ROBERT STROUGO, Individually and
`on Behalf of All Others Similarly
`Situated,
`
`
`Lead Plaintiff,
`
`UNITED STATES DISTRICT COURT
`MIDDLE DISTRICT OF TENNESSEE
`NASHVILLE DIVISION
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`MEMORANDUM OPINION
`
`
`
`
`
`
`
`No. 3:20-cv-00165
`
`
`
`
`v.
`
`TIVITY HEALTH, INC., et al.,
`
`
`Defendants.
`
`
`
`Lead Plaintiff Sheet Metal Workers Local No. 33, Cleveland District, Pension Fund (“Lead
`
`Plaintiff”), on behalf of all of those who purchased Tivity Health, Inc. (“Tivity”) stock between
`
`March 8, 2019 and February 19, 2020, bring this putative class action under Sections 10(b) and
`
`20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b) and 78t(a) (“Securities
`
`Exchange Act”).1 Lead Plaintiff alleges that Defendants Tivity, former Tivity Chief Executive
`
`Officer (“CEO”) Donato Tramuto (“Tramuto”), Chief Financial Officer (“CFO”) Adam C.
`
`Holland (“Holland”), and President and Chief Operating Officer (“COO”) Dawn Zier (“Zier”)
`
`(collectively, “Defendants”) misled investors about the success of Tivity’s acquisition of
`
`Nutrisystem, Inc. (“Nutrisystem”), as well as the valuation of Tivity’s goodwill and the
`
`Nutrisystem tradename. Now before the Court is Defendants’ Motion for Summary Judgment
`
`(Doc. No. 213), which has been fully briefed, heard at oral argument, and is ripe for review (see
`
`
`1 As the Court noted in its Memorandum Opinion on Defendants’ motion to dismiss, “[p]rior to
`consolidation, Robert Strougo filed the initial complaint in this action. (See Doc. No. 1). For ease
`of reference, the parties and the Court have kept Strougo’s name in the caption even though Sheet
`Metal Workers is Lead Plaintiff.” (Doc. No. 116 at 2 n.2).
`
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`

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`Doc. Nos. 213–14, 226, 233, 284–85).2 For the following reasons, Defendants’ motion will be
`
`granted in part and denied in part. Lead Plaintiff’s Motion to Supplement Status Conference (Doc.
`
`No. 284), which is opposed by Defendants (Doc. No. 285), will be granted.
`
`I.
`
`BACKGROUND AND UNDISPUTED FACTS3
`
`Contrary to Defendants’ assertions, the briefing before the Court is far from “narrowly
`
`tailored.” (Doc. No. 234 at 2). The parties’ nearly-200 pages of briefing on the statements of
`
`undisputed material facts proves unhelpful, as it is marred with manufactured disagreements and
`
`inappropriate argument. (Doc. Nos. 227, 234). To make matter worse, the parties have filed more
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`than 2,500 pages of exhibits, many of which are not pertinent to the dispute at hand. (Doc. Nos.
`
`227–30, 234). Considering the needlessly expansive record the parties have developed on this
`
`motion, and that the Court has already recounted the basic facts of this case on multiple occasions,
`
`(see Doc. No. 116 at 1–3; Doc. No. 178 at 1–2), the Court finds it unnecessary to delve into the
`
`intricacies of the various events pertinent to this case. Instead, the Court will describe the relevant
`
`circumstances only as necessary for the purposes of resolving the instant motion.
`
`
`2 Both parties are guilty of violating this Court’s Local Rules in their briefing. As an example,
`Lead Plaintiff’s response to Defendants’ statement of undisputed material facts does not comply
`with Local Rule 56.01(c), as it is a far cry from providing only concise statements “demonstrating
`that the fact[s] [are] disputed” with support by “specific citation[s] to the record.” Meanwhile,
`Defendants’ reply to Lead Plaintiff’s response to the statement of undisputed material facts (Doc.
`No. 234) was filed in contravention to this Court’s Local Rules. L.R. 56.01(d) (providing for a
`reply to a statement of undisputed material facts only “[i]f the non-moving party has asserted
`additional disputed facts[.]”). Because Defendants’ reply filing is improper, the Court will only
`cite to Lead Plaintiff’s response to Defendants’ statement of undisputed material facts in this
`section.
`
` 3
`
` The undisputed facts in this section are drawn from the undisputed portions of Defendants’
`statements of facts (Doc. No. 227), the exhibits and depositions submitted in connection with the
`summary judgment briefing, and portions of the Consolidated Complaint (“Consolidated
`Complaint”) (Doc. No. 105) that are not contradicted by the evidence in the record.
`
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 2 of 32 PageID #: 8262
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`2
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`

