatements and Omissions ................... 34

1. Statements Regarding Lotus Edge Accounts and Orders ... 36

a. Statements Tallying the Lotus Edge Accounts and

Expressions of Satisfaction with the Launch.............. 42

b. Growing Use of Lotus Edge and Reorder Rates ......... 43

2. Simplicity and Ease of Use of Lotus Edge .............. 45

a. Ease of Use Statements .............................. 46

b. Failure to Disclose the Complexity of Device and

Delivery Malfunctions.................................... 47

3 E. dge M Li as us nt ca ht e .m .e .n .t .s . .a .n .d . .O .m .i .s .s .i .o .n .s . .a .s . .t .o . .t .h .e . .S .a .f .e .t .y . .o .f . .t .h .e . .L .o .t u 5s 1

4. Misleading Reports of the Success of the Lotus Platform

and its Role in the TAVR Portfolio ........................ 53

a. Disclosure of the Lotus Recall and Termination ..... 53

b. The Future of Lotus as a Growth Driver and

Strategic Investment..................................... 55

5. Conclusion ............................................ 59

C. Scienter ............................................... 59

1. Plaintiff’s General Scienter Allegations .............. 62

a. Confidential Source Accounts ........................ 62

b. Insider Trading Activity ............................ 65

c. The Resignations of Mr. McCarthy and Mr. Ballinger .. 67

d. Boston Scientific’s Need to Raise Capital and

Renegotiate Its Debts.................................... 68

e. Conclusion .......................................... 69

2. Scienter of Ms. Lisa and Mr. Fitzgerald ............... 69

3. Scienter of Mr. Mahoney ............................... 71

D. Reliance .............................................. 74

E. Economic Loss and Loss Causation ...................... 76

1. The Alleged Corrective Disclosures .................... 77

2. Additional Loss Causation Considerations .............. 79

3. Conclusion ............................................ 80

F. Whether Boston Scientific May Be Held Liable ........... 80

G. Summary ................................................ 82

IV. COUNT II - VIOLATION OF SECTION 20(a)..................... 82

V. CONCLUSION................................................. 84

APPENDIX A.................................................... 86

Mr. Mahoney................................................... 86

Mr. Ballinger................................................. 90

Ms. Lisa...................................................... 90

Mr. Fitzgerald................................................ 92

Mr. Brennan................................................... 92

Mr. McCarthy.................................................. 94

Dr. Meredith.................................................. 94

Before me is a motion [Dkt. No. 53] to dismiss a putative

securities fraud class action against Boston Scientific

Corporation (“Boston Scientific”). The motion to dismiss

submissions were developed in accordance with the demanding

protocols of the Private Securities Litigation Reform Act. The

operative Amended Consolidated Complaint [Dkt. No. 44] (“the

Complaint”) presents a narrative alleging attempts to deceive

investors regarding the success of the company’s new medical

device in an effort to prop up Boston Scientific stock prices,

raise capital and support improper insider trading.

Boston Scientific and seven high-ranking executives are

alleged to have perpetrated securities fraud on Boston

Scientific investors by making a host of false and misleading

statements about the commercial viability of Boston Scientific’s

Transcatheter Aortic Valve Replacement (“TAVR”) device: the

Lotus Edge. The overarching contention is that Boston

Scientific executives hid technical failures and sluggish sales

of the Lotus Edge from the public during the period February 6,

2019 to November 16, 2020. The Complaint alleges that by

providing false reassurances that the device was safe, simple,

and marketable, Defendants caused artificial inflation of Boston

Scientific common stock, in violation of Section 10(b), 15

U.S.C. § 78j(b) and Rule 10b–5, 17 C.F.R. § 240.10b–5 (Count I)

and in violation of Section 20(a) of the Securities Exchange Act

of 1934, 15 U.S.C. § 78t(a) (Count II).

Defendants have moved to dismiss the Complaint for failure

to meet the heightened pleading requirements for securities

fraud claims under FED. R. CIV. P. 9(b) and the Private Securities

Litigation Reform Act. I consider primarily two questions, both

of which must be answered in the affirmative if Plaintiff’s case

is to proceed: 1) whether any of the statements detailed in the

Complaint are both misleading and actionable and, if so, 2)

whether particularized facts alleged in the Complaint give rise

to a strong inference of Defendants’ scienter.

I will grant Defendants’ Motion to Dismiss the Complaint as

to Count I, except as to Defendant Mahoney — the Boston

Scientific Chairman, President and Chief Executive Officer — and

Boston Scientific, the corporation to which his scienter may be

imputed — because Plaintiff successfully pleads scienter and

material misrepresentations as to him. Meanwhile, I will deny

Defendants’ Motion to Dismiss Count II of the Complaint as to

the Section 20(a) claims alleged against the Executive

Defendants.

I. BACKGROUND

A. The Parties

Defendant Boston Scientific is a publicly traded

manufacturer of medical devices. Headquartered in

Massachusetts, Boston Scientific develops, manufactures, and

markets a range of medical device platforms, including

interventional cardiovascular technologies.

The Complaint names seven individual Boston Scientific

executives as Defendants (collectively, the “Executive

Defendants”):

•

Michael Mahoney, the Chairman, President, and Chief

Executive Officer;

•

Daniel Brennan, the Executive Vice President and Chief

Financial Officer;

•

Joseph Fitzgerald, the Executive Vice President and

President of Rhythm Management (through July 6, 2020),

and thereafter Executive Vice President and President of

Interventional Cardiology;

•

Shawn McCarthy, the Vice President and General Manager of

Structural Heart Valves (through 2020);

•

Kevin Ballinger, the Executive Vice President and

President of Interventional Cardiology (through July 3,

2020);

•

Ian Meredith, the Executive Vice President and Global

Chief Medical Officer; and

•

Susan Vissers Lisa, the Vice President of Investor

Relations.

Union Asset Management Holding AG is the Lead Plaintiff.

Lead Plaintiff brings suit on behalf of a class of investors who

purchased or acquired Boston Scientific common stock between

February 6, 2019 and November 16, 2020 (the Class Period). Lead

Plaintiff is the parent holding company of the Union Investment

Group, an asset management firm based in Frankfurt-am-Main,

Germany. Union Asset Management funds purchased common stock in

Boston Scientific during the Class Period. I refer to Lead

Plaintiff and the putative class it would represent as Plaintiff

throughout the remainder of this Memorandum except when reciting

the circumstances in which Union Asset Management became Lead

Plaintiff.

B. Factual Background

This action arises from Boston Scientific’s 2020 recall of

its Lotus Edge device and its decision to retire the entire

Lotus Valve Platform.

The Lotus Edge device is a transcatheter heart valve used

to treat patients suffering from aortic stenosis.1 Physicians

historically treated aortic stenosis with surgical aortic valve

replacement. A surgeon would perform open heart surgery to

replace a faulty aortic valve with a new mechanical or biologic

valve. Complaint, Dkt. No. 44 at ¶ 49. Surgical aortic valve

replacement was attended by high risks and prolonged recovery

times.

In 2002, however, surgeons began to see clinical success

with a new method: transcatheter aortic valve replacement, or

TAVR. TAVR surgery involved only a small incision to insert a

catheter, as opposed to an open heart surgery. Using the

catheter, a surgeon could then implant a new aortic valve

prosthesis to replace the diseased aortic valve. TAVR patients

recovered far faster and more easily than open-heart patients.

1 Aortic stenosis is a chronic and progressive form of heart

disease caused by narrowing of the aortic valve. Complaint,

Dkt. No. 44 at ¶ 45. Narrowing in this pathway reduces blood

flow from the heart’s left ventricle to the aorta.

Consequently, the aorta does not receive the blood necessary to

pump through the body, while the left ventricle sees a dangerous

The new TAVR procedure took the medical community by storm.

The global market for TAVR devices was projected to double in

between 2018 and 2023. Id. at ¶ 51. With the increasing

popularity of TAVR treatment came “immense competition among

several of the top medical device manufacturers to develop TAVR

valves.” Id. at ¶ 52. Boston Scientific’s competitors, Edwards

[Lifesciences Corporation] and Medtronic [PLC], quickly

developed their own TAVR devices and enjoyed “near total market

domination.” Id. Their devices utilized self-expanding or

balloon expanding valves.2

In 2010, Boston Scientific sought to claim a share of the

lucrative TAVR market by developing its own unique valve

replacement device, the Lotus Valve Platform.3 Id. at ¶ 53.

Unlike other TAVR devices on the market, the Lotus valve was the

first “fully repositionable device.” Id. at ¶ 53. With the

Lotus device, surgeons could position the valve, deploy it, and

then recapture and reposition it after deployment, allowing

optimal final placement of the valve. Id. at ¶ 55. The Lotus

valve also included a seal that would fill in gaps between the

implanted valve and the cardiac tissue, thereby preventing

2 Using these devices, a surgeon would insert the new valve with

the catheter, position it across the damaged aortic valve, and

deploy the valve where it would expand and seal into place,

pushing the remains of the diseased valve aside. Id. at ¶ 54.

3 For purposes of the Complaint, the Lotus Valve Platform is

presented as encompassing the first iteration of the Lotus

device (Lotus), and the Lotus Edge device, the iteration of

leakage. Boston Scientific marketed the Lotus device as

offering surgeons “superior ease of use” and “total control”

over the replacement valve’s positioning. Id. at ¶¶ 58-60.

Beginning with its announcement of the product in 2016,

Boston Scientific maintained an optimistic view of the device’s

potential in the structural heart therapies market. On November

17, 2020, however, Boston Scientific initiated a voluntary

recall of all Lotus Edge devices and announced its decision to

terminate the entire Lotus Valve Platform.

1. The Early Lotus Valve Recalls and Delays

Boston Scientific’s Lotus device first received regulatory

approval in Europe in 2013 and began clinical trials in the

United States shortly thereafter. Id. at ¶¶ 62-63 n.1. In its

early years on the European market, the Lotus device was the

subject of several recalls.5 Id. at ¶ 63. In February of 2017,

Boston Scientific recalled all Lotus devices based on reports

4 The Lotus device was designed to prevent a specific adverse

event associated with existing TAVR devices: paravalvular

leakage. Paravalvular leakage occurred most frequently when a

TAVR valve was not positioned properly to seal against cardiac

tissue or because the TAVR valve is undersized. Id. at ¶ 56.

5 Boston Scientific instituted a recall in November of 2014 due

to malfunctions in the mechanical locking mechanism. Id. at ¶

63. Boston Scientific then recalled 250 units of the device in

August of 2016, including Lotus devices being used in United

States clinical trials, this time due to breaks in the mechanism

that released the valve from its delivery system. Id. at ¶ 64.

In October of 2016, Boston Scientific recalled the second

generation of the Lotus valve, Lotus Edge, when reports surfaced

that the device could not be fully locked during the procedure.

that a pin connecting the valve to the delivery system was

faulty. Id. at ¶ 65.

Defendants reassured investors that each of these recalls

resulted from an issue in the device’s delivery and locking

mechanism, “not a design flaw” of the valve itself. Id. at ¶¶

67, 74. These issues, Boston Scientific maintains, could be

dealt with through manufacturing adjustments and specification

changes. Id. at ¶ 67. Nevertheless, in March of 2017 Boston

Scientific took on a new TAVR valve platform, the Acurate TA, as

a result of its acquisition of Swiss Manufacturer Symetis, which

used the traditional self-expansion design of competitor TAVR

devices, not the repositionable design of the Lotus. Id. at ¶

71. Boston Scientific’s Chairman, President and Chief Executive

Officer, Executive Defendant Michael Mahoney, however, reassured

investors that this new acquisition was not intended to replace

the Lotus device. Id. at ¶¶ 72-73.

Throughout 2017, Boston Scientific faced a series of delays

to the Lotus platform’s return to the European market and to its

approval by the United States Food and Drug Administration.

Boston Scientific executives maintained, however, that the

problem had been identified and resolved. Id. at ¶¶ 70, 74, 78.

In the final months of 2018, Boston Scientific announced its

plans for an early 2019 European relaunch of the Lotus Edge.

Executives expected FDA approval for the Lotus device by the

middle of 2019. Id. at ¶ 80.

2. Launch in the United States

On the first day of the Class Period, February 6, 2019,

Mr. Mahoney announced plans for a “controlled launch” of the

Lotus Edge in the United States to begin in the second quarter

of 2019. Id. at ¶ 84. The FDA approved the Lotus Edge device

for certain high-risk surgical patients on April 23, 2019 and

Boston Scientific began its controlled launch. The full launch

of the Lotus Edge, however, was not scheduled to begin until the

fall of 2019. Id. at ¶ 96.

Mr. Mahoney told investors he expected that Lotus Edge

would be a “workhorse valve” as well as a specialized tool for

complex cases. Id. at ¶ 87. The United States launch strategy

was to open “roughly 150 accounts within the first 12 months of

launch” with at least 50 accounts to be opened by centers not

involved in the Lotus Edge clinical trials. Id. at ¶¶ 92, 94.

3. The Launch as Reported by Boston Scientific

Boston Scientific executives are alleged to have told

investors repeatedly that the Lotus launch was moving forward as

planned throughout 2019 and into early 2020. Id. at ¶¶ 95-97,

260, 279-281, 287, 292, 296. One of the early priorities of the

United States launch was ensuring a controlled, safe rollout of

this unique TAVR device. Various Executive Defendants also

represented that they were satisfied with the Lotus Edge’s early

success and Mr. Mahoney stated that he believed it was “doing

very well in the market.” Id. at ¶¶ 260, 280, 282, 302-303.

Analysts asked Boston Scientific executives repeatedly

about their goal of opening roughly 150 accounts in the United

States in the first year of the launch. Each time, they were

told that the Lotus team was on pace to meet its goal.

At a virtual event on August 19, 2020, an analyst asked for

a progress report as to the number of accounts opened in the

United States. The question was referred to Boston Scientific’s

vice president of Investor Relations, Executive Defendant Susan

Vissers Lisa, and her Director of Investor Relations, Lauren

Tengler. Ms. Tengler, who is not named as an Executive

Defendant, responded “we’re on track pre-COVID and we hit 138

accounts.” Id. at ¶¶ 99, 305.

