In Bach v. Amedisys, Inc., the Fifth Circuit reversed the dismissal of a complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 because the district court erred in reviewing a set of five partial corrective disclosures individually, rather than looking at them collectively.

Amedisys, Inc. is a home health company that provides home health services to chronically ill patients. A vast majority of Amedisys’s income derives from Medicare reimbursements, which are based on a tiered threshold system built upon the number of home health visits Amedisys makes per patient. Two lead plaintiffs filed a purported class action lawsuit against Amedisys, Inc. and its seven current or former board members (collectively, the “Defendants”) alleging that they pressured Amedisys employees into making medically unnecessary home visits to hit a higher Medicare reimbursement threshold. The complaint alleged that the Defendants then made a series of materially false and misleading representations that concealed the fraudulent scheme and that the misrepresentations came to light through a series of five partial corrective disclosures. The five disclosures included an online report, a statement that Amedisys’s CEO and CIO were leaving the company to pursue other interests, a Wall Street Journal article, the initiation of federal investigations, and a company announcement revealing disappointing operating results.

In a 12(b)(6) motion to dismiss, the Defendants challenged the loss causation element of the securities fraud claim. A plaintiff can establish loss causation by identifying a corrective disclosure, showing a drop in the stock price soon after the disclosure, and excluding other factors that could have caused the price drop. The Defendants argued that the five disclosures were not corrective disclosures because they did not reveal information that was related to the alleged fraud. The district court evaluated each of the five corrective disclosures individually, concluded that none of them amounted to a corrective disclosure, and dismissed the complaint. The Fifth Circuit, however, reversed and held that the five disclosures “collectively constitute and culminate in a corrective disclosure.” The Court noted that a corrective disclosure can come from any source, take any form, and also be a part of a series that should be evaluated together. The case was remanded back to the district court for further proceedings.

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