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`On December 10, 2018, Tivity announced it would acquire Nutrisystem. (Doc. No. 227 ¶
`
`1; Doc. No. 105 ¶ 41). At that time, Tramuto served as Tivity’s CEO, and Holland served as its
`
`CFO. (Doc. No. 105 ¶¶ 23, 25).
`
`The next month, Tivity included “financial forecasts prepared by Nutrisystem
`
`management” in its January 2019 Form S-4, which included Nutrisystem’s estimated adjusted
`
`earnings before interest, taxes, depreciation, and amortization (“aEBITDA”) of $763 million.
`
`(Doc. No. 228-10 at 4). On February 19, 2019, Nutrisystem announced that it reduced its 2019
`
`revenue guidance to “the range of $682 to $702 million and adjusted EBITDA between $100 and
`
`$110 million.” (Doc. No. 215-32 at 3). The same day, Tivity issued earnings guidance for 2019,
`
`which reflected Nutrisystem’s adjusted reduced 2019 guidance and predicted: $1.146 billion to
`
`$1.177 billion in revenue; $240 million to $ 258 million in aEBITDA; and $9 million to $12 million
`
`in cost synergies. (Doc. No. 227 ¶¶ 61, 62; Doc. No. 215-31 at 4).
`
`On March 8, 2019, Tivity announced the closing of its acquisition. (Doc. No. 227 ¶ 1).
`
`That day, Tivity recorded $445.7 million as the value of Nutrisystem’s goodwill, and $800 million
`
`as the value of Nutrisystem’s tradename.4 (Doc. No. 227 ¶¶ 5, 8). Following the acquisition, Zier,
`
`
`4 Pursuant to Generally Accepted Accounting Principles (“GAAP”), because Tivity recorded
`Nutrisystem’s goodwill, Tivity was required to test that goodwill “at least annually[,] for
`impairment at a level of reporting referred to as a reporting unit.” (Doc. No. 227 ¶ 9(citing ASC
`350-20-35-1)). In addition to the annual test, ASC 350 also required Tivity to perform interim
`goodwill impairment tests to determine “if an event occurs or circumstances change that indicate
`that the fair value of the entity (or the reporting unit) may be below its carrying amount (a
`triggering event).” (Id. ¶ 12 (citing ASC 350-20-35-66)). If, after assessing the totality of the
`events or circumstances, Tivity determined that it was “more likely than not that the fair value of
`a reporting unit is less than its carrying amount,” then Tivity was required to perform the goodwill
`impairment test.” (Id. ¶¶ 9, 12 (citing ASC 350-20-35-3E)). If Tivity determined that no triggering
`event had occurred making it more likely than not that the fair value of a reporting unit had fallen
`below its carrying amount, no interim quantitative impairment test would be required. (Id. ¶ 16).
`If Tivity reached the opposite conclusion, ASC 350 would require it to perform an interim
`quantitative impairment test. (Id. ¶ 12 (citing ASC 350-20-35-3E)). This process also applies to
`intangible asset assessments. (Id. ¶ 16 (citing ASC 350-30-35-18F)). One of the cornerstones of
`3
`
`
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`