On September 16, 2020 Mr. Mahoney told analysts that he

expected that “Lotus will continue to be an important product

for us. It’s a significant market as you know, and even small

share gains are significant for us. And so, Lotus will continue

to be an important growth driver for us supported with our whole

platform . . . .” Id. at ¶ 308. On October 15, 2020, Boston

Scientific’s executive vice president and president of

Interventional Cardiology, Executive Defendant Joseph

Fitzgerald, notified investors that Boston Scientific had

reached its goal of opening over 150 Lotus accounts in the

United States. Id. at ¶¶ 100, 313-314. The launch, he

represented, was “gaining momentum” and the Lotus platform was

“growing actual procedures per center, per month” in the United

States. Id. at ¶ 316.

On October 28, 2020 an analyst asked Mr. Mahoney whether it

made sense for Boston Scientific to be developing two different

TAVR platforms, the Lotus Edge and the more traditional self-

expanding Acurate valve. Mr. Mahoney maintained that developing

the Lotus Edge alongside the Acurate valve platform made

strategic sense, because the company was “seeing strong results

in the sites that are using Lotus in the U.S.” despite the

challenges they encountered opening new accounts. Id. at ¶ 319.

4. Boston Scientific Terminates the Lotus Valve Platform

On November 17, 2020, Boston Scientific issued a press

release announcing a “global, voluntary recall of all unused

inventory of the Lotus Edge Aortic Valve System due to

complexities associated with the product delivery system.” Id.

at ¶ 181. With “the additional time and investment required to

develop and reintroduce an enhanced delivery system,” the

company decided to “retire the entire [Lotus] product platform

immediately.” Id. Consequently, Boston Scientific would face

“pre-tax GAAP charges of approximately $225 million to $300

million” of which 100 to 150 million would impact the company’s

adjusted results. Id.

During a conference call on the Lotus recall, Boston

Scientific’s Executive Vice President and Chief Financial

Officer, Executive Defendant Daniel Brennan, stated that Lotus

was “overall a drag on the bottom line for the company.” at

¶ 183. Lotus sales, he said, accounted for only $60 million in

revenue in 2019 and would only reach about $75 million in 2020.

Id. Mr. Fitzgerald further explained Boston Scientific’s

reasons for retiring the Lotus platform at this stage:

So we just rounded the corner right at around TCT

[October 15, 2020] of a 1- year anniversary of

launching in the U.S. . . . And we’re – we have done a

really good job of training and retraining around the

complexities of the delivery system. But we came to the

conclusion that to scale this, to go from sub-100

accounts today in the United States to hundreds of

accounts, right, we really were going to struggle in

replicating that deep technical, clinical support as we

scale cases and go to 2, 3, 4, 5x without a design

enhancement. So I think it was the proper thing for us

to do to really be our own worst critics after the first

full year of having [Lotus] Edge on the market and

commercialized in the U.S. And it became very apparent

that without a design enhancement, that our program

wasn’t scalable and that [Lotus] would ultimately remain

as a niche device in a pretty expensive space to operate.

Dkt. No. 60-1 at 13.

By the end of the first year of the full United States

launch, it had become clear, he said on November 18, 2020, that

the Lotus Edge operated in a niche of the TAVR market, while

Boston Scientific’s Acurate platform would be a “super workhorse

valve.” Dkt. No. 64-1 at 6-7. According to Mr. Fitzgerald, it

took a full year of “the U.S. experience” to decide to terminate

Lotus. Id. at 6.

Following Boston Scientific’s announcement on November 17,

Boston Scientific common stock decreased in value by about $3.00

per share or approximately 8%, beginning the day at a price of

$38.03 and ending at $35.03. Dkt. No. 44 at ¶ 324.

5. Failures of the Lotus Launch Revealed after the Class

Period

Plaintiff alleges that it became clear to the Executive

Defendants that Lotus Edge was not commercially viable at least

six months before Boston Scientific announced its decision to

terminate the program. Plaintiff presents accounts from nine

confidential sources, each a former Boston Scientific employee

(“FE”), in support of this claim.

During the Lotus launch in the United States, FE 16 surveyed

physicians on how many TAVR patients they expected to treat

using the Lotus device. Physicians reported that the Lotus

device was not appropriate for most patients, that the Lotus

device would be used in about 5-6% of TAVR patients and that it

would achieve at most, 5-10% market share. Id. at ¶ 104. FE 27

reported that that the Lotus Edge device saw higher risk than

did its competitors, which hampered its sales. Id. at ¶ 106.

FE 38, a Therapy Consultant, described many challenges

associated with Lotus Edge’s delivery system. The complex

6 FE 1 was a Principal Therapy Consultant in Boston Scientific’s

Structural Heart Division in New York and New Jersey from 2000-

2021. Id. at ¶ 104.

7 FE 2 was a Principal Clinical Field Manager in Boston

Scientific’s Structural Heart division from 2017 to 2021. Id.

at ¶ 106.

8 FE 3 was a Therapy Consultant in the Structural Heart Division

delivery system required extensive training to operate and

involved many moving parts and steps to implant. Id. at ¶¶ 108-

111. To FE 49, Lotus “was the most complicated device on the

planet.” Id. at ¶ 113. Lotus Edge’s multi-step implantation

process was far more difficult, according to human factor

engineer FE 610 for example, than the two step process to implant

competitors’ valves. Id. at ¶ 124.

FE 3 also described specific malfunctions associated with

the Lotus delivery system, including the “Twisted Post”

phenomenon, wherein the rods in the delivery system prevented

the valve from locking into position.11 If the valve did not

lock into place, surgeons could be forced to convert the patient

to open heart surgery. Id. at ¶¶ 109, 128. According to FE 4,

malfunctions like the Twisted Post were common, happening in

“50% of all cases.” Id. at ¶ 112. FE 4 also claimed the Lotus

salesforce, clinical staff, and certified representatives lacked

the experience with TAVR procedures generally and the Lotus Edge

specifically to implement the Lotus launch responsibly. Id. at

9 FE 4 was an Interventional Cardiology Territory Manager at

Boston Scientific from 2016 to 2021. Id. at ¶ 112.

10 FE 6 was a Principal Human Factors Engineer at Boston

Scientific from 2019 to 2020. Id. at ¶ 122.

11 FE 5, a salesperson and care coordinator for Boston

Scientific’s southern Germany region from 2017 to 2020, noted

that the issues in the Lotus delivery system in 2019-2020 launch

were similar to those that plagued the device in 2016 and 2017.

¶¶ 112-113. As a result, FE 4 characterized the launch as

“clinically unsafe.” Id. at ¶ 113.

FE 6 reported that by the end of 2019, knowledge of Lotus

Edge’s complexity and delivery-system failures “went all the way

up” to the executive level.12 Id. at ¶ 123. Boston Scientific

reportedly shifted its objective from refining the Lotus

platform to replacing it with another TAVR system as soon as

possible. Id.

Senior Financial Analyst FE 713 revealed that the Lotus

launch also had not produced the kind of revenue that Boston

Scientific anticipated. In 2019, the Lotus Edge group failed to

meet their forecasted revenues by half. Id. at ¶ 133. By 2020,

it was clear to FE 7 that the Lotus Edge group was “consistently

underperforming.” Id. at ¶ 132. As of mid-2020, only twelve

United States centers were implementing two or more Lotus

devices per month. Id. at ¶ 131. Even with recalculated

forecasts reduced by 25% every quarter, FE 7 reported that the

Lotus Edge group’s revenue was still 25% below where it should

have been. Id. at ¶ 133. FE 1, too, noted the Lotus Edge’s

dwindling sales in 2020; of 120 sales representatives in the

Structural Heart group in the United States, he estimated that

12 As a basis for this view, FE 6 explained that the Lotus Edge

chief engineer Dan Foster told FE 6 during their job interview

that the Lotus Edge required “three hands to operate” and was

difficult for the surgeons to deploy. Id. at ¶ 124.

13 FE 7 was a Boston Scientific Senior Financial Analyst from

only about 15-20 hit their quotas, while the others missed often

by 50% or more. Id. at ¶ 134.

Beyond these sales challenges, Financial Analyst FE 8

reported that the Lotus Edge was abnormally difficult to

manufacture. The standard manufacturing yield rate for medical

devices (i.e., the proportion of devices produced that were

acceptable for commercial use) is about 85%. Id. at ¶ 141.

One Lotus Edge plant in the United States saw manufacturing

yield rates between 5-10% from 2016 to 2018, which only rose to

about 20% in 2019. Id. Low yield rates presented challenges at

other factories as well, according to FE 9, a Manufacturing

Engineer at the Boston Scientific plant in Penang, Malaysia.

Id. at ¶ 142. The poor yield so increased the cost of Lotus

Edge production that the device sales had a gross margin of less

than 30%, compared to the industry norms of around 90%. Id. at

¶ 144. Further, at the Penang plant, FE 9 reported that “zero

orders” for the Lotus Edge came in between the end of 2019 and

March of 2020. Id. at ¶ 273. Boston Scientific ultimately shut

down the plant and terminated its employees in March of 2020.

See id.; see also id. at ¶ 310.

The Complaint paints the Lotus platform as a slowly but

plainly sinking ship whose demise was obscured by Executive

Defendant disclosure misconduct. Plaintiff contends that the

Executive Defendants hid the Lotus Edge’s failures and delayed

disclosing their decision to terminate the Lotus platform to

inflate Boston Scientific’s stock value artificially.

6. Allegations of Executive Defendant False Statements

Plaintiff’s lengthy Complaint appears to raise sixty-three

of what it calls actionable false statements by the Executive

Defendants during the Class Period. I have gathered these

alleged misstatements by individual Executive Defendants said to

be the declarants in a Chart attached as an Appendix to this

Memorandum and Order.14

a. Mr. Mahoney’s Alleged Misstatements

About half of the alleged misstatements are attributed to

Executive Defendant Michael Mahoney, Boston Scientific’s

Chairman, President, and Chief Executive Officer. Mr. Mahoney

is alleged to have misled investors throughout 2019 and 2020 by

affirming the United States Lotus launch was “going extremely

well” and was “on track” to reach the company’s goal of opening

roughly 150 accounts in the first year.15 Mr. Mahoney touted the

14 Defendants identified seventy-five alleged misstatements in

Exhibit B [Dkt. No. 54-2] filed in support of their motion [Dkt.

No. 53] to dismiss. Some of those misstatements are attributed

to individuals not named as Defendants, appear to be the result

of fractionated versions of the statements reported, or refer to

company documents. The Appendix to this Memorandum and Order

sets forth only alleged misstatements made by the named

Executive Defendants.

15 Mr. Mahoney stated that the launch was going well, there was a

market demand for the product, and he remained confident in the

Lotus platform on February 6, 2019, Dkt. No. 44 at ¶ 237, ,

April 24, 2019, id. at ¶ 241, May 29, 2019, id. at ¶ 243, July

24, 2019, id. at ¶¶ 245-246, January 14, 2020, id. at ¶ 277,

“very high” rates at which centers were using and reordering the

device on four occasions.16 Plaintiff also asserts that Mr.

Mahoney’s proclamations of the Lotus Edge’s ease of use and his

descriptions of the initial Lotus launch as “controlled” were

materially misleading.17 In the months before the Lotus recall,

Mr. Mahoney allegedly misled investors as to the future

prospects of the Lotus Edge as well. In July of 2020, he

confirmed that the “gates [were] open[ing] up” for new Lotus

accounts. Id. at ¶ 303. On September 16, 2020, Mr. Mahoney

claimed that the Lotus platform was and “will continue to be an

important growth driver” for Boston Scientific. Id. at ¶ 308.

On October 28, 2020, about three weeks before announcing the end

and July 29, 2020, id. ¶ 301. He represented that the launch

was “on track” or “on pace” to achieve 150 accounts on July 24,

2019, id. at ¶ 246, October 23, 2019, id. at ¶¶ 260-261,

February 5, 2020, id. at ¶ 279, and March 11, 2020, id. at

¶ 296.

16 Mr. Mahoney told investors on September 5, 2019 that the Lotus

team was seeing “very high” and “strong” reorder rates. Id. at

¶ 251. On July 29, 2020, he affirmed that the Lotus Edge

“continues to see strong utilization within existing accounts,”

id. at ¶ 301, and then stated that “current centers are using

the device quite consistently,” id. at ¶ 302. He told investors

again on September 16, 2020 that the “reorder rate for existing

users is quite high.” Id. at ¶ 308. On October 28, 2020, Mr.

Mahoney stated that although opening new sites had proven

challenging, “the sites that are using Lotus in the U.S. are

using it quite regularly.” Id. at ¶ 319.

17 Mr. Mahoney described “[p]ositive physician feedback

highlight[ing] the benefit of [the] complete control” afforded

by the repositionable Lotus device on July 24, 2019. Id. ¶ 245,

246. He also, at various times, described the company’s

approach to the Lotus launch as a “deliberate” and “controlled”

one and “focused on quality, strong patient outcomes, and

of the Lotus platform, Mr. Mahoney told investors “we’re seeing

strong results in the sites that are using Lotus in the U.S. . .

. So we do believe that the two-valve strategy makes sense.”

Id. at ¶ 319.

b. Mr. Ballinger’s Alleged Misstatements

Plaintiff relies upon four misstatements by Boston

Scientific’s executive vice president and president of

Interventional Cardiology until his resignation on July 3, 2020,

Executive Defendant Kevin Ballinger, as to the success of the

Lotus launch and the Lotus Edge’s ease of use. Boston

Scientific engineers, Mr. Ballinger claimed, made “something

that is very complex feel really simple” with the Lotus Edge.

Id. at ¶ 226. Mr. Ballinger told investors in September of 2019

that the Lotus Edge was “not a complicated device” but one that

“actually takes stress out of the [TAVR] procedure.” Id. at ¶

258. Like Mr. Mahoney, Ballinger described the Lotus rollout as

“self-constrained” due to the “exceptional proctoring [and]

training” the company hoped to provide for users. Id. at ¶ 256.

Finally, Mr. Ballinger also stated, in September 2019, that

Boston Scientific was “on track” for its goal of 150 accounts.

