In my 2022 year-end wrap up of D&O insurance developments, I identified macroeconomic factors as among the sources of D&O claims during the past year including, among other things, interest rate increases, economic inflation, labor supply and supply chain disruption, and the Ukraine War. In various posts this year, I have noted that these factors continue to affect companies and to contribute to the number of securities class action lawsuit filings. In the latest example of the way in which these macroeconomic factors can translate into securities litigation, the drug and healthcare company Baxter International was sued last week due to the decline in the company’s share price after the company’s announcement that continuing supply chain woes were setting back its operations and financial results more significantly than the company had anticipated. The new lawsuit shows that macroeconomic factors such as supply chain constraints are continuing to contribute to securities lawsuit filings. A copy of the July 12, 2023, complaint against Baxter can be found here.


Baxter is a healthcare and drug company with a globally dispersed supply chain. The securities lawsuit complaint alleges that “there have been several roadblocks preventing the free flow of its supply in recent years – such as the COVID-19 pandemic and the Russian war in Ukraine.” As a result, the company has “at times, experienced shortages of supply.” The complaint cites numerous instances during 2022 in which the company identified the challenges it was experiencing in its supply chain, but the complaint also alleges that the company continued to provide “healthy earnings guidance due, in its words, to being able to control problems arising from its supply chain.”

While the company revealed by, among other things, lowering its earnings guidance, “that the supply chain and/or operational issues previously discussed were more severe that initially presented,” the company continued “to conceal the true extent of the supply chain problems affecting Baxter’s financial earnings and operations.”

On February 9, 2023, when Baxter announced its FY 2022 earnings results, the company stated in its earnings press release that “ongoing macroeconomic challenges and supply chain headwinds continue to weigh on business performance.” The supply chain challenges in recent periods, the company said, have “had a negative impact on our profit margins, due to increased costs, and on our sales for certain product categories due to our inability to fully supply demand.” According to the complaint, the company’s share price declined on this news from $45.68 per share to $41.01 per share, representing, according to the complaint, of loss to shareholders of nearly $1.25 billion.

The Lawsuit

On July 12, 2023, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of Illinois against Baxter and certain of