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`who was Nutrisystem’s former President and CEO, became Tivity’s President and Chief Operating
`
`Officer (“COO”). (Doc. No. 105 ¶¶ 6, 24). Keira Krausz (“Krausz”), who was Nutrisystem’s
`
`former Nutrisystem Chief Marketing Officer, became Tivity’s President of the Nutrition Business
`
`Unit. (Doc. No. 215-54 at 13).
`
`On May 8, 2019, Tivity affirmed its February 19, 2019 guidance in its earnings results for
`
`Q1 2019.5 (Doc. No. 227 ¶ 65). In its release, Tivity noted that it was including Nutrisystem’s
`
`financial results for only a portion of Q1 2019 following the closing of the transaction, but did not
`
`include Nutrisystem’s financial results for the stub period from January 1, 2019 to March 7, 2019
`
`(“Stub Period”). (Doc. No. 227 ¶¶ 74, 76; Doc. No. 228-29 at 1, 4). It further stated that the
`
`Nutrisystem integration was “on track.” (Doc. No. 227 ¶¶ 74, 76; Doc. No. 228-29 at 1, 4). This
`
`was based on the reported aEBITDA for the Nutrisystem segment (i.e., the “nutrition segment”)
`
`from March 8 to March 31, 2019 that came to $13.3 million, ensuring Tivity was moving toward
`
`its continued expectation to deliver $9 million to $12 million in cost synergies for 2019. (Doc.
`
`No. 227 ¶¶ 74, 76; Doc. No. 228-29 at 1, 4). A day later, Tivity filed its Form 10-Q for Q1 2019,
`
`including in its balance sheet the $445.7 million in goodwill and $800 million in intangible assets
`
`for the Nutrisystem tradename that Tivity recorded on the day the acquisition closed. (Doc. No.
`
`215-6 at 12). It also included pro forma financials describing Tivity’s “results as if the acquisition
`
`of Nutrisystem had occurred on January 1, 2018.”6 (Id. at 11).
`
`
`Lead Plaintiff’s case is that Defendants allegedly failed to properly follow these procedures
`throughout the 2019 fiscal year in regard to Nutrisystem’s goodwill and tradename.
`
` 5
`
` In its opinion, the Court will refer to the four quarters of the fiscal year as Q1 (comprising of
`January 1 to March 31), Q2 (comprising of April 1 to June 3), Q3 (comprising of July 1 to
`September 30), and Q4 (comprising of October 1 to December 31).
`
` 6
`
` Put simply, Tivity’s pro forma financials demonstrate to investors the financial position Tivity
`would have been in had it acquired Nutrisystem at a prior date—in this case, on January 1, 2018.
`These metrics are used to show investors how Tivity’s acquisition of Nutrisystem impacted
`4
`
`
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`

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`On August 7, 2019, Tivity issued another press release announcing its earnings for Q2
`
`2019. (Doc. No. 215-33). That release stated that revenues increased to $340 million, “including
`
`nutrition segment revenues of $182.9 million”; income from continuing operations was $18.1
`
`million; net goodwill of $791.7 million, and stated:
`
`Adjusted EBITDA from continuing operations for the second quarter of 2019 was
`$70.3 million. This includes $1.3 million of cost synergy benefits and $34.7 million
`from the nutrition segment and excludes $ 11.4 million of acquisition, integration,
`and restructuring costs associated with the Nutrisystem acquisition. This compares
`to adjusted EBITDA from continuing operations of $ 35.1 million for the second
`quarter of 2018.
`
`(Id. at 2–3). In its release, Tivity reduced its 2019 earnings guidance on the nutrition segment as
`
`follows:
`
`• Revenues: $534 million to $550 million (previous 2019 guidance) to $502 million
`to $512 million (updated 2019 guidance); and
`• Consolidated Adjusted EBITDA: $91 million to $101 million (previous 2019
`guidance) to $80 million to $84 million (updated 2019 guidance).
`
`(Id. at 4). Tramuto told investors that “a comprehensive optimization plan ha[d] been developed”
`
`that Tivity believed would “result in improved results for the 2020 diet season” for the nutrition
`
`business. (Id. at 3). That day, Tivity filed with the SEC an earnings supplement presentation
`
`describing its Q2 2019 performance and reduced financial guidelines. (Doc. No. 227 ¶ 87). As
`
`relevant here, Tivity’s filing included updated 2019 guidance for the nutrition segment based on
`
`when it acquired Nutrisystem, as well as for all of 2019. (Id. ¶ 88).
`
`On November 5, 2019, in Q3 2019, Tivity released a memo describing an impairment
`
`assessment it conducted on the Nutrisystem segment. (Doc. No. 215-16 at 2; Doc. No. 227 ¶ 34).
`
`In it, Tivity concluded “no impairment existed as of the test date as the fair value of the reporting
`
`
`Tivity’s historical financial position and operations to date by retroactively folding Nutrisystem’s
`operations into Tivity’s historical results. Pro forma numbers are, by definition, hypothetical.
`5
`
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`

