Case Background:
The complaint alleges that, on October 22, 2019, before the market opened, ServiceMaster announced disappointing preliminary financial results for the third quarter 2019 as well as net income of $25 million versus $71 million during the third quarter of 2018. The press release attributed the disappointing results to “termite damage claims arising primarily from Formosan termite activity . . . concentrated in Mobile, Alabama,” which had “been increasing over the last few years.” ServiceMaster had never mentioned Formosan or Mobile, Alabama, in its quarterly or annual SEC filings throughout the Class Period. Following this news, the price of ServiceMaster’s common stock fell $11.44 or 20%, closing at $44.70 on October 22, 2019, down from its $56.14 closing price on October 21, 2019.
The complaint alleges that throughout the Class Period, the Defendants made false and/or misleading statements and/or failed to disclose that: (1) ServiceMaster had failed to properly inspect and treat for Formosan activity; (2) as a result, ServiceMaster was and continued to experience a material adverse trend of costly litigation from injured customers which was not disclosed to investors; (3) in an unsuccessful attempt to mitigate this trend, the Defendants had been taking remedial measures since at least 2018, including drastically raising prices for termite treatments in Mobile, Alabama to deter contract renewals; and (4) as a result of the foregoing, ServiceMaster’s financial results were reasonably likely to be impacted, and would continue to impact ServiceMaster into 2020.
Current Status of Case:
On the Court granted Defendants’ Motion for Judgement on the Pleadings and dismissed the action. Lead Plaintiffs appealed the Court’s dismissal of the action to the Sixth Circuit Court of Appeals. On September 28, 2023, the Sixth Circuit affirmed the Court’s dismissal of the action. This action has concluded.
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