Id. at ¶ 255.

c. Ms. Lisa’s Alleged Misstatements

Boston Scientific’s vice president of Investors Relations,

Executive Defendant Susan Vissers Lisa, is said to have misled

investors by repeatedly expressing satisfaction with the

progress of the Lotus launch. She also gave allegedly false

descriptions of a “controlled” initial Lotus launch, id. at ¶

253, and the Lotus team’s focus on training and proctoring, id.

at ¶¶ 267, 269. Plaintiff disputes Ms. Lisa’s characterization

of the Lotus Edge as a “big driver” for Boston Scientific and a

product that was “gaining [market] share. . . from both the

competitors in the U.S. market.” Id. at ¶¶ 275, 286. Ms. Lisa,

like Mr. Mahoney, stated throughout the Class Period that the

Lotus launch was “on target” or “on track” to achieve 150

accounts. During a conference call with analysts on August 19,

2020, Ms. Lisa allowed her Director of Investor Relations,

Lauren Tengler, to report without contradiction that “we hit 138

accounts” when, Plaintiff alleges, the company had only opened

around 100 accounts. Id. at ¶ 99, 305.

d. Mr. Fitzgerald’s Alleged Misstatements

Boston Scientific’s executive vice president and president

of Interventional Cardiology beginning in July 2020, Executive

Defendant Joseph Fitzgerald, is alleged to have misled investors

with his public statements in the weeks leading up to the Lotus

recall. On September 28, 2020, Mr. Fitzgerald told investors

that the Acurate neo2 TAVR device represented “the natural

evolution of our complementary dual-valve TAVI toolkit,” along

with the Lotus Edge. Id. at ¶ 311. Plaintiff contends Boston

Scientific planned to replace the defective Lotus Edge with the

Acurate platform.

On October 15, 2020, Mr. Fitzgerald announced “we have

opened more than 150 accounts in the U.S.” Id. at ¶ 314. Mr.

Fitzgerald reiterated that “I like what I see in terms of us

being now in 150 accounts . . . I think our launches, I know our

launch is gaining momentum.” Id. at ¶ 316. He then described

the launch as “a ground game where we are expanding our

footprint in the US, each month we’re growing actual procedures

per center, per month.” Id. at ¶ 316.

e. Mr. Brennan’s Alleged Misstatements

Boston Scientific’s executive vice president and chief

financial officer, Executive Defendant Daniel Brennan, is

alleged to have mischaracterized the Lotus launch as “very

controlled” and paced according to the proctoring and training

needs for a safe introduction of the Lotus Edge to the market.18

Mr. Brennan predicted throughout the Class Period that the Lotus

launch would grow and gain momentum. He also periodically

affirmed that the launch was “on track for 150 centers.”19 Id.

at ¶ 292.

18 Mr. Brennan referred to the launch as “controlled” in November

2019 and February and March of 2020. Id. at ¶¶ 271, 281, 292.

He explained that the launch has been “more kind of slow and

steady” with a “heavy emphasis on proctoring and making sure

folks are 100% able and ready to use the valve.” Id. at ¶ 292.

19 On November 19, 2019, Mr. Brennan predicted “Lotus, as we

continue to go at a controlled rollout pace and enter new

accounts, will continue to grow.” Id. at ¶ 271. On February 5,

2020, he predicted the launch “should gain momentum over time.”

Id. at ¶ 281. On March 3, 2020, Mr. Brennan maintained that the

company’s successes “should be built on the momentum that we

Boston Scientific’s vice president and general manager of

Structural Heart Valves from July 2017 through January 2020,

Executive Defendant Shawn McCarthy, is said to have made two

alleged misstatements. Both statements related to the function

of the Lotus Edge. On June 26, 2019, Mr. McCarthy stated “we

believe we’re offering unmatched control and predictability”

with the Lotus Edge. He also affirmed that “early

indications... are very positive” and that “we’ll want to make

sure we’re doing the exact work we will as a world-class

organization to train physicians to use and reuse the

technology” as the Lotus team pursued its goal of launching

roughly 150 accounts in the first year. Id. at ¶ 244.

g. Dr. Meredith’s Alleged Misstatements

Boston Scientific’s executive vice president and global

chief medical officer during the Class Period, Executive

Defendant Ian Meredith, is said to have misled investors as to

the success and pacing of the launch. On October 23, 2019, he

claimed “the limited market release is going very well. It's on

track and the plans haven't changed thus far.... But the rollout

of Lotus Edge of course is a planned controlled release. And in

the short term, it will be determined by training.” Id. at ¶

263.

7. Allegations of Executive Defendant Scienter

a. Executive Defendant Knowledge throughout the

Class Period

Plaintiff alleges that Boston Scientific’s leadership was

“absolutely aware” of Lotus Edge’s failing performance, even as

they touted its success. Id. at ¶ 204. Plaintiff identifies

the following as evidence that the Executive Defendants knew the

Lotus launch was doomed throughout the Class Period.

•

In November of 2019, Executive Defendants Meredith,

Ballinger, and McCarthy convened an emergency meeting of

the entire Lotus Edge salesforce over Thanksgiving

weekend to discuss the poor patient outcomes and

malfunctions associated with the Lotus valve. FE 1 and

FE 2, who attended the meeting, reported that the group

also discussed Lotus’s lagging sales and failure to meet

revenue targets. Id. at ¶¶ 137, 208.

•

According to FE 8, the device’s low manufacturing yield

rate was a “hot topic,” discussed at monthly engineering

status updates with Boston Scientific’s senior

leadership, though FE 8 does not specify which Executive

Defendants allegedly attended these monthly updates. Id.

at ¶ 143.

• The Executive Defendants are alleged to have known that

the Lotus Edge was associated with disproportionately

high rates20 of adverse medical events because Boston

Scientific was legally required to track these adverse

events and report them to the FDA. Id. at ¶¶ 117-118.

Executive Defendants Ballinger, Meredith and McCarthy

reportedly discussed these adverse events regularly in

companywide training sessions. Id. at ¶ 117.

•

FE 7 reported that Boston Scientific’s leaders often

discussed “how to turn [Lotus] around” in 2019 and then

in 2020. Defendant Mahoney, in particular, “constantly”

asked the divisional controller about the progress of

Lotus sales. Id. at ¶ 136. According to FE 1, Boston

Scientific began to authorize bulk-order discounting for

Lotus sales after low order rates for the Lotus Edge

caused many units to “never be[] used and just expir[e]

on the shelf.” Id. at ¶ 147. FE 9 alleged that Boston

Scientific then shut down the Penang plant in March of

2020 after it received “zero orders” from the end of 2019

to 2020. Id. at ¶ 146.

20 Between May 2019 and November 2020, Lotus Edge accounted for

12% of all TAVR adverse events reported, though it was used in

• The Lotus group’s underperformance was reflected in the

monthly and quarterly revenues routinely uploaded to

Boston Scientific’s company-wide dashboard. Id. at

¶¶ 134, 204. As alleged, all Executive Defendants had

access to this dashboard. Id. at ¶ 134.

b. Boston Scientific’s Need to Raise Funds to Keep

Up with Its Debts

Plaintiff alleges Boston Scientific’s need to raise capital

and renegotiate its debts in 2020 was Defendants’ motive to

delay announcement of the Lotus recall until November 17, 2020.

Id. at ¶¶ 155-156, 214. Following the first quarter of 2020,

Boston Scientific allegedly was in danger of breaching its loan

covenants unless it could renegotiate its debts and raise

capital.21 Id. at ¶ 152. On May 21, 2020, the Company held its

largest ever secondary public equity offering, raising over two

billion dollars, at a common stock price of $34.25 per share.

Id. at ¶ 156 & n.3. Around this same time, Boston Scientific

21 According to the Complaint, Boston Scientific’s covenants at

the end of 2019 required the company to maintain a debt leverage

ratio of total debt to consolidated EBITDA of 3.75, except if

the company undertook a “Qualified Acquisition.” Id. at ¶ 151.

In the case of a Qualified Acquisition, Boston Scientific’s

leverage ratio maximum was 4.75, subject to quarterly “step-

down[s].” Id. Boston Scientific made a “Qualified Acquisition”

in 2019 and ended the year with a debt leverage ratio of 4.75.

The Complaint alleges that, in 2020, even if the company used

its available cash to reduce its debts, by the fourth quarter

its leverage ratio would amount to 4.05, exceeding the 3.75

was able to renegotiate over four billion dollars of its debt.

Id. at ¶ 155.

According to Plaintiff, the failure of one of Boston

Scientific’s most significant investments could have caused

share prices to plummet and made investors doubt the security of

Boston Scientific’s structural heart portfolio. Id. at ¶¶ 155-

156. Boston Scientific would then have struggled to raise

capital and renegotiate its debts. Id. at ¶ 155. Plaintiff

asserts that Defendants decided in April of 2020 to delay

announcing the retirement of the Lotus platform to prevent

investors from losing faith in the TAVR portfolio until after

Boston Scientific raised capital and renegotiated its debts.

c. Executive Defendant Conduct throughout the Class

Period

At the end of 2019 and in 2020, several Executive

Defendants made decisions for their own professional and

financial futures that, according to Plaintiff, show their

complicity in a plot to deceive investors.

Two leaders of the Lotus team resigned during the United

States launch. Executive Defendant Shawn McCarthy, the General

Manager of the Structural Heart Valves division, left his role

at the end of 2019. Id. at ¶ 149. Executive Defendant Kevin

Ballinger also resigned his post as the executive vice president

and global president of Interventional Cardiology and left the

Company in June of 2020. Id. In addition, a Lotus Edge sales

leader and area vice president for the Structural Heart division

in the United States, Richard Maher, resigned in February of

2020 and the head of Lotus sales in Europe, Sandrine Maset, was

removed from her post and transferred to a different department

in May of 2019. Id.

The Complaint alleges improper insider trading by

Executive Defendants Ballinger, Brennan, Fitzgerald, and

Mahoney. Messrs. Ballinger, Brennan, and Fitzgerald received

significantly greater proceeds overall from their sales during

the Class Period than from their sales from the preceding one-

year-and-nine-month period.22 Id. at ¶ 224. Mr. Ballinger and

Mr. Fitzgerald sold most of their shares based on trading plans

adopted during the Class Period or otherwise outside of any Rule

10b5-1 plan.23

Mr. Mahoney set up a Rule 10b5-1 trading plan on August 25,

2020 for 259,207 shares of his own Boston Scientific stock, then

22 Plaintiff presents Executive Defendant insider sales records

from the twenty-one-month period before the Class Period, April

28, 2017 to February 5, 2019 as a Control Period, to which they

compare the Executive Defendant Class Period sales. Id. at ¶¶

217, 223.

23 According to the Complaint, Mr. Ballinger sold over 200,000 of

his shares in excess of eight million dollars; only 11% of his

shares were sold pursuant to a pre-Class Period trading plan.

Id. at ¶ 223. Two of his major sales were in August and

September of 2020, after he left Boston Scientific. Id. at ¶

224. Mr. Fitzgerald sold over 250,000 of his shares for a total

in excess of ten million dollars; 16% of these shares were sold

pursuant to a pre-Class Period trading plan. Id. at ¶ 223. Mr.

Brennan made over seven million dollars selling over 170,000 of

his shares; 88% of these shares were sold pursuant to a pre-

worth about ten million dollars. at ¶ 161. Mr. Mahoney’s

plan was designed to expire on November 6, 2020. Id. at ¶ 180.

Mr. Mahoney’s 10b5-1 plan covered a shorter period than all of

his publicly available previous plans, which covered three-to-

twelve-month periods. In fact, this plan covered the shortest

period of any Boston Scientific executive since 2017. Id. at ¶

162. Mr. Mahoney’s August 10b5-1 plan also differed from his

previous plans in that it sold all 259,207 shares at once,

instead of in a series of sales over time. Id. at ¶ 220.

According to public records presented by Defendants [Dkt.

No. 55-2 at 11], Mr. Mahoney’s plan had a price trigger of

$35.00 per share with an earliest sale date of October 29, 2020,

the day after his third-quarter earnings call with investors.24

The price of Boston Scientific shares rose to $35.06 on November

3 and Mr. Mahoney sold all 259,207 of his shares for about nine

million dollars.25 Id. at ¶¶ 218, 219. Two weeks later, on

24 I consider Mr. Mahoney’s plan documents as records integral to

the Complaint. Shaw v. Digit. Equip. Corp., 82 F.3d 1194, 1220

(1st Cir. 1996), abrogated in part by 15 U.S.C. § 78u–4(b).

Though Plaintiff in its opposition brief characterizes

Defendants’ inclusion of these plan documents in their Motion to

Dismiss as “improper” [Dkt. No. 61 at 43], Plaintiff does not

appear to dispute the authenticity or accuracy of their

contents.

25 This was the first day after the plan’s earliest sale date of

October 28 when Boston Scientific shares reached the minimum

November 17, Mr. Mahoney announced Boston Scientific’s decision

to terminate the Lotus platform.26 Id. at ¶ 181.

C. Development of Challenged Amended Complaint by Plaintiff

On December 16, 2020, plaintiff Mariano Errichiello filed

the original complaint in the instant action, on behalf of

himself and similarly situated investors. Plaintiff Errichiello

sought class certification pursuant to FED. R. CIV. P. 23(a).

[Dkt. No. 1] On February 2, 2021, Union Asset Management

Holding AG moved to be appointed Lead Plaintiff pursuant to

Section 21D(a)(3)(B) of the Exchange Act, 15 U.S.C. § 78u-

4(a)(3(B). [Dkt. No. 16] I consolidated Errichiello v. Boston

Scientific Corporation, No. 1:20-cv-12225-DPW (D. Mass.) and

Jevons v. Boston Scientific Corporation, No. 1:21-cv-10033-DPW

(D. Mass.) pursuant to FED. R. CIV. P. 42(a), and appointed Union

Asset Management Holding AG as the Lead Plaintiff for the

putative class on March 30, 2021. [Dkt. No. 31]

Lead Plaintiff in due course filed the Amended,

Consolidated Class Complaint now under consideration.

