Jesse Campbell v. Transgenomic, Inc., 916 F.3d 1121

In 2016 Transgenomic and pre‑merger Precipio agreed to combine; Transgenomic circulated a proxy statement and shareholders approved the merger in June 2017.
Plaintiff Jesse Campbell (a former Transgenomic shareholder) sued as a class, alleging the proxy statement contained materially misleading omissions and mislabelings in violation of §14(a), Rule 14a‑9, and §20(a).
Key allegations: (1) the proxy omitted pre‑merger Precipio’s projected net income/loss and omitted expense items needed to derive net income from disclosed revenue/gross‑profit figures; (2) a “Revenue distribution” table was mislabeled so shareholders would misread Precipio’s value.
District court dismissed the amended complaint for failure to state a claim, finding any omissions/mislabeling were not materially misleading as a matter of law.
The Eighth Circuit reversed and remanded, holding materiality for both the omission of net income projections and the table labeling is a fact issue for the trier of fact; it also reinstated the §20(a) control‑person claim against Transgenomic’s CEO Paul Kinnon.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether omitting pre‑merger Precipio’s projected net income/loss from the proxy was materially misleading	Campbell: net income projections are non‑trivial and their omission (while disclosing revenue/gross profit) could materially alter the total mix	Transgenomic: proxy disclosed other key metrics (cash flows, revenue, gross profit); proxy need not include every financial metric	Reversed: materiality cannot be decided as a matter of law; a reasonable investor may find the omission significant, so factfinder must decide
Whether the “Revenue distribution” table was mislabeled/misleading	Campbell: the table’s label could lead shareholders to overvalue Precipio because it was ambiguous whether figures were pre‑ or post‑merger	Transgenomic: other proximate clues in the proxy identify the columns as post‑merger figures, so no meaningful deception	Reversed: whether a reasonable investor would resolve ambiguity from surrounding text is a jury question; labeling may be materially misleading
Whether plaintiff pleaded control‑person liability under §20(a) against Kinnon	Campbell: alleged Kinnon exercised actual control over operations and had power to direct the misstatements/omissions	Kinnon: (not detailed at dismissal stage) challenged sufficiency of pleading	Reversed: complaint sufficiently pled primary violation and control; §20(a) claim survives pleading standards

Elam v. Neidorff, 544 F.3d 921 (8th Cir.) (standard of de novo review for dismissal of securities fraud pleadings)
In re Stratasys Ltd. S’holder Sec. Litig., 864 F.3d 879 (8th Cir.) (PSLRA heightened pleading standards and materiality framing)
Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27 (U.S.) (materiality standard: whether a statement was misleading as to a material fact)
In re K‑tel Int’l, Inc. Sec. Litig., 300 F.3d 881 (8th Cir.) (materiality usually a jury question; only decided as law when reasonable minds cannot differ)
TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (U.S.) (proxy disclosure materiality test: substantial likelihood reasonable shareholder would consider omitted fact important)
Basic Inc. v. Levinson, 485 U.S. 224 (U.S.) (materiality standard applied across §14(a) and §10(b) contexts)
Gebhardt v. ConAgra Foods, Inc., 335 F.3d 824 (8th Cir.) (net income may be more significant to investors than revenue for valuing a company)
Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083 (U.S.) (true statements can sometimes negate the risk of deception but do not automatically defeat a materiality claim)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S.) (pleading standard: complaint must contain sufficient factual matter to state a plausible claim)