The panel also upheld the dismissal of claims related to Eargo’s post-IPO statements, including those concerning an audit by Blue Cross Blue Shield, revenue recognition, and the company’s growth. The court emphasized that Eargo’s statements about the audit were opinions and noted that investors did not provide sufficient evidence to prove that the statements were actionable.
Additionally, the panel pointed out that the lawsuit did not properly allege scienter (intent or knowledge of wrongdoing) since Eargo’s CEO and CFO had increased their stock holdings during the class period, which undermined the inference of fraudulent intent.
Eargo, which sells air conduction hearing aids directly to consumers, had marketed its products to customers under the Federal Employees Health Benefits Program (FEHBP) starting in 2017. The plaintiffs alleged that Eargo’s telecare business model was incompatible with FEHBP insurance policies, which require a diagnosis of “medical necessity” for hearing aids.
The case, Cai et al. v. Eargo Inc. et al., is case number 23-3470 in the U.S. Court of Appeals for the Ninth Circuit. The investors were represented by attorneys from Bernstein Litowitz Berge & Grossmann LLP and Block & Leviton LLP, while Eargo and the individual defendants were represented by Latham & Watkins LLP.