II. STANDARD OF REVIEW

To survive a motion to dismiss, a complaint must contain

plausible factual allegations sufficient to “raise a right to

26 I note that although Boston Scientific share prices did drop

about 8% following the announcement that the Lotus would be

recalled and terminated, the shares had approximately the same

value at the close of trading on November 17, $35.03, as they

had on November 3 when Mr. Mahoney traded his shares, $35.06.

relief above the speculative level.” v.

Twombly, 550 U.S. 544, 555 (2007). The plaintiff must allege

specific facts supporting each element of their cause of action;

conclusory assertions of the defendant’s liability will not

suffice. Id.

I accept as true all well-pleaded factual allegations in

the Complaint and draw all reasonable inferences in Plaintiff’s

favor – though, as explained infra Part III, Plaintiff faces a

higher standard as to inferences of scienter. Tellabs, Inc. v.

Makor Issues & Rts., Ltd., 551 U.S. 308, 321, 324 (2007). “In

deciding a motion to dismiss a securities action, [I] may [also]

properly consider the relevant entirety of a document integral

to or explicitly relied upon in the complaint . . . .” Shaw v.

Digit. Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996) (citing

Watterson v. Page, 987 F.2d 1, 3–4 (1st Cir. 1993)),abrogated in

part by 15 U.S.C. § 78u-4(b)(2). Here, although they were not

appended to the Complaint, I consider the transcripts of

Defendants’ earnings calls, conference talks, question and

answer sessions, and other public statements referenced in the

Complaint.27

27 No dispute as to the accuracy and authenticity of these

transcripts and other public statements has been raised before

III. COUNT I - VIOLATION OF SECTION 10(b) AND RULE 10b-5

A. Applicable Legal Standard

Plaintiff raises in Count I a claim under Section 10(b) of

the Exchange Act, 15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17

C.F.R. § 240.28 To allege a right to relief under Section 10(b),

a plaintiff must adequately plead:

(1) a material misrepresentation or omission; (2)

scienter; (3) a connection with the purchase or sale

of a security; (4) reliance; (5) economic loss; and

(6) loss causation.

Constr. Indus. & Laborers Joint Pension Tr. v. Carbonite, Inc.,

22 F.4th 1, 6 (1st Cir. 2021) (quoting In re Biogen Inc. Sec.

Litig., 857 F.3d 34, 41 (1st Cir. 2017)).

Beyond the general requirements of an adequately pled

complaint, the plaintiff in a securities fraud case must meet

the heightened pleading requirements of FED. R. CIV. P. 9(b) and

the Private Securities Litigation Reform Act (“PSLRA”). 15

U.S.C. § 78u-4(b) (describing pleading requirements in private

28 The U.S. Securities and Exchange Commission (“SEC”)

investigated whether Boston Scientific violated the federal

securities laws with respect to its actions surrounding the

discontinuation of Lotus Edge. Dkt. No. 72. That investigation

concluded on January 3, 2022, with the SEC not recommending an

enforcement action against Boston Scientific. Dkt. No. 72-1.

That the SEC decided not to take an enforcement action is not

material to my disposition on the motion to dismiss now before

me. The SEC’s letter explains that it “must in no way be

construed as indicating that [Boston Scientific] has been

exonerated or that no action may ultimately result from the

staff’s investigation.” Dkt. No. 72-1 (quoting Procedures

Relating to the Commencement of Enforcement Proceedings and

Termination of Staff Investigations, Securities Exchange Act of

actions alleging securities fraud); v. ,

665 F. Supp. 2d 28, 33 (D. Mass. 2009). All allegations of

fraud must be stated “with particularity.” FED. R. CIV. P. 9(b).

The PSLRA requires the plaintiff to “specify each [defendant]

statement alleged to have been misleading” and explain “the

reason or reasons why the statement is misleading.” In re

Biogen Inc. Sec. Litig., 857 F.3d at 41 (quoting 15 U.S.C. §

78u-4(b)(1)).

Under the PSLRA, a plaintiff is obligated to allege

specific facts giving rise to a strong inference of the

defendants’ scienter, defined as either “intentional or willful

conduct designed to deceive or defraud investors by controlling

or artificially affecting the price of securities” or a “high

degree of recklessness.” Id. (internal quotations and citations

omitted).

B. Material Misstatements and Omissions

To avoid dismissal, a plaintiff must identify at least one

material misrepresentation or omission during the Class Period.

See Aldridge v. A.T. Cross Corp., 284 F.3d 72, 78, 82 (1st Cir.

2002).

Not every arguably false or misleading statement by a

corporate executive is actionable under the PSLRA. Shaw, 82

F.3d at 1217; Fire & Police Pension Ass'n of Colo. v. Abiomed,

Inc., 778 F.3d 228, 242 (1st Cir. 2015). A defendant’s forward-

looking, predictive statement will not be found actionable if it

falls within the PSLRA’s Safe Harbor provision, 15 U.S.C. § 78u–

5(c)(1), as a statement that “(1) includes a disclaimer

regarding risks and the possibility that results will differ

from projections; (2) is immaterial; or (3) the executives of

the company had no actual knowledge . . . was false or

misleading.” In re Smith & Wesson Holding Corp. Sec. Litig.,

604 F. Supp. 2d 332, 340 (D. Mass. 2009).

A plaintiff must also show that a defendant’s misstatements

were material, such that there is “a substantial likelihood that

a reasonable investor would have viewed [the statement] as

significantly alter[ing] the total mix of information made

available” on the market. Fire & Police Pension Ass'n of Colo.,

778 F.3d at 240 (internal quotations and citations omitted).

Statements constituting mere puffery, or vague corporate

optimism on the current success of a product or its prospects,

for example, are not material and do not prove a basis for a

securities fraud action. Metzler Asset Mgmt. GmbH v. Kingsley,

305 F. Supp. 3d 181, 209 (D. Mass. 2018), aff'd, 928 F.3d 151

(1st Cir. 2019). Statements “clearly constituting the opinions

of the speaker” are equally immaterial, Shaw, 82 F.3d at 1217,

because a reasonable investor would not consider these

statements important in assessing the market. Id. To sort

actionable misrepresentations from non-actionable puffery or

optimism, I consider “(1) whether [each] statement is so vague,

so general, or so loosely optimistic that a reasonable investor

would find it unimportant to the total mix of information and

(2) whether the statement was also considered unimportant to the

total mix of information by the market as a whole.” In re

Biogen Inc. Sec. Litig., 193 F. Supp. 3d 5, 41 (D. Mass. 2016)

(internal quotations and citation omitted), aff’d, 857 F.3d 34

(1st Cir. 2017).

Here, I can discern four broad categories of what Plaintiff

characterizes as material misrepresentations: (1) false reports

as to the accounts opened and orders received during the Lotus

Edge launch in the United States; (2) mischaracterizations of

the Lotus Edge device as a simple, user-friendly device

competitive with existing TAVR devices; (3) omissions and

misstatements as to the safety of the Lotus Edge device and its

launch; and (4) Executive Defendant failures to disclose their

mid-2020 decision to terminate the Lotus Edge project and

reporting misleading reports regarding the future of the Lotus

Valve Platform.

1. Statements Regarding Lotus Edge Accounts and Orders

Plaintiff contends that a number of Executive Defendant

progress reports on the success of the United States Lotus

launch constitute fraud. I find that the vast majority of these

misstatements are not material representations upon which the

reasonable investor would rely.

Executive Defendant pronouncements that the launch was

going well, that Boston Scientific was “on track” to meet the

goal of roughly 150 accounts, that the launch was “gaining

momentum” and that Boston Scientific was seeing “strong” sales

and order rates, are all statements of immaterial corporate

puffery. Dkt. No. 44 at ¶¶ 260, 265, 267, 274-275, 279-280,

286-287, 291-292, 296, 303, 305, 309, 313, 316, 319. “Analysts

and arbitrageurs rely on facts in determining the value of a

security, not mere expressions of optimism from company

spokesmen.” Suna v. Bailey Corp., 107 F.3d 64, 72 (1st Cir.

1997) (internal quotations omitted) (quoting Raab v. Gen.

Physics Corp., 4 F.3d 286, 290 (4th Cir. 1993)). None of these

rosy assessments, devoid as they are of detail, would have been

confused for factual representations important to the market.

See In re Wayfair, Inc. Sec. Litig., 471 F. Supp. 3d 332, 339

(D. Mass. 2020) (executives’ reports that they were “delighted”

with the progress and that the market-share would grow were not

actionable); In re iRobot Corp. Sec. Litig., 527 F. Supp. 3d

124, 138 (D. Mass. 2021) (statements related to market momentum

or reports of traction are not actionable). To the extent that

these statements were demonstrably false at all, they were vague

proclamations of progress to which a reasonable investor would

assign little weight. See Hensley v. Imprivata, Inc., 260 F.

Supp. 3d 101, 124 (D. Mass. 2017) (citing Shaw, 82 F.3d at 1217–

18).

Opinions offered by Executive Defendants, for example, that

the Lotus team was “really pleased” by the pace of the launch,

that Lotus was “doing very well on the market,” that the device

was being used and ordered “quite consistently,” and that

results were “encouraging,” are equally immaterial. Dkt. No. 44

at ¶¶ 260, 267, 274, 286, 292, 301, 302. These opinions

regarding the current state of the Lotus launch and its future

prospects are not the factual representations that would be

considered in the total mix of information in the market. In re

iRobot Corp. Sec. Litig., 527 F. Supp. 3d at 138 (citing In re

Boston Sci. Corp. Sec. Litig., No. 1:10-cv-10593-DPW, 2011 WL

4381889, at *11 (D. Mass. Sept. 19, 2011), aff’d, 686 F.3d 21

(1st Cir. 2012)).

Finally, Plaintiff contends that several forward-looking

statements, such as the predictions that Lotus “will continue to

grow” in new accounts and sales were “expect[ed] to get back to

our regular cadence” in the second half of 2020, are actionable.

Dkt. No. 44 ¶¶ 271, 301. Those predictions fall under the

PSLRA’s Safe Harbor provision and do not give rise to liability.

Not all of Executive Defendant alleged misstatements may be

disposed of as non-actionable puffery, opinions, or predictions,

however. Four representations from Ms. Lisa, Mr. Mahoney, and

Mr. Fitzgerald require more careful analysis.

• On August 19, 2020, Ms. Lisa allowed her Director of

Investor Relations to report without contradiction that

“we hit 138 accounts” in the Lotus Launch.29 Id. at ¶¶

29 Plaintiff alleges “Boston Scientific” reported the 138-account

tally on August 19, 2020. Yet the Complaint attributes the

statement “we hit 138 accounts” to Director of Investor

Relations Lauren Tengler, who is not named as a Defendant in the

Complaint. Dkt. No. 44 at ¶ 99, 305-306.

The only possible Defendant to whom this statement might be

attributed is Ms. Lisa, the vice president of Investor

Relations, because Plaintiff presents no facts to suggest that

Ms. Tengler’s scienter may be imputed to Boston Scientific

itself. Ms. Lisa 1) presumably supervised Ms. Tengler, 2) was

on the conference call with Ms. Tengler when she made this

statement, and 3) permitted Ms. Tengler to respond to an

analyst’s request for account tallies that had been directed to

both Ms. Lisa and Ms. Tengler. Though I need not resolve the

issue in this case, I note that whether Ms. Lisa can be said to

have “ma[d]e” this alleged false statement within the meaning of

Section 10(b) is not a question to which First Circuit case law

provides a clear answer.

Section 10(b) imposes liability on “any person, [that]

directly or indirectly, . . . make[s] any untrue statement of a

material fact or [omits] a material fact necessary in order to

make the statements made, in the light of the circumstances

under which they were made, not misleading.” 15 U.S.C. § 78j(b),

as refined in 17 C.F.R. § 240.10b–5(b).

In Janus Capital Group, Inc. v. First Derivative Traders, 564

U.S. 135, 145 (2011), the Supreme Court considered whether Janus

Capital Management LLC could be held liable for statements made

in its wholly owned subsidiary’s prospectuses, which allegedly

were misleading. Id. at 137–142. Holding that Janus Capital

Management could not be held liable, the Supreme Court explained

that the “maker” of a false statement is “the person or entity

with ultimate authority over the statement, including its

content and whether and how to communicate it.” Id. at 142; see

also id. at 148. Accordingly, only the wholly owned subsidiary

could be held liable because Janus Capital Management did not

have “the statutory obligation to file prospectuses with the

SEC.” Id. at 146–147.

Since Janus, courts have disagreed as to whether Section 10(b)

contemplates liability for the corporate executive who knowingly

permits third parties to make false statements in her presence

but does not author such statements herself. For example, the

99, 305.

•

On September 16, 2020, Mr. Mahoney told analysts that

“Lotus remains a key growth driver for us. And we’re not

imposes a “duty to correct” misstatements made by others, and

“if there were one, Janus Capital itself would have come out the

other way.” Fulton Cnty. Emps. Ret. Sys. v. MGIC Inv. Corp.,

675 F.3d 1047, 1051–52 (7th Cir. 2012). Other courts apply

Janus similarly. See Oaktree Principal Fund V, LP v. Warburg

Pincus LLC, No. CV 15-8574 PSG (MRWx), 2017 WL 3187688, at *8

(C.D. Cal. Jan. 17, 2017) (“[S]peakers are only liable for

failing to correct their own omissions.”); Ho v. Duoyuan Glob.

Water, Inc., 887 F. Supp. 2d 547, 572 n.13 (S.D.N.Y. 2012). In

contrast, at least one court post-Janus has explained that “a

high ranking company official cannot sit quietly at a conference

with analysts, knowing that another official is making false

statements and hope to escape liability for those statements.”

Ga. Firefighters’ Pension Fund v. Anadarko Petroleum Corp., 514

F. Supp. 3d 942, 956 (S.D. Tex. 2021) (quoting Barrie v.

Intervoice-Brite, Inc., 397 F.3d 249, 262 (5th Cir. 2005)).

The First Circuit has not weighed in on this issue post-Janus,

though courts have acknowledged its earlier decision in SEC v.

Tambone, 597 F.3d 436, 442–43 (1st Cir. 2010) (en banc) as

“consistent with Janus.” See, e.g., SEC v. City of Victorville,

No. ED CV13-00776 JAK (DTBx), 2017 WL 11679413, at *60 (C.D.