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`unit of $1.436 billion exceeded its carrying value of $1.183 billion[.]” (Doc. No. 215-16 at 3).
`
`Further, according to the memo, Tivity “performed a quantitative impairment test of the
`
`Nutrisystem tradename in connection with the triggering event identified above” and “concluded
`
`no impairment existed as of the test date as the fair value of the tradename of $829 million exceeds
`
`its carrying value of $800 million.” (Doc. No. 215-16 at 5).
`
`On November 12, 2019, Tivity issued a press release affirming its August 7, 2019
`
`guidance. (Doc. No. 215-33 at 4). In that release, Tramuto stated that the nutrition segment had
`
`“met [Tivity’s] expectations reflecting an improved focus on execution and new investments in []
`
`strategy.” (Doc. No. 230-47 at 3). The same day, Tivity filed an earnings supplement presentation
`
`with the SEC, describing its Q3 2019 performance and again included slides comparing guidance
`
`for the nutrition segment for the period that Tivity owned Nutrisystem, and for all of 2019. (Doc.
`
`No. 227 ¶ 93). Less than a month later, on December 9, 2019, Tivity announced that “[e]ffective
`
`December 4, 2019, the employment relationship between Tivity . . . and Dawn M. Zier, the
`
`President and Chief Operating Officer of the Company, was mutually terminated.” (Doc. No. 215-
`
`51 at 3).
`
`As relevant here, on February 19, 2020, Tivity issued two separate press releases
`
`(collectively, “Corrective Disclosure”). First, Tivity issued a press release announcing its Q4 2019
`
`and full year 2019 results, as well as providing financial guidance for Q1 and full year of 2020
`
`(“Financial Press Release”). (Doc. No. 227 ¶ 99). The Financial Press Release opened with the
`
`following evaluation of the nutrition segment:
`
`[W]hile the Nutrition segment had a disappointing end to 2019, it remains
`profitable, and we believe it will continue to generate significant cash flow.
`Management and our Board of Directors are committed to making the right
`investments for this business with a focus on innovation, execution, and new
`advertising strategies to return the business to growth.
`
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 6 of 32 PageID #: 8266
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`6
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`

`

`(Doc. No. 228-19 at 8). The guidance in the Financial Press Release provided the details on
`
`Tivity’s losses in Q4 2019, stating:
`
`Net loss in the fourth quarter of $(323.1) million included a non-cash impairment
`charge of $(377.1) million in the Nutrition segment. In connection with its annual
`impairment test, the Company concluded that the fair values of both goodwill and
`the Nutrisystem tradename were below their carrying amounts. As a result, the
`Company recorded non-cash impairment charges to lower the carrying amount of
`goodwill and the Nutrisystem tradename by $(137.1) million and $(240.0) million,
`respectively. These impairment losses primarily resulted from a reduction in the
`Company’s long-term forecast for the Nutrition segment. The Company does not
`expect the impairment charge to have an impact on future operations, or affect its
`liquidity, cash flows from operating activities, or compliance with the financial
`covenants in its credit agreement. In addition, the Company recorded a purchase
`accounting measurement period adjustment to accelerate amortization of the
`customer list intangible asset to more closely align with the estimated economic
`benefit. When compared to the Company’s guidance for 2019, this acceleration
`resulted in incremental amortization expense of $17.4 million for 2019. Adjusted
`EBITDA was $55.5 million and $222.1 million for the fourth quarter and fiscal year
`2019, respectively. The Company benefited from cost synergies realized of $5.4
`million during the fourth quarter and $9.8 million during the fiscal year. The
`Company remains on track to deliver on its stated cost synergy and integration
`goals.
`
`(Id. at 9). The Financial Press Release provided further information on the nutrition segment,
`
`disclosing the $8.3 million Nutrisystem pre-merger aEBITDA losses from the Stub Period, and
`
`stating:
`
`Revenues in the Nutrition segment were $113.7 million for the fourth quarter and
`$498.1 million for the fiscal year since acquisition. Fiscal year 2019 adjusted
`EBITDA for the Nutrition segment was $79.6 million, which benefited from the
`timing of certain expenses in relation to the acquisition date of March 8, 2019 as
`reflected in the table above. Adjusted EBITDA includes $3.7 million and $7.0
`million of benefits from cost synergies for the fourth quarter and fiscal year 2019,
`respectively.
`
`(Id. at 10).
`
`Second, Tivity issued a press release stating that Tramuto was terminated “without cause”
`
`as the Company’s Chief Executive Officer effective February 18, 2020 (“Employment Press
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 7 of 32 PageID #: 8267
`
`7
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`

