GRABAR LAW OFFICE INVESTIGATES POTENTIAL SHAREHOLDER ACTION ON BEHALF OF CURRENT SHAREHOLDERS OF MERIT MEDICAL SYSTEMS, INC. (NASDAQ: MMSI)
Current Merit Medical Systems, Inc. (NASDAQ: MMSI) shareholders who have held shares of the Company’s stock since at least February 26, 2019, have standing to seek corporate reforms, the return of funds back to company coffers and potentially a court approved incentive award if appropriate.
An $18.25 million settlement in a securities class action against Merit in the United States District Court for the Central District of California has recently been announced. The class action alleged that Merit, a medical device company whose entire business model was predicated on a “growth-by-acquisitions” strategy, and its CEO and CFO, made false and misleading statements about the company's integration of two key corporate acquisitions, Cianna Medical Inc. and Vascular Insights, LLC’s ClariVein. When Merit eventually revealed the truth about its difficulties in successfully integrating the acquisitions, hundreds of millions of dollars of shareholder value was lost. While the market was kept in the dark, several Merit officers and directors sold more than $12.6 million of company stock.
Unlike a class action, brought on behalf of damaged investors, a shareholder derivative action is an action brought by a shareholder of a public company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the board would be unwilling to pursue on its own.
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A securities class action is a case brought pursuant to Federal Rule of Civil Procedure 23 on behalf of a group of persons and entities who purchased the securities of a particular company during a specified period of wrongdoing (the class period). The complaint generally contains allegations that the company and/or certain of its officers and directors violated one or more federal or state securities laws.
A shareholder derivative action is a lawsuit brought by a shareholder of a publicly traded company on behalf of and for the benefit of the company itself against the directors and/or officers of that company. In a derivative action, shareholders “step into the shoes” of the directors and officers of a company and bring litigation that the corporate board would be unwilling to pursue on its own. Such unwillingness typically relates to the fact that the board members themselves are alleged to have participated in the misconduct and thus would be unlikely to “sue themselves.”
Shareholder derivative litigation can recover money damages back to the company for financial or reputational harm caused by the conduct of its insiders, and also can be used to improve the governance of public companies in order to guard against such harms in the future.
Any shareholder of a company can be a nominal plaintiff in a shareholder derivative action provided that the shareholder has held stock in the company continuously from at least the period in which the alleged wrongful conduct began through the present.