Cal. June 2, 2017). In Tambone, the Court of Appeals explained

that “[r]eading ‘make’ to include the use of a false statement

by one other than the maker” would stretch liability under Rule

10b-5(b) too far. Tambone, 597 F.3d at 446. Even in Tambone,

however, the First Circuit left open the possibility that Rule

10b-5(b) liability may attach where “defendants have expressly

or impliedly adopted the [mis]statements, placed their

imprimatur on the [mis]statements, or have otherwise entangled

themselves with the analysts to a significant degree.” Id. at

449 (quoting In re Cabletron Sys., Inc., 311 F.3d 11, 37–38 (1st

Cir. 2002)).

I need not decide the question of whether Ms. Tengler’s

alleged false statement or misleading omission could be said to

have been “made” by Ms. Lisa. For the purposes of this

Memorandum only I will refer to the statement as one made by Ms.

Lisa. However, as further explained infra Part III.C.2, I hold

that even if Ms. Lisa is legally responsible for failing to

correct the inaccurate 138-account tally, Plaintiff has not made

a sufficient showing of Ms. Lisa’s scienter to support its

claims.

going to give share [] estimates, but we’re continuing to

invest along those lines. We’re starting to do more

account openings, the reorder rate for existing users is

quite high, and we’re slowly beginning to penetrate some

new accounts . . . .” Id. at ¶ 308 (emphasis added).

•

On October 15, 2020, Mr. Fitzgerald told analysts “we

have opened more than 150 accounts in the [United

States].” He then announced that the Lotus Edge launch

was “expanding our footprint in the [United States]” and

that “each month we’re growing actual procedures per

center, per month.” Id. at ¶¶ 314, 316 (emphasis added).

•

On October 28, 2020, when Mr. Mahoney was asked whether

it made strategic sense for Boston Scientific to develop

two different TAVR platforms — the Lotus platform and the

Acurate platform — he responded “we do believe that the

two-valve strategy makes sense” despite the continued

challenges of opening new Lotus accounts in the United

States. Id. ¶ 319 (emphasis added).

In contrast to most statements discussed above these are, at

least arguably, factual representations. I turn to whether

Plaintiff has stated with particularity that they are both false

and material. See Greebel v. FTP Software, Inc., 194 F.3d 185,

193–194 (1st Cir. 1999).

Expressions of Satisfaction with the Launch

Plaintiff pleads adequately that Ms. Lisa and Mr.

Fitzgerald misstated the number of Lotus accounts opened in the

United States as of August 19, 2020 (138 accounts) and October

15, 2020 (over 150 accounts) and that the misstatements were

material. As alleged, the day after Boston Scientific announced

its decision to terminate the Lotus platform, Mr. Fitzgerald

announced that Lotus Edge had only launched “about 100 accounts

in the U.S.” Dkt. No. 44 at ¶ 194. Making all reasonable

inferences in Plaintiff’s favor, I find Mr. Fitzgerald’s

November report of 100 accounts, accompanied by Boston

Scientific’s decision to terminate the Lotus platform, support

the conclusion that Ms. Lisa and Mr. Fitzgerald presented

inaccurate tallies of Lotus Edge accounts.30

Account reports by Ms. Lisa and Mr. Fitzgerald’s are also

material. Ms. Lisa and Ms. Fitzgerald both represented that the

Lotus Edge launch was hitting concrete milestones when,

according to the allegations in the Complaint, it was not.

30 Defendants read Mr. Fitzgerald’s November tally of about 100

open Lotus accounts as including only then-active accounts and

contend there may have been more accounts open when Ms. Lisa and

Mr. Fitzgerald gave their earlier tallies. I, however, read the

allegations in the light most favorable to Plaintiff and find

that Plaintiff has pleaded falsity with sufficient

particularity. However, I do recognize that Mr. Fitzgerald’s

November 18 statement could be read to a narrower class of

accounts than the class of accounts described by Ms. Lisa and

Mr. Fitzgerald in their August and October tallies in my

These are not the subjective, vague statements of corporate

optimism that reasonable investors would disregard. Rather they

should be considered at this stage as factual representations

relevant to potential investment decisions. In re Cytyc Corp.,

No. 1:02-cv-12399-NMG, 2005 WL 3801468, at *20 (D. Mass. Mar. 2,

2005) (“The more specific, definite or concrete the outward

statement is . . . the greater the likelihood the statement is

material and not mere puffery.”).

b. Growing Use of Lotus Edge and Reorder Rates

Mr. Fitzgerald’s statement that “each month we’re growing

actual procedures per center, per month,” Dkt. No. 44 at ¶¶ 100,

316, is not materially misleading. Plaintiff claims that Mr.

Fitzgerald’s statement was false because by mid-2020 “only 12

Lotus Edge accounts in the country used more than 2 devices per

month, and only nine of those centers used more than 2.5 per

month.” Id. at ¶ 204. Mr. Fitzgerald’s statement and the rates

of use alleged are not mutually exclusive. Plaintiff does not

allege that the average number of monthly procedures performed

per center was not increasing, month after month, or that there

were few centers using more than two per month. Cf. Coyne v.

Metabolix, Inc., 943 F. Supp. 2d 259, 268-69 (D. Mass. 2013)

(plaintiffs failed to plead falsity when the defendant’s

statements and the facts pleaded in the complaint were not

necessarily mutually exclusive). Consequently, Mr. Fitzgerald’s

statement is not actionable.

Plaintiff claims that Mr. Mahoney further misled investors

by claiming that “the reorder rate for existing [Lotus Edge]

users is quite high,” Dkt. No. 44 at ¶ 308, when “only 12 Lotus

Edge accounts in the country used more than 2 devices per

month.” Id. at ¶ 204. With the Lotus device used so rarely,

Plaintiff claims, Defendants could not have been seeing “very

high” reorder rates. Id. at ¶ 203. Again, Plaintiff has not

explained with particularity why Mr. Mahoney’s statement was

misleading. See Shaw, 82 F.3d at 1217.

First, Plaintiff has not alleged that the rate at which a

center orders Lotus devices is the same as the rate at which it

uses the device; centers may order more devices than they use

monthly or be unable to predict the number of devices needed

each month.

Second, Plaintiff has not pleaded that an order rate of one

to two Lotus devices per month is not a high reorder rate to Mr.

Mahoney. I cannot conclude that Mr. Mahoney’s statement was

false under these circumstances. See Fitzer v. Sec. Dynamics

Techs., Inc., 119 F. Supp. 2d 12, 26-27 (D. Mass. 2000).

Even if it were false, Mr. Mahoney’s statement is too vague

to be one upon which investors would rely. Mr. Mahoney made no

representation as to the actual rate at which centers that

purchased one Lotus device returned for future orders. He did

not claim that the device was used at a certain rate across the

existing accounts. He stated only that the frequency of reorder

was “high” in his view. This alone does not constitute a

fraudulent statement. See id. at 26 (representation of

“continued market demand” for a company’s product is too vague

to be material as defendants did not specify “a particular

market demand, a market share figure, or represent that the

market demand is static, shrinking, or growing”).

2. Simplicity and Ease of Use of Lotus Edge

Defendant statements in marketing the Lotus Edge as a

device offering “superior ease of use” were, Plaintiff alleges,

materially false and misleading. See Dkt. No. 44 at ¶¶ 226,

229, 233-235, 269. In reality, Lotus Edge was a complicated

instrument that Plaintiff alleges required three hands and

thirty-five steps to implant. Id. at ¶ 124. Defendants contend

that any statements of their hopes for the Lotus Edge’s

simplicity and ease of use were statements of opinion and

corporate optimism.

Defendant comments regarding the Lotus Edge’s ease of use

and marketability are not actionable misstatements. The

statements to which Plaintiff directs my attention are vague

statements of corporate puffery and overly optimistic opinion.

To the extent Plaintiff raises any material statements by

Defendants, its claims are of fraud by hindsight and must fail.

City of Dearborn Heights Act 345 Police & Fire Ret. Sys. v.

Waters Corp., 632 F.3d 751, 759 (1st Cir. 2011).

Defendants’ rosy assessments of the Lotus Edge product as

“a simpler device to use” or “a superb choice for operators

early in their TAVR experience” were not objective assessments

that could deceive investors. Dkt. No. 44 at ¶¶ 231-232.

Plaintiff does not claim, for example, that Defendants made

false statements as to the number of steps it took to implement

the Lotus Edge, the mechanics by which it operated, or the

limits of its use in TAVR procedures. A reasonable investor

would not rely on Defendants’ vague praise of their own

product’s potential market-advantages. See Wang Yan v. ReWalk

Robotics Ltd., 330 F. Supp. 3d 555, 571 (D. Mass. 2018)

(references to medical device as a “breakthrough product” and to

“compelling” clinical data found to be “unquestionably

subjective, optimistic statements that a reasonable investor

would not consider material”), aff'd sub nom. Yan v. ReWalk

Robotics Ltd., 973 F.3d 22 (1st Cir. 2020).

Even were Defendants’ ease of use statements more than

vague puffery, Plaintiff has pleaded nothing more than fraud by

hindsight. Plaintiff essentially claims that investors were

promised a simple and easy-to-implement design but ended up with

a device that required “three hands to operate.” Dkt. No. 44 at

¶¶ 233-234. However, Plaintiff cannot “simply contrast a

defendant’s past optimism with less favorable actual results,

and then contend[] that the difference must be attributable to

fraud.” , 82 F.3d at 1223 (alteration in original)

(citation omitted). There are no facts in the Complaint

suggesting that the Defendants’ expressed their goal to build a

user-friendly yet repositionable device in bad faith. Here, the

Complaint makes out “general allegations that defendants knew

earlier what later turned out badly” which are not sufficient to

sustain a claim for securities fraud. Ezra Charitable Tr. v.

Tyco Int'l, Ltd., 466 F.3d 1, 6 (1st Cir. 2006) (internal

quotations and citation omitted).

b. Failure to Disclose the Complexity of Device and

Delivery Malfunctions

Plaintiff also contends that various descriptions by

Defendants regarding the Lotus device omit essential information

about the complexity of the device and its malfunctions. I

disagree.

As an initial matter, “[a] defendant does not have a duty

to cast the descriptions of its business in the most negative

light.” Coyne, 943 F. Supp. 2d at 269. A defendant is liable

for omissions in statements comparing its product’s merits (i.e.

its simplicity and safety) to those of competitors only if his

statements are “so incomplete as to mislead” reasonable

investors. Backman v. Polaroid Corp., 910 F.2d 10, 16 (1st Cir.

1990) (en banc) (citation omitted).

Here, Plaintiff relies primarily on the accounts of

confidential sources that Defendants failed to disclose the

Lotus valve’s known design flaws:

•

Sales representatives in charge of overseeing Lotus

procedures described the Lotus Edge as “the most

complicated device on the planet,” Dkt. No. 44 at ¶ 231,

and the complexity of the Lotus device and delivery

system posed significant medical and sales challenges,

id. at ¶ 232.

•

The Lotus device’s complexity required “extensive

training that Boston Scientific failed to provide.” Id.

at ¶ 235.

•

Malfunctions in the delivery system resulted in “an

alarming rate of adverse events, including patient deaths

and injuries, that far outpaced those of its two primary

competitor devices.” New iterations of the device did

not resolve these issues. Id. at ¶¶ 235-236.

Plaintiff presents accounts from confidential sources FE 3,

4, and 6, describing the Lotus device as overly complex and

prone to specific malfunctions in the delivery system. Weighing

these source accounts based on “the level of detail provided by

the confidential sources, the corroborative nature of the other

facts alleged (including from other sources), the coherence and

plausibility of the allegations, the number of sources, [and]

properly alleged a material omission. ,

Inc., 311 F.3d 11, 29-30 (1st Cir. 2002). Plaintiff’s

confidential sources make conclusory statements about the

complexity of the Lotus device and the training challenges it

posed. They do not, however, explain with sufficient

particularity the factual basis for their conclusions.31 See

Dkt. No. 44 at ¶¶ 234-235.

It also does not appear that Defendants withheld

information from investors that would have been new and

material. “A plaintiff fails to plead an actionable § 10(b)

claim predicated on the concealment of information if that

information was, in fact, disclosed.” In re The First

Marblehead Corp. Sec. Litig., 639 F. Supp. 2d 145, 155 (D. Mass.

2009). Here, investors and analysts were well-acquainted with

the challenges posed by the Lotus delivery system. When

Defendants announced the decision to end the Lotus platform, one

analyst noted “the delivery issues have been front and center

for years.” Dkt. No. 44 at ¶ 194. Defendants discussed the

complexities of the Lotus device’s delivery system with

31 None of Plaintiff’s confidential sources report, for example,

that the Lotus valve’s design or mechanical function differed

from Defendants’ descriptions to the public. None suggested

that Defendants concealed records of adverse patient events or

instances of device malfunction from the public. The sources

opined on the incredible complexity of the device and

physicians’ difficulty using it but Plaintiff has not supported

these accounts with any internal reports or accounts from

investors as early as 2016 and 2017 during the first Lotus

recalls. Id. at ¶¶ 65, 67-68, 78. Moreover, Boston Scientific

made records of each instance of the Lotus device malfunction,

including malfunctions that occurred within the delivery system,

and reported them to the FDA. These reports were made available

through the FDA’s public Manufacturing and User Facility Device

Experience database. Id. at ¶ 116. I cannot conclude that

Defendants misled, let alone intended to defraud, investors as

to the safety and design of the Lotus device.32

I also reject Plaintiff’s contention that Mr. Fitzgerald

admitted on November 18, 2020 that Defendants knew as of April

2020 that the Lotus valve design posed too many clinical support

challenges to be commercially viable. As further discussed

infra Part.III.B.4.a., Mr. Fitzgerald’s full November 18

statement states the view that the company determined that the

Lotus valve was not commercially viable in the fall of 2020, not

that it was perceived as such in April of 2020. Boston

32 I observe that Defendants do not assert a truth on the market

defense, as Plaintiff suggests in its opposition brief. See

Dkt. No. 61 at 40. “The truth on the market defense is used to

rebut a plaintiff's presumption of reliance on the market by

arguing that even if fraudulent statements were made, truthful

information later entered the market.” In re The First

Marblehead Corp. Sec. Litig., 639 F. Supp. 2d 145, 155 n.75 (D.