`

`Release”). (Doc. No. 215-54 at 4). The Employment Press Release also stated that Krausz
`
`resigned from her position as President of the Nutrition Business Unit. (Doc. No. 215-54 at 4, 13).
`
`By close of the market the next day, Tivity’s stock price fell by more than $10.00 per
`
`share—more than 45% in share value—to close at $12.50 per share. (Doc. No. 230-12).
`
`Following the instant events, Lead Plaintiff Sheet Metal Workers Local No. 33, Cleveland
`
`District, Pension Fund brought suit against Defendants for violations of Sections 10(b) and 20(a)
`
`of the Securities Exchange Act of 1934. Lead Plaintiff alleges, and now seeks to prove to a jury,
`
`that: (1) leading up to and after the Nutrisystem acquisition, Defendants painted a deceitfully
`
`optimistic picture of the acquisition through false statements exaggerating Nutrisystem’s financial
`
`status alongside omissions of Nutrisystem’s aEBITDA loss from the Stub Period (“Nutrisystem
`
`Claim”); and (2) Defendants made material misrepresentations and omissions in Tivity’s quarterly
`
`filings starting in 2019 regarding Nutrisystem’s tradename and goodwill, failing to account for
`
`their impairments (“Goodwill Claim”).7 Now before the Court is Defendants’ motion for summary
`
`judgment on Lead Plaintiff’s Section 10(b), 20(a), and scheme claims. (Doc. No. 213).
`
`II.
`
`LEGAL STANDARD
`
`Summary judgment is appropriate only where there is “no genuine dispute as to any
`
`material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A
`
`genuine dispute of material fact exists ‘if the evidence is such that a reasonable jury could return
`
`
`7 Defendants characterize Lead Plaintiff’s Section 10(b) and Rule 10b-5 claim as two separate
`claims: the Nutrisystem Claim and the Goodwill Claim. The Court interprets Lead Plaintiff to
`dispute this characterization. (Doc. No. 226 at 14 (referring to the “so-called Nutrition Claim”),
`17 (referring to the “so-called Goodwill Claim”)). However, given Lead Plaintiff does not
`expressly object to this characterization as faulty in some material respect, and acknowledging that
`the parties have consistently addressed Lead Plaintiff’s Section 10(b) claim in this manner
`throughout the course of this litigation, the Court will do the same here and will consider the
`Nutrisystem and Goodwill Claims to be separate for the purposes of resolving the instant motion.
`
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 8 of 32 PageID #: 8268
`
`8
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`

