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Fortrea Holdings Inc., a clinical research company spun off from Labcorp Holdings Inc. in June 2023, is facing a proposed shareholder class action lawsuit alleging that it overstated the strength of its business model, resulting in significant investor harm as the company’s financial difficulties came to light.

The lawsuit, filed on Monday in the U.S. District Court for the Southern District of New York by shareholder Lucas Deslande, claims that Fortrea, along with CEO Thomas Pike and CFO Jill McConnell, misled investors by repeatedly assuring that the company would develop its own independent technology infrastructure separate from Labcorp. The complaint asserts that Fortrea overstated anticipated cost savings related to exiting transition service agreements with Labcorp, which were intended to support the spinoff process.

The suit highlights key moments when Fortrea’s financial weaknesses surfaced publicly, including a downgrade by Jefferies Financial Group on September 25, 2024, which lowered Fortrea’s rating from "buy" to "hold," citing concerns over the company’s business model and the limited materiality of expected cost savings. Following this downgrade, Fortrea’s shares dropped approximately 12%.

Further scrutiny followed on December 6, 2024, when Baird downgraded Fortrea from "outperform" to "neutral," referencing the company’s inconsistent post-spinoff performance and unclear strategic direction. This downgrade corresponded with an 8% decline in Fortrea’s share price.

On March 3, 2025, Fortrea disclosed that its projected revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2025 would not meet prior expectations, citing delayed project progress post-spinoff. This announcement resulted in a significant 25% drop in Fortrea’s share price.

The lawsuit accuses Fortrea and the individual defendants of acting with scienter—meaning actual knowledge or reckless disregard of wrongdoing—and alleges violations of the Securities Exchange Act.

Jeremy A. Lieberman, J. Alexander Hood II, and Thomas H. Przybylowski of Pomerantz LLP represent the plaintiff. Counsel for Fortrea and the individual defendants have not responded to requests for comment.

The case is Deslande v. Fortrea Holdings Inc. et al., case number 1:25-cv-04630, U.S. District Court for the Southern District of New York.