Mass. 2009). Here, Defendants point to their public disclosures

as evidence that they had no intent to mislead investors or

conceal safety data regarding the Lotus Edge. See id.

(“Defendants have not raised a truth on the market defense, but

instead argue that ‘Plaintiffs have failed to plead facts to

show that there were any misstatements or scienter in the first

Scientific weighed the high manufacturing costs of the device,

the resources needed to train representatives to use it safely,

and the niche position the device occupied in the TAVR market

just before the Lotus platform was terminated. With these

allegations, I see no basis to support the contention that

Defendants failed to timely disclose material information to

investors.

3. Misstatements and Omissions as to the Safety of the

Lotus Edge Launch

Plaintiff argues Defendants misled investors by proclaiming

that the Lotus launch was a safe and controlled one, when it was

actually conducted in a manner that was “clinically unsafe.”

Dkt. No. 44 at ¶ 248. Further, Plaintiff alleges that

Defendants should have disclosed the fact that Defendants’

“[e]gregiously [i]nadequate [t]raining [l]ed [t]o [p]atient

[i]njuries [a]nd [d]eath.” See id. at 96. I find no actionable

misrepresentations or omissions.

Several of the misrepresentations alleged in this category

occurred before the Class Period and, as such, I need not

consider them as bases for a securities fraud claim. Shaw, 82

F.3d at 1217 n.31 (“We limit our analysis of the. . .plaintiffs'

claims of affirmative misrepresentation to the statements

allegedly made by defendants within the Class Period.”); see

also In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 643

(S.D.N.Y. 2007) (“Although pre-class-period statements can be

relevant for showing whether defendants had knowledge that their

later statements were false, those statements cannot themselves

give rise to liability.” (internal citations omitted)). So far

as appears, Plaintiff’s remaining allegations, that Defendants

did not require sufficient training for its sales and clinical

representatives and that Defendants did not provide the level of

clinical support necessary, are thinly veiled criticisms of the

way that Boston Scientific conducted its product launch, not

particularized claims that Defendants’ deceived investors.

The Complaint does not adequately support Plaintiff’s

contention that Defendants withheld information about the safety

of the Lotus launch and jeopardized patient safety. As

discussed supra Part III.B.2.b, information regarding the safety

of the Lotus Edge and its launch in the United States was made

publicly available to investors.33 Plaintiff has not clearly

articulated which of Defendants’ duties, if any, would obligate

them to disclose further information regarding the Lotus’s

design and function. Plaintiff has not, for example, alleged

that Defendants failed to meet their obligations under 21 C.F.R.

§§ 803.50 and 803.52 to disclose safety information or adverse

device events to the FDA. At most they allege that puffing by

certain Executive Defendants suggesting that the Lotus launch

33 In fact, Plaintiff presents exactly this publicly available

data in the Complaint to demonstrate the number of adverse

events associated with the Lotus Edge Delivery System throughout

would be a controlled one focused on strong patient outcomes was

misleading because, in the conclusory opinion of one of the

Plaintiff’s confidential sources, the launch was clinically

unsafe. The Complaint fails to allege satisfactorily that

Defendants withheld material information from investors based on

these allegations.

4. Misleading Reports of the Success of the Lotus

Platform and its Role in the TAVR Portfolio

a. Disclosure of the Lotus Recall and Termination

Plaintiff claims Defendants decided to terminate the Lotus

platform in April of 2020 but delayed announcing this decision

to inflate the value of Boston Scientific stock during a

financially challenging period for the company. Plaintiff bases

this allegation on carefully excerpted phrases from Executive

Defendant Joseph Fitzgerald’s November 18, 2020 explanation of

when Boston Scientific decided to terminate the Lotus platform:

according to the Complaint Mr. Fitzgerald allegedly “admitted”

that Boston Scientific senior management made the decision by

“no later than April 2020” when he said “[i]t took us about 12

months after full launch to evaluate [Lotus].” Id. at ¶¶ 194-

195. The “full launch,” according to Plaintiff, began when the

device gained FDA approval on April 23, 2019, meaning Boston

Scientific leaders fully evaluated Lotus around or before April

of 2020. Id. at ¶ 195.

Plaintiff’s interpretation of Mr. Fitzgerald’s words is

strained and contorted. The Complaint makes clear that April

23, 2019 marked the beginning of a controlled launch of the

Lotus Edge. The full launch began in the fall of 2019. Id. at

¶ 96. Mr. Fitzgerald apparently shared this understanding.

Asked on November 18, 2020 why it “took so long” to end the

Lotus platform, Mr. Fitzgerald responded:

So really, when you think about it, with getting approval

in April and then going into our limited market release

a few months later and then really full launch this time

last year, right? So we've had essentially 12 months.

And oh, by the way, COVID is right in the middle of those

12 months. But we needed to get the U.S. experience to

determine what's going to be the rightful place in the

universe for the LOTUS valve. And the decision we came

to after thousands of implants, we launched about 100

accounts in the U.S., was that LOTUS was going to remain

a niche. . . And it took launching in a country like the

U.S. for us to figure that out because of the past of

what we purposefully did in Europe. So I think, you look

at it, and I think I would characterize it as it took us

about 12 months after full launch to fully evaluate

LOTUS, to fully understand ACURATE neo2.

Dkt. No. 64-1 at 6 (emphasis added). Mr. Fitzgerald made clear

that he was stating that Boston Scientific leaders decided to

terminate the Lotus platform in the fall of 2020, within weeks

of later disclosing that decision to investors. I therefore

find no adequate basis for a securities fraud claim on the

ground that the Defendants delayed disclosure of the Lotus

shutdown.

Strategic Investment

Plaintiff identifies Executive Defendant Michael Mahoney’s

September 16 statement34 and October 28 statement35 to investors

affirming that the Lotus platform remained an important growth

driver and strategic investment. Given their temporal proximity

to Defendants’ decision to terminate the Lotus platform

34 On September 16, 2020 Mr. Mahoney made the following statement

at the Morgan Stanley Health Conference, in response to an analyst

question:

I think, you know, certainly Lotus will continue to be

an important product for us. It’s a significant market

as you know, and even small share gains are significant

for us. And so, Lotus will continue to be an important

growth driver for us supported with our whole platform

with ACURATE neo2. So, overall, Lotus remains a key

growth driver for us. And we’re not going to give share

estimates, but we’re continuing to invest along those

lines. We’re starting to do more account openings, the

reorder rate for existing users is quite high, and we’re

slowly beginning to penetrate some new accounts with

some new training.

Dkt. No. 44 at ¶ 307–08.

35 On October 28, 2020 during Boston Scientific’s third quarter

earnings call, Mr. Mahoney allegedly “highlighted [Boston

Scientific’s] ‘continued U.S. and Japan rollout of Lotus Edge and

U.S. intermediate risk trial enrollment’” and emphasized the

“’distinct benefits’ of the Lotus Edge.” Id. at ¶ 318.

Mr. Mahoney also made the following statement, in response to an

analyst’s question:

And we’ve obviously had the two-valve strategy, and

we’re seeing strong results in the sites that are using

Lotus in the U.S. Opening new sites has been a

challenging exercise for us given the pandemic, but the

sites that are using Lotus in the U.S. are using it quite

regularly. So we do believe that the two-valve strategy

makes sense and we’re excited about the Acurate neo2

launch in Europe.

Id. at ¶ 319.

altogether, these statements are adequately alleged to have

misled the reasonable investor.

The First Circuit, in Construction Industry and Laborers

Joint Pension Trust v. Carbonite, Inc., 22 F.4th 1 (1st Cir.

2021) (“Carbonite”), and my colleague Judge Young, in In re

Allaire Corporation Securities Litigation, 224 F. Supp. 2d 319

(D. Mass. 2002), addressed similar representations and found

them actionable. I find their reasoning persuasive.

In In re Allaire Corporation Securities Litigation, 224 F.

Supp. 2d 319, 331-332 (D. Mass. 2002) the defendant president of

the company stated in an interview that the company’s latest

software product was “fueling growth” when the product was known

—by “customers, distributors, sales personnel, and technical

personnel”— to be defunct. Id. at 331. Judge Young concluded

that the defendant’s “precise statement” that a specific product

is driving profit growth for the company is actionable when the

statement “could not have been believed by its maker — at least

not without recklessness on his part.” Id. at 331-332.

The statements in Carbonite were similar, though some were

“presented in the form of a statement of belief.” 22 F.4th at

7. Despite the at-issue product allegedly never working, the

defendant CFO stated that the company “put something out that we

think is just completely competitive and just a super strong

product” and the defendant CEO stated that the product “improves

our performance” and “makes us really competitive.” Id.

(emphasis in original). Although defendants argued, ,

that the statements were opinions, the First Circuit explained

that the use of certain phrases, such as “I think” or “I

believe,” to characterize a statement “does not preclude the

possibility that the statement as a whole may still mislead as

to some fact.” Id. (internal citation omitted) (citing

Omnicare, Inc. v. Laborers Dist. Council Constr. Indus. Pension

Fund, 575 U.S. 175, 193 (2015)). Statements of opinion “may

convey three facts: that the speaker has such a belief; that the

belief fairly aligns with the facts known to the speaker;

and . . . that the speaker has made the type of inquiry that a

reasonable investor would expect given the circumstances.” Id.

Guided by the reasoning of Carbonite and In re Allaire

Corp. Sec. Litig., I find Mr. Mahoney’s statements are

adequately alleged to have been materially misleading when

viewed in the light most favorable to Plaintiff. According to

Mr. Fitzgerald’s November 18 account of the decision to retire

the Lotus platform, discussed above, Defendants were in the

process of critically evaluating the Lotus platform in the fall

of 2020. When Mr. Mahoney made these representations that Lotus

was driving growth and a dual-valve strategy made sense for the

company, Boston Scientific’s leadership had either already

decided the Lotus platform was unsalvageable or was on the cusp

of doing so in a matter of weeks. Under these circumstances,

the representations that the Lotus platform was still driving

growth and its continuation made sense from an investment

standpoint are adequately alleged to constitute specific

misrepresentations that the Lotus Edge was and would remain

viable. See In re Cytyc Corp., No. Civ.A. 02–12399–NMG, 2005 WL

3801468, at *20 (more concrete representations are more likely

to be misleading). Unlike the less concrete claims discussed in

Part III.B.1, these statements could have been material to

investors.

To the extent Defendants argue that these statements are

nonactionable opinions, I disagree. Here, Mr. Mahoney’s

statements “could be reasonably construed in context as a

statement of fact,” such that “it would be false as compared to

the [C]omplaint’s contention that” leadership at Boston

Scientific was deciding to pull the plug on the Lotus platform.

Carbonite, 22 F.4th at 7. Moreover, as the First Circuit

explained, framing a statement as a “belief” is not dispositive

of whether it is an opinion and nonactionable. Id. Here, Mr.

Mahoney’s statement could have “plausibly conveyed” that he

“actually believed” the Lotus platform “will continue to be an

important product,” that his opinion was “fairly align[ed] with”

the information he possessed at the time, and that this “opinion

was based on the type of reasonable inquiry that an investor in

context would expect to have been made.” Carbonite, 22 F.4th at

7.

5. Conclusion

Nearly all of the misrepresentations alleged by Plaintiff

amount to nonactionable corporate puffery, opinions, and

predictions. Two sets of statements detailed in the Complaint,

however, are actionable: 1) The inaccurate tallies of the number

of accounts opened in the Lotus launch by Ms. Lisa and Mr.

Fitzgerald on August 19 and October 15, 2020, respectively; and

2) Mr. Mahoney’s September and October statements that the Lotus

platform was a key growth driver and a viable investment. I

turn now to whether Plaintiff has met its burden of pleading the

Defendants’ scienter with respect to these statements.

C. Scienter

Under Section 10(b)’s scienter element, Plaintiff must

plead particularized facts that raise a “strong inference” that

Defendants made their actionable misstatements and omissions

with “either conscious intent to defraud or ‘a high degree of

recklessness.’” ACA Fin. Guar. Corp. v. Advest, Inc., 512 F.3d

46, 58 (1st Cir. 2008) (quoting Aldridge, 284 F.3d at 82); 15

U.S.C. § 78u-4(b)(2)(A). “A statement cannot be intentionally

misleading if the defendant did not have sufficient information

at the relevant time to form an evaluation that there was a need

to disclose certain information and to form an intent not to

disclose it.” N.J. Carpenters Pension & Annuity Funds v. Biogen

IDEC Inc., 537 F.3d 35, 45 (1st Cir. 2008). Recklessness in the

Section 10(b) context involves “not merely simple, or even

inexcusable, negligence, but an extreme departure from the

standards of ordinary care, and . . . presents a danger of

misleading buyers and sellers that is either known to the

defendant or is so obvious that the actor must have been aware

of it.” Mehta v. Ocular Therapeutix, Inc., 955 F.3d 194, 206

(1st Cir. 2020)(quoting Brennan v. Zafgen, Inc., 853 F.3d 606,

613 (1st Cir. 2017)).

Under the PSLRA, the pleading standard for scienter is a

“rigorous” one, ACA Fin. Guar. Corp., 512 F.3d at 58, in its

requirement of a “strong inference” of scienter, Tellabs, Inc.,

551 U.S. at 314 (quoting 15 U.S.C. § 78u-4(b)(2)). Alleged

facts said to evidence a defendants’ scienter “need not be

irrefutable” but, taken together, they must raise “at least as

compelling [an inference] as any opposing inference one could

draw from the facts alleged.” Tellabs, Inc., 551 U.S. at 323-

324. The “classic evidence” of scienter are facts showing that

the defendant knew their public statements to be inaccurate or

recklessly disregarded the risk that they would be. Aldridge,

284 F.3d at 83.

To plead a corporate defendant’s knowledge of or disregard

for the misleading nature of statements successfully, a

plaintiff must do more than describe a declarant’s high-ranking

position at the company. Coyne, 943 F. Supp. 2d at 272

(“[S]cienter allegations based solely on a defendant's high-

ranking position in the company are not sufficient.”). A

defendant’s motive and opportunity to deceive investors, without

more, also may not suffice to establish the defendant’s

knowledge. “[C]lear allegations of admissions, internal records

or witnessed discussions suggesting that at the time they made

the statements claimed to be misleading, the defendant officers

were aware that they were withholding vital information or at

least were warned by others that this was so” are often

necessary to meet the PSLRA’s scienter requirement. In re Bos.