`

`a verdict for the nonmoving party.’” Peffer v. Stephens, 880 F.3d 256, 262 (6th Cir. 2018) (quoting
`
`Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)). “The party bringing the summary
`
`judgment motion has the initial burden of informing the Court of the basis for its motion and
`
`identifying portions of the record that demonstrate the absence of a genuine dispute over material
`
`facts.” Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003) (citation omitted). “The moving party
`
`may satisfy this burden by presenting affirmative evidence that negates an element of the non-
`
`moving party’s claim or by demonstrating an absence of evidence to support the non-moving
`
`party’s case.” Id. (citation and quotations omitted). “In response, the nonmoving party must
`
`present ‘significant probative evidence’ that will reveal that there is more than ‘some metaphysical
`
`doubt as to the material facts.’” Miller v. Maddox, 866 F.3d 386, 389 (6th Cir. 2017) (quoting
`
`Moore v. Philip Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir. 1993)).
`
`In deciding a motion for summary judgment, the Court must review all the evidence, facts,
`
`and inferences in the light most favorable to the party opposing the motion. Matsushita Elec.
`
`Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citation omitted). The Court does
`
`not, however, weigh the evidence, judge the credibility of witnesses, or determine the truth of the
`
`matter. See Anderson, 477 U.S. at 249. The mere existence of a scintilla of evidence in support
`
`of the non-moving party’s position will be insufficient to survive summary judgment; rather, there
`
`must be evidence on which a trier of fact could reasonably find for the non-moving party. See
`
`Rodgers, 344 F.3d at 595.
`
`III. ANALYSIS
`
`Defendants contend they are entitled to summary judgment on all of Lead Plaintiff’s
`
`claims, or at minimum, a shortened class period. (Doc. No. 214). Lead Plaintiff disagrees, arguing
`
`there are genuine disputes of material fact on all issues Defendants raise that make summary
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 9 of 32 PageID #: 8269
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`9
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`

`

`judgment inappropriate, and that Defendants’ request for a shortened class period is baseless.
`
`(Doc. No. 226). The Court will address the parties’ respective arguments by claim below.
`
`1. Section 10(b) and Rule 10b-5 Claims
`
`Defendants argue that they are entitled to summary judgment on Lead Plaintiff’s Section
`
`10(b) and Rule 10b-5 claims, i.e., the Nutrisystem and Goodwill Claims. “Section 10(b) of the
`
`Securities Exchange Act and Rule 10b-5 promulgated thereunder prohibit ‘fraudulent, material
`
`misstatements or omissions in connection with the sale or purchase of a security.’” La. Sch.
`
`Emps.’ Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471, 478 (6th Cir. 2010) (quoting Frank v.
`
`Dana Corp., 547 F.3d 564, 569 (6th Cir. 2008)). As the Court previously articulated at the motion
`
`to dismiss stage, “[t]here are six elements to a securities-fraud suit under Section 10(b) and Rule
`
`10b-5: ‘(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a
`
`connection between the misrepresentation or omission and the purchase or sale of a security; (4)
`
`reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.’” In
`
`re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 469 (6th Cir. 2014) (citing Matrixx Initiatives, Inc. v.
`
`Siracusano, 563 U.S. 27, 38–39 (2011)); see also Dougherty v. Esperion Therapeutics, Inc., 905
`
`F.3d 971, 979 (6th Cir. 2018). Defendants move for summary judgment on the first, second, and
`
`sixth elements of the Nutrisystem and Goodwill Claims. The Court will address Defendants’
`
`arguments, by element, below.
`
`A. First Element: Materially False or Misleading Statement or Omission
`
`First, Defendants contend they are entitled to summary judgment on the first element of
`
`the Nutrisystem and Goodwill Claims because Lead Plaintiff cannot show they made a material
`
`misrepresentation or omission on either claim. See Omnicare, 769 F.3d at 469. To establish an
`
`actional material misrepresentation or omission, a plaintiff must demonstrate two things: “(1) that
`
`
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`10
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`

