GNC Holdings Inc., a global retailer of health and wellness products, has filed a motion to dismiss a proposed class action pending in Pennsylvania federal court. Martin v. GNC Holdings, Inc., No. 15-1522 ( W.D. Pa., filed July 11, 2016). Oregon Attorney General Ellen Rosenblum originally filed the case in November 2015 alleging that the company had sold third- party supplements containing illegal substances.
After the case was filed, GNC’s stocks fell by 14 percent, then another 26.9 percent after the release of its third quarter 2015 report. In the complaint, investors allege that the company misled shareholders about nutritional supplements containing illegal substances shortly before stock prices dropped.
In May 2016, GNC responded with a motion to dismiss, reportedly arguing that the investors’ complaint was deficient and that they were required to plead the particular facts of their case rather than rely on the attorney general’s allegations. In response, investors claim former employees’ interviews and emails to executives prove that the company knew about the risks related to third-party supplements.
GNC’s reply brief in support of its motion to dismiss maintains that the plaintiff bears the burden of pleading particularized facts showing a strong inference that the defendants intended to deceive investors, that the statements were materially false or misleading at the time they were made, and that the truth of the allegedly concealed facts was revealed to the market in a corrective disclosure. The company maintains that the documents introduced by the plaintiffs do not prove defendants had specific knowledge or intent. Oral argument on the motion to dismiss is scheduled for August 10, 2016.