Sci. Corp. Sec. Litig., 686 F.3d 21, 31 (1st Cir. 2012).

Finally, “the importance of a particular item to a

defendant can support an inference that the defendant is paying

close attention to that item,” but that inference can only aid a

plaintiff “in establishing scienter if that close attention

would have revealed an incongruity so glaring as to make the

need for further inquiry obvious.” Local No. 8 IBEW Retirement

Plan & Tr. v. Vertex Pharms., Inc., 838 F.3d 76, 82 (1st Cir.

2016) (internal citations and quotations omitted); see also

Carbonite, 22 F.4th at 9–10.

Guided by these principles, I consider whether Plaintiff

here has raised a strong inference that the misrepresentations

were made with the required scienter. I first address

Plaintiff’s generalized allegations of scienter, which I do not

find sufficient. Then, because I have found actionable only

statements by Ms. Lisa, Mr. Fitzgerald, and Mr. Mahoney, I will

focus my analysis on those Executive Defendants. See N.J.

, 537 F.3d at 44

(“The PSLRA requires that the plaintiffs' complaint, ‘with

respect to each act or omission ..., state with particularity

facts giving rise to a strong inference that the defendant acted

with the required state of mind.’” (quoting 15 U.S.C. § 78u–

4(b)(2))).

1. Plaintiff’s General Scienter Allegations

Plaintiff makes generalized allegations of scienter on the

basis of the following evidence: (1) accounts from confidential

sources, which Plaintiff alleges bear upon corporate executives’

knowledge; (2) insider trading activity by four Executive

Defendants; (3) resignations by two Executive Defendants

involved with the Lotus platform; and (4) inferences concerning

Boston Scientific’s motive to hide the Lotus platform’s failure

in order to raise capital and renegotiate its debts. See Dkt.

44 at ¶¶ 201–224. As I explain, these allegations are not

sufficient to raise a “strong inference” of scienter, either

individually or collectively, as to Defendants.

a. Confidential Source Accounts

Plaintiff contends that its nine confidential sources provide

accounts of Defendants’ knowledge required to infer scienter. I

disagree. These former employees accounts are largely devoid of

the facts necessary to raise a strong inference of scienter,

including “particular times, dates, places, or other details of

the alleged fraudulent activity.” Orton v. Parametric Tech.

, 344 F. Supp. 2d 290, 306 (D. Mass. 2004) (quoting

v. Summa Four, Inc., 93 F.3d 987, 992 (1st Cir. 1996)); see id.

at 307-308(“spotty and vague” accounts from unnamed former

employees will not establish scienter). “The absence of [such]

key details ‘is indicative of the excessive generality of

[Plaintiff’s] allegations’” of scienter. Sousa v. Sonus

Networks, Inc., 261 F. Supp. 3d 112, 120 (D. Mass. 2017)

(quoting Greebel, 194 F.3d at 204).

First, the sources upon which Plaintiff relies most heavily

in the Complaint provide only their own opinions as to what the

senior leadership knew about the Lotus launch. These include FE

7 with his oft quoted opinion that Executive Defendants were

“absolutely aware” that Lotus sales were sluggish and FE 6’s

claim that knowledge of the Lotus valve’s design issues “went

all the way up.” These accounts do not provide the details at

the core of scienter: “what [each] defendant[] had knowledge of

and when.” In re Boston Tech., Inc. Sec. Litig., 8 F.Supp.2d

43, 57 (D. Mass. 1998). Such conclusory opinions from

confidential sources, unsupported by detail or explanation, do

not establish scienter. Fire & Police Pension Ass'n of Colo.,

778 F.3d at 245.

I also do not find an adequate basis for scienter in

conclusory assertions by former employees that specific

obstacles to the Lotus launch’s success were “constantly”

discussed at meetings with senior leadership. “[A]llegations

that the defendants attended unspecified meetings where” the

Lotus platform’s challenges were “discussed constantly . . .

fall[] well below the threshold for adequately pleading

scienter.” Coyne, 943 F. Supp. 2d at 273 (internal quotation

omitted).

Those former employees who did recount meetings attended by

the named Executive Defendants still have not recounted facts

that suggest fraud or a high degree of recklessness. FE 1 and

FE 2’s account of the Thanksgiving 2019 Lotus salesforce

meeting, for example, allows me to infer only that certain

Executive Defendants were aware of early adverse events

associated with the Lotus valve and lagging Lotus sales in

November of 2019. According to the Complaint, Defendants were

still committed to making the Lotus platform a success at this

stage; this Thanksgiving meeting was “focused on retraining the

sales staff to help prevent the bad outcomes [for] Lotus

patients” and teaching sales representatives to sell physicians

better on the Lotus valve. Dkt. No. 44. at ¶ 12.

Allegations that various employees at Boston Scientific

believed the Lotus platform was beset by fatal flaws is also not

compelling; there is no evidence that any of the Executive

Defendants shared the views of these nameless former employees.

In the 140-page Complaint, Plaintiff has not provided a single

contemporaneous statement from any of the Executive Defendants

to demonstrate their fraudulent intent. Cf. Crowell v. Ionics,

, 343 F.Supp.2d 1, 5–6, 17-18 (D. Mass. 2004)(suggesting

that an allegation that a specific defendant said “I want to go

on the record stating it's not proper accounting—but it's nice

to make money” during a specific meeting supported a strong

inference of fraudulent intent).

b. Insider Trading Activity

Plaintiff’s insider trading allegations are equally lacking

as a basis for scienter. To be sure, insider trading “may offer

some support” for an inference of securities fraud, Fire &

Police Pension Ass'n of Colo., 778 F.3d at 245–246 (quotations

and citation omitted), but only when the trade is so unusual

that it goes “well beyond the normal patterns of trading” for a

given defendant, Greebel, 194 F.3d at 198.

Mr. Mahoney’s November 3, 2020 sale was not so unusual or

suspicious as to be probative of his scienter. First, this

trade was made according to a 10b5–1 trading plan. Use of a

prescheduled 10b5-1 plan “negates an inference of scienter.”

Leavitt v. Alnylam Pharms., Inc., 451 F. Supp. 3d 176, 188 (D.

Mass. 2020). Mr. Mahoney’s plan specified that the earliest

date he could sell was October 29, 2020 and the plan was

scheduled to terminate on November 6, 2020. The plan-provided

shares could only be sold at a price equal to or higher than

$35.00 per share. Dkt. No. 55-2 at 11. November 3, the date of

the sale, was the first day in the sale period during which

Boston Scientific stock reached a value of over $35.00 per

share. The structure of this 10b5-1 plan, even if shorter in

duration than Defendants’ prior plans, is not so unusual as to

raise suspicion.

Plaintiff nevertheless characterizes the timing and

quantity of the sales as highly suspicious. On its face, the

timing of the sales, does not evince fraudulent intent. It also

cannot be said that Mr. Mahoney sold his shares at the height of

their value; in fact, Mr. Mahoney’s shares had nearly the same

value on November 3 as they did on November 17, after it was

announced that the Lotus platform had been terminated.36

Further, Plaintiff has not alleged sufficient information about

Mr. Mahoney’s trading practices to suggest that the timing,

amount, and price of his sales were otherwise highly suspicious.

Leavitt, 451 F. Supp. 3d at 187–188 (“The plaintiff bears the

burden of showing that insider sales were suspicious and must

provide a complete picture of the defendant's trading, both

before and after the class period.”). These facts do not lead

me to infer that Mr. Mahoney’s acted with fraudulent intent.

As for Defendants Ballinger, Fitzgerald, and Brennan,

Plaintiff has not shown that their trading during the Class

Period was so unusual or suspicious as to raise an inference of

scienter. Plaintiff contends that because these Defendants

36 Boston Scientific common stock was valued at $35.06 per share

on November 3. Id. at ¶ 219. It was valued at $35.03 following

reaped greater proceeds during the Class Period than the control

period, their trading warrants suspicion. Those circumstances

may warrant some degree of suspicion, but that, however, is not

enough. As Defendants point out, Mr. Fitzgerald and Mr. Brennan

made their trades through Rule 10b5-1 plans. Mr. Fitzgerald

increased his holdings in Boston Scientific over the Class

Period, undermining Plaintiff’s theory that his advanced

knowledge of Lotus’s doom led him to sell off his shares before

their value declined. Mr. Ballinger made his large sales

immediately after leaving his position at Boston Scientific, not

an unusual decision as the First Circuit has noted in the past.

Greebel, 194 F.3d at 206 (“It is not unusual for individuals

leaving a company . . . to sell shares.”).

c. The Resignations of Mr. McCarthy and Mr.

Ballinger

Plaintiff has not alleged particularized facts regarding

the reason for and timing of either Mr. McCarthy’s or Mr.

Ballinger’s resignation to support a strong inference of

scienter. So far as appears, these resignations were not the

result of any investigation of fraud or recklessness on the part

of these defendants. Cf. Collier v. ModusLink Glob. Sols.,

Inc., 9 F. Supp. 3d 61, 65, 76 (D. Mass. 2014) (SEC

investigation into the company’s accounting practices led to an

internal audit that “culminated in the resignation” of two key

executives and contributed to a strong inference of scienter).

Even if these Executives Defendants resigned to distance

themselves from the challenges and disappointments of the Lotus

launch, that circumstance does not raise a strong inference that

Executive Defendants knew that the Lotus platform was not

commercially viable. None of the confidential sources recount

statements or reports from Executive Defendants McCarthy or

Ballinger that express such knowledge. Their resignations also

do not allow me to infer that the Defendants intentionally or

recklessly deceived investors.

d. Boston Scientific’s Need to Raise Capital and

Renegotiate Its Debts

Plaintiff contends that Defendants’ capital-raise on May

21, 2020 and its efforts to renegotiate its debts in April of

2020 provided a compelling motive to lie to investors, from

which I should infer scienter. I reject this contention. The

First Circuit has “set a high bar” for a plaintiff seeking to

rely upon an inference of scienter based on a defendant’s public

equity offering during the Class Period. Kader v. Sarepta

Therapeutics, Inc., 887 F.3d 48, 60 (1st Cir. 2018). The

generic claim that Defendants had a motive to inflate stock

values before conducting public equity offering, without some

other indication of fraud, is not sufficient. See id.

Moreover, it must be noted that none of the actionable

misstatements alleged in the Amended Complaint predate the

Defendants’ capital-raise and debt renegotiation. Ms. Lisa and

Mr. Fitzgerald offered their allegedly inaccurate account

tallies in August and October of 2020 and Mr. Mahoney made his

alleged misstatements in September and October. Defendants had

already secured their two billion dollars in capital and

renegotiated four billion dollars of debt by May 21, 2020. Even

if Defendants were motivated to inflate Boston Scientific stock

values in advance of the capital raise in this setting, the

Defendants would not have been so motivated after they

successfully raised the desired capital and avoided default on

their debts. I can draw no strong inference of scienter on this

basis.

e. Conclusion

None of Plaintiff’s general allegations of scienter, either

individually or considered together, give rise to an inference

that is “at least as compelling as any opposing inference of

nonfraudulent intent”. Tellabs, Inc., 551 U.S. at 314. I now

turn to whether allegations of misrepresentation, specific to

Ms. Lisa, Mr. Fitzgerald, and Mr. Mahoney, can meet the

“rigorous” inference standard for scienter. ACA Fin. Guar.

Corp., 512 F.3d at 58.

2. Scienter of Ms. Lisa and Mr. Fitzgerald

Ms. Lisa and Mr. Fitzgerald may have given investors

inaccurate tallies of Lotus accounts but that does not raise a

strong inference that they provided fraudulent tallies. The

Complaint provides no particularized facts upon which to

conclude that Ms. Lisa or Mr. Fitzgerald were aware of the true

account tallies but inflated the numbers to reassure investors.

That they were executives involved in the Lotus Launch and had

access to the company sales dashboard, without more, does not

establish that these Defendants intentionally lied to investors.

See In re Wayfair, Inc. Sec. Litig., 471 F. Supp. 3d at 344-345.

Although Plaintiff may suggest an inference, it is

certainly not “strong” nor is it “at least as compelling as any

opposing inference of nonfraudulent intent.” Tellabs, Inc., 551

U.S. at 314. There are multiple explanations for the

discrepancy between counts offered by Ms. Lisa and Mr.

Fitzgerald, and the statement by Mr. Fitzgerald that the launch

only reached 100 accounts. Ms. Lisa and Mr. Fitzgerald could

have been operating with inaccurate or outdated information when

they made those initial tallies. They could have been referring

to a broader category of accounts than just those opened in the

United States during the launch. Some of the accounts open in

August and October of 2020 may have closed by November 18, when

Mr. Fitzgerald noted there were only 100 accounts opened. In

the absence of any allegations that Executive Defendants Lisa

and Fitzgerald had access to reports and data reflecting only

100 open accounts, I cannot find the high degree of recklessness

required to support scienter. Accordingly, Plaintiff has not

pleaded scienter as to Ms. Lisa and Mr. Fitzgerald at the time

of these statements.

3. Scienter of Mr. Mahoney

As I have already indicated, I do not find Plaintiff’s

allegations related to Mr. Mahoney’s insider trading activity

adequate to show scienter. However, Mr. Mahoney’s actionable

statements are undeniably similar to those held to show scienter

in Carbonite and raise an inference of scienter on that basis.

Compare Dkt. No. 44 at ¶¶ 308 (“Lotus will continue to be an

important growth driver for us. . . .”); 319 (“[W]e do believe

that the two-valve strategy makes sense. . . .”), with

Carbonite, 22 F.4th at 7, 11 (“[W]e have put something out that

we think is just completely competitive and just a super strong

product.” (alteration in original) (emphasis removed)).