`

`a defendant made a statement or omission that was false or misleading; and (2) that this statement
`
`or omission concerned a material fact.” Id. at 470 (citing Matrixx, 563 U.S. at 38)). On the first
`
`element, a plaintiff must show either that the defendant made “an affirmative statement that is
`
`misleading or false” or “fail[ed] to disclose information when it had a duty to do so.” Omnicare,
`
`769 F.3d at 470–71. There is “[a] duty to affirmatively disclose” such that an omission may be
`
`actionable “‘when there is insider trading, a statute requiring disclosure,’” or, as relevant in this
`
`case, “‘an inaccurate, incomplete[,] or misleading prior disclosure.’” City of Monroe Emps. Ret.
`
`Sys. v. Bridgestone Corp., 399 F.3d 651, 669 (6th Cir. 2005) (quoting In re Digital Island Sec.
`
`Litig., 357 F.3d 322, 329 n.10 (3d Cir. 2004)).
`
`On the second element, “the analytic approach for evaluating ‘materiality’” is no clearer
`
`than the first. Omnicare, 769 F.3d at 471. It is therefore informative to look at the materiality
`
`requirement’s purpose, which is “not to attribute to investors a child-like simplicity, an inability
`
`to grasp the probabilistic significance of [opinion statements], but to filter out essentially useless
`
`information that a reasonable investor would not consider significant, even as part of a larger ‘mix’
`
`of factors to consider in making his investment decision.’” Id. at 471–72 (quoting Basic, Inc. v.
`
`Levinson, 485 U.S. 224, 234 (1988) (citation and quotations omitted)). To that end,
`
`““[m]isrepresented or omitted facts are material only if a reasonable investor would have viewed
`
`the misrepresentation or omission as having significantly altered the total mix of information made
`
`available.” In re Sofamor Danek Grp., Inc., 123 F.3d 394, 400 (6th Cir. 1997) (citation and
`
`quotations omitted). In simple terms, a “‘fact is material if there is a substantial likelihood that a
`
`reasonable shareholder would consider it important in deciding how to vote.’” Basic, 485 U.S. at
`
`231 (quoting TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976)). A fact is immaterial,
`
`and not actionable under Section 10(b) and Rule 10b-5, if it is a statement including “‘vague, soft,
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 11 of 32 PageID #: 8271
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`11
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`