In Carbonite, the First Circuit held that defendants had

the requisite scienter based on “two specific plugs from top

management” despite the product “never once [doing] what it

[was] supposed to do,” and allegations in the complaint that did

not “leave open the possibility that . . . management was

somehow in the dark about [its] true status.” 22 F.4th at 9,

10. On those facts, there was a “strong inference” that the

executive defendants “either inquired about [the product] before

deciding to promote it to investors or were reckless in failing

to do so.” Id. at 10. The Court of Appeals contrasted the

facts in Carbonite, where it was allegedly widely known within

the company that the product was defective, with Vertex

Pharmaceuticals, Inc., 838 F.3d at 82–83, where the product

received inaccurate positive testing results, but the complaint

did not allege that anyone at the company (including experts)

“noticed or suspected” that the results as reported were wrong.

There were no allegations in Vertex Pharmaceuticals, Inc.

showing the results were “so obviously suspect” as to warrant a

“strong inference that the defendants were reckless in failing

to consult the raw data themselves for verification.” 838 F.3d

at 83.

Plaintiff’s allegations fall somewhere in between those at

issue respectively in Carbonite and Vertex Pharmaceuticals,

Inc., but I find that they are sufficient to raise the required

strong inference of scienter. Unlike in Carbonite, where the

product never worked, there was a market for Lotus, albeit

modest. Dkt. No. 44. at ¶ 105. Similarly, Plaintiff’s

allegations related to management’s awareness of Lotus’

shortcomings are not as strong as those in Carbonite. However,

I am cognizant of my duty “not to scrutinize each [scienter]

allegation in isolation but to assess all the allegations

holistically.” Tellabs, Inc., 551 U.S. at 326. I must ask

whether there is an inference of scienter “[w]hen the

allegations are accepted as true and taken collectively.” Id.

Taken together, and in light of Carbonite, Plaintiff’s pleadings

sufficiently allege an inference of scienter. See ACA Fin. Gur.

Corp., 512 F.3d at 59 (“[W]here there are equally strong

inferences for and against scienter, now awards the draw

to plaintiff.” (citing Tellabs, Inc., 551 U.S. at 324)).

Mr. Mahoney, the CEO of Boston Scientific, on two occasions

in fall 2020 — shortly before directing discontinuance of the

Lotus platform — made specific statements touting Lotus and the

two-valve strategy. Dkt. No. 44 at ¶¶ 308, 319. As I discussed

supra Part III.B.4., Mr. Fitzgerald’s November 18, 2020

explanation of the termination of the Lotus platform reasonably

construed indicates that the decision was made in fall 2020.

Plaintiff does not plead specifically that Mr. Mahoney was party

to the decision to terminate the Lotus platform; however, Mr.

Mahoney announced the decision to discontinue Lotus, stating

that the decision was made “[a]fter much analysis and careful

consideration.” Id. at ¶ 182 (alteration in original). It is

not unreasonable to infer that Mr. Mahoney was privy to, or at

least aware of, discussions surrounding Lotus during this time

period, given his September and October statements plugging the

product and his position as CEO of Boston Scientific.

Moreover, the Complaint alleges that the Lotus’ limited

market share “was documented in internal company records.” Id.

at ¶¶ 104, 105. Accordingly, “nothing in the alleged facts

renders less than sufficiently compelling the conclusion that

[Mr. Mahoney] would have known of the product’s status had [he]

inquired.” Carbonite, 22 F.4th at 10. In light of the

preceding, “the [C]omplaint, alleges facts raising a strong

inference that [Mr. Mahoney] either inquired about [Lotus]

before deciding to promote it to investors or [was] reckless in

failing to do so.” Carbonite, 22 F.4th at 10.

As the Court of Appeals explained in Carbonite, “the

relevant point here is not that [Lotus] was the only or the most

‘outsized’ [Boston Scientific] product.” Id. at 9. The point

is that when a chief executive, like Mr. Mahoney, makes specific

remarks on the role of a product in a company’s portfolio, there

is a “very strong inference” that such an executive “would have

paid at least some attention to the product’s status.” Id. I

find that, on the facts as pleaded in the Complaint, the

inference applies. In summary, Plaintiff has pleaded scienter

as to Mr. Mahoney.

Defendants do not dispute the other elements of Plaintiff’s

Section 10(b) claim, namely reliance, economic loss, and loss

causation, however, in the interest of completeness and in

anticipation of further proceedings, I will briefly address

reliance, economic loss, and loss causation.37

D. Reliance

Plaintiff invokes the fraud on the market rebuttable

presumption under Basic, Inc. v. Levinson, 485 U.S. 224 (1988)

37 As to “connection with the purchase or sale of a security,”

Plaintiff pleaded [Certification Pursuant to the Federal

Securities Laws, Dkt. No. 45] many purchases and sales of Boston

to prove reliance. Dkt. No. 44 at ¶¶ 329–330. I find that

Plaintiff has sufficiently pleaded this element.

As the Supreme Court has explained, “[t]he ‘traditional

(and most direct) way’ for a plaintiff to prove reliance is to

show that he was aware of a defendant’s misrepresentation and

engaged in a transaction based on that misrepresentation.”

Goldman Sachs Grp., Inc. v. Ark. Teacher Ret. Sys., 141 S. Ct.

1951, 1958 (2021) (quoting Halliburton Co. v. Erica P. John

Fund, Inc., 573 U.S. 258, 267 (2014)). Under Basic, however, a

plaintiff may prove reliance “by invoking a [rebuttable]

presumption that the price of stock traded in an efficient

market reflects all public, material information—including

material misstatements.” Halliburton Co., 573 U.S. at 263. The

“fraud-on-the-market theory undergirding” Basic is that “an

investor presumptively relies on a misrepresentation so long as

it was reflected in the market price at the time of his

transaction.” SEC v. Sargent, 589 F. Supp. 3d 173, 198 (D.

Mass. 2022) (quoting Erica P. John Fund v. Halliburton Co., 563

U.S. 804, 813 (2011)).

The rebuttable presumption “has particular significance in

securities-fraud class actions.” Amgen, Inc. v. Conn. Ret. Plans

& Tr. Funds, 568 U.S. 455, 462 (2013). It “allows plaintiffs to

38 Plaintiff also alleges that the presumption in Affiliated Ute

Citizens of Utah v. United States, 406 U.S. 128 (1972) applies.

See Dkt. No. 44 at ¶ 331. I need not address those allegations

establish the necessary element of reliance through common

proof.” In re New Motor Vehicles Canadian Exp. Antitrust

Litig., 522 F.3d 6, 25 (1st Cir. 2008). In an efficient market,

“the theory goes,” prices take into account all public

information, “so that an investor who buys or sells stock in

reliance on the integrity of the market price is in fact buying

or selling stock in reliance on the material

misrepresentations.” Id. At this stage, Defendants do not

dispute Plaintiff’s assertion that the presumption in Basic

applies.

E. Economic Loss and Loss Causation

To plead loss causation, Plaintiff must have “adequately

alleged a causal connection between the [D]efendants’ material

misrepresentations and the drop in [Boston Scientific’s] share

price.” Mass. Ret. Sys. v. CVS Caremark Corp., 716 F.3d 229,

237 (1st Cir. 2013). Said another way, “the stock market must

have reacted to the subsequent disclosure of the misconduct and

not to a ‘tangle of [other] factors.’” Bricklayers & Towel

Trades Int’l Pension Fund v. Credit Suisse Sec. (USA) LLC, 752

F.3d 82, 86 (1st Cir. 2014) (alteration in original) (quoting

Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 343 (2005)).

Plaintiffs typically allege39 loss causation by

39 It is up for debate whether the Rule 9(b) pleading standard

applies to loss causation. See Coyne, 943 F. Supp. 2d at 273–74

(describing Circuit split regarding proper pleading standard for

(1) identifying a ‘corrective disclosure’ (a release of

information that reveals to the market the pertinent

truth that was previously concealed or obscured by the

company's fraud); (2) showing that the stock price

dropped soon after the corrective disclosure; and (3)

eliminating other possible explanations for this price

drop, so that the factfinder can infer that it is more

probable than not that it was the corrective disclosure

. . . that caused at least a ‘substantial’ amount of the

price drop.

Mass. Ret. Sys., 716 F.3d at 237–38 (quoting FindWhat Inv. Grp.

v. FindWhat.com, 658 F.3d 1282, 1311–12 (11th Cir. 2011)). A

corrective disclosure “must connect the current, present,

negative information to the earlier false or misleading

statement.” Coyne, 943 F. Supp. 2d at 273 (internal citations

omitted). Accordingly, “[i]f [p]laintiff’s loss resulted from

the disclosure of negative information other than a prior false

or misleading statement by the Defendants, then she cannot show

that Defendants' conduct caused her injury and she has not pled

an adequate claim for securities fraud.” Id.

Here, Plaintiff’s allegations fall into the “inflation-

disclosure-deflation cycle,” whereby “loss causation may be

established, provided the disclosure is sufficiently connected

to the misstatement or omission.” Miller Inv. Tr. v. Morgan

Stanley & Co., LLC, 308 F. Supp. 3d 411, 445 (D. Mass. 2018).

1. The Alleged Corrective Disclosures

Plaintiff alleges two corrective disclosure events: (1) the

I proceed in the same manner here. Id. at 274; see also Miller

Inv. Tr. v. Morgan Stanley & Co., LLC, 308 F. Supp. 3d 411, 445

October 15, 2020 statement that Lotus Edge would not receive an

intermediate risk indication from the FDA until 2024, delaying

the expansion of Lotus Edge’s market from high risk patients to

intermediate risk patients, see Dkt. No. 44 at ¶¶ 86, 172, and

(2) the November 17, 2020 Lotus Edge recall announcement, id. at

¶ 324.

As a threshold matter, Plaintiff has alleged economic loss.

See id. at ¶ 324 (summarizing declines in share price following

each corrective disclosure). However, Plaintiff has only

demonstrated a causal connection between the loss and the

actionable misstatements as to the November 17, 2020 corrective

disclosure.

Mr. Mahoney’s statements on September 16 and October 28,

2020 are the only actionable statements made with scienter.

Those statements emphasize Lotus’ role as “an important growth

driver,” and the benefits of the two-valve strategy. See id. at

¶¶ 307, 308, 319. The first alleged corrective disclosure, on

October 15, 2020, relates to the timeline for Lotus’

intermediate risk indication, not whether Lotus will be a

“growth driver” or whether the two-valve strategy “makes sense.”

Although the corrective disclosure “need not be a mirror-image”

or “direct admission that a previous statement is untrue,” it

“must relate to the same subject matter as the alleged

misrepresentation.” Mass. Ret. Sys., 716 F.3d at 240 (emphasis

added) (internal citations and quotations omitted). The alleged

corrective disclosure on October 15, 2020 relates to the

intermediate risk indication for Lotus, not the future of Lotus

within Boston Scientific’s TAVR portfolio, which is the subject

matter of the actionable misstatements. Accordingly, Plaintiff

cannot plead loss causation on this ground.

In contrast, the November 17, 2020 recall announcement is

related to the same subject matter as the actionable

misstatements. When Defendants announced Lotus’ recall on

November 17, 2020, Mr. Mahoney explained that “[Boston

Scientific] [could] better serve [its] patients by prioritizing

and focusing our financial and employee resources on [a] one-

valve platform,” Dkt. No. 44 at ¶ 182, clearly indicating that

the two-valve strategy did not “make[] sense” and Lotus would

not drive growth, id. at ¶¶ 308, 319. The recall announcement

at least “partially disclosed what the alleged

misrepresentations had concealed from the market.” Omanoff v.

Patrizio & Zhao LLC, No. 14–723, 2015 WL 1472566, at *6 (D.N.J.

Mar. 31, 2015) (quoting In re Bradley Pharms., Inc. Sec. Litig.,

421 F. Supp. 2d 822, 829 (D.N.J. 2006)).

2. Additional Loss Causation Considerations

Plaintiff has adequately pleaded that “the stock price

dropped soon after the corrective disclosure” on November 17,

2020. Mass. Ret. Sys., 716 F.3d at 237 (citation omitted); see

Dkt. No. 44 at ¶¶ 192, 324. Plaintiffs have also, as alleged,

“eliminat[ed] other possible explanations for this price drop.”

, 716 F.3d at 238 (citation omitted). In the

Complaint, Plaintiff described in detail the questions analysts

asked following the announcement on November 17, 2020, as well

as articles40 published after the announcement, which all

centered on the decision to terminate the Lotus platform. See

Dkt. No. 44 at ¶¶ 182–191. As alleged, “[I] can infer that it

is more probable than not that it was the corrective

disclosure. . . that caused at least a ‘substantial’ amount of

the price drop.” Mass. Ret. Sys., 716 F.3d at 238 (citation

omitted).

3. Conclusion

Plaintiff’s allegations adequately pleaded loss causation

and economic loss, though only as to the alleged corrective

disclosure on November 17, 2020 based on the alleged

misstatements in the Complaint that I have found actionable.

F. Whether Boston Scientific May Be Held Liable

Having determined that Executive Defendant Mahoney, the

Chairman, President, and Chief Executive Officer of Boston

Scientific, has violated Section 10(b), I now turn to whether

Boston Scientific may be held liable also. I look to the

40 Plaintiff, for example, points to one article, allegedly

published in Mass Device on November 17, 2020, that described

the disclosure and recall, noting that the decision “set[] the

company back after it was expected that Lotus Edge would be a

‘major growth engine.’” Dkt. No. 44 at ¶ 191 (emphasis added).

This language clearly mirrors Mr. Mahoney’s actionable

statements.

principles of agency when considering whether Mr. Mahoney’s

actions and scienter can be imputed to Boston Scientific. See

In re ChinaCast Educ. Corp. Sec. Litig., 809 F.3d 471, 475 (9th

Cir. 2015); cf. SEC v. Tropikgadget FZE, 146 F. Supp. 3d 270,

280 (D. Mass. 2015) (explaining in the context of a civil

enforcement action under Section 10(b) that “[a]lthough a

corporate entity is not capable of intent, the knowledge

obtained by corporate employees acting within the scope of their

employment is imputed to the corporation, and the scienter of

executives can b

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