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`puff[ery] [] or obvious hyperbole’ upon which a reasonable investor would not rely.” In re Ford
`
`Motor Co. Sec. Litig., 381 F.3d 563, 570 (6th Cir. 2004) (quoting In re K-tel Int’l, Inc. Sec. Litig.,
`
`300 F.3d 881, 897 (8th Cir. 2002)). The Supreme Court has articulated why the issue of materiality
`
`is one not often best resolved at summary judgment:
`
`The issue of materiality may be characterized as a mixed question of law and fact,
`involving as it does the application of a legal standard to a particular set of facts.
`In considering whether summary judgment on the issue is appropriate, we must
`bear in mind that the underlying objective facts, which will often be free from
`dispute, are merely the starting point for the ultimate determination of
`materiality. The determination requires delicate assessments of the inferences a
`‘reasonable shareholder’ would draw from a given set of facts and the significance
`of those inferences to him, and these assessments are peculiarly ones for the trier
`of fact. Only if the established [statements or] omissions are so obviously important
`to an investor, that reasonable minds cannot differ on the question of materiality is
`the ultimate issue of materiality appropriately resolved as a matter of law by
`summary judgment.
`
`TSC Indus., 426 U.S. at 450 (citation and quotations omitted). Consequently, “[c]ourts generally
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`reserve such questions for the trier of fact.” Helwig v. Vencor, Inc., 251 F.3d 540, 563 (6th Cir.
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`2001) (en banc). With these standards in mind, the Court turns to the parties’ arguments on this
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`element.
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`1. Nutrisystem Claim
`
`As articulated above, the heart of the Nutrisystem Claim is that Defendants fraudulently
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`failed to disclose to investors that Nutrisystem suffered a substantial aEBITDA loss during the
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`Stub Period. (See, e.g., Doc. No. 105 ¶¶ 54, 67, 74). That Nutrisystem suffered a $8.3 million
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`aEBITDA loss during the Stub Period is not in dispute. (Doc. No. 228-19 at 10). Nor is it disputed
`
`that when Tivity reported its Q1 results on May 8, 2019—the first earnings release after acquiring
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`Nutrisystem—it did not include that loss. (Doc. No. 227 ¶¶ 74, 76; Doc. No. 228-29 at 4). Instead,
`
`Tivity disclosed that it was reporting only on Nutrisystem’s performance from March 8 to March
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`31, 2019, which constituted a positive $13.3 million in aEBITDA. (See Doc. No. 227 ¶¶ 74, 76;
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 12 of 32 PageID #: 8272
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`12
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`Doc. No. 228-29 at 4). Lead Plaintiff argues that Defendants’ omission of Nutrisystem’s $8.3
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`million aEBITDA loss in the Stub Period, an omission it contends Defendants did not clear up for
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`investors until the Corrective Disclosure on February 19, 2020, was materially misleading because
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`it painted a faulty picture of Nutrisystem’s success leading up to and after the acquisition.
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`Defendants now move for summary judgment, contending they had no duty, statutory or
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`otherwise, to disclose Nutrisystem’s $8.3 million aEBITDA loss in the Stub Period prior to
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`February 19, 2020.8 (Doc. No. 214 at 15–18). Defendants present evidence demonstrating that
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`no statute, regulation, or GAAP required Tivity to disclose Nutrisystem’s financial performance
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`pre-merger. (Doc. No. 227 ¶¶ 76–78). Lead Plaintiff counters with expert testimony to dispute
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`Defendants’ arguments, asserting that the SEC required disclosure to inform investors of the
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`proper context of Nutrisystem’s performance at the time of its acquisition. (Doc. No. 229-68 at
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`13–15). Lead Plaintiff further argues that Defendants touting Nutrisystem’s success and
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`expectations to surpass its prior guidance rendered Tivity’s initial disclosures omitting the
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`Nutrisystem Stub Period loss misleading, therefore requiring its disclosure. (Doc. No. 226 at 14–
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`15).
`
`Defendants also contend the omitted information on the Nutrisystem Stub Period in
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`Tivity’s initial financial disclosures on the Nutrisystem acquisition was not material. In support,
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`Defendants rely upon: (1) Tivity’s initial disclosure results for Q1 2019, which indicated that it
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`was only reporting on Nutrisystem’s performance “for the 24-day period March 8, 2019 through
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`March 31, 2019” (Doc. No. 227 ¶¶ 74–75); (2) Nutrisystem’s full performance for Q1 2019, which
`
`
`8 Given the dispute of fact on this alleged material omission, see supra, the Court need not address
`Defendants’ arguments they are entitled to summary judgment on the “synergy” and “guidance”
`statements. (Doc. No. 214 at 12, 14). In any event, the Court does not find these arguments legally
`relevant considering those challenged statements all relate to the disputed material omission on
`Nutrisystem’s Stub Period performance.
`
`
`Case 3:20-cv-00165 Document 302 Filed 04/21/25 Page 13 of 32 PageID #: 8273
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`was in line with previously reported guidance (id. ¶¶ 64, 86); (3) Tivity’s Form 10-Q for Q1 2019,
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`with pro forma financials showing that Nutrisystem had an $8.8 million net income loss (id. ¶ 83);
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`and (4) Tivity’s August and November 2019 disclosures showing Nutrisystem had an approximate
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`$9 million aEBITDA loss for the pre-merger portion of Q1 2019. (Doc. No. 215-6 at 11; Doc. No.
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`227 ¶ 88).
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`In response, Lead Plaintiff counters with evidence that investors did not fully appreciate
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`Tivity’s limited initial disclosures on the Nutrisystem acquisition and subsequent disclosures of
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`Nutrisystem’s losses. Specifically, Lead Plaintiff presents evidence that: (1) Nutrisystem
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`manipulated its financials to meet its prior guidance (Doc. Nos. 150-3, 150-4; Doc. No. 229-27 at
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`2 (discussing “how critical [it] is hitting the Q1 [EBITDA] guidance[,]” and asking “[w]hat can
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`we cut to make the number”); Doc. No. 229-28 (discussing how Nutrisystem’s aEBITDA number
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`was formed without the Stub Period included); (2) Tivity’s proffered pro forma financials did not
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`disclose Nutrisystem’s Stub Period $8.3 million aEBITDA loss (Doc. No. 229-68 ¶ 45 n.47; see
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`Doc. No. 215-6 at 11; Doc. No. 227 ¶ 88); and (3) Tivity’s August and November 2019 disclosures
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`did not correct investors’ perceptions about Nutrisystem’s performance during the Stub Period
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`(Doc. No. 215-48 at 2 (“We don’t think that [the Nutrition EBITDA’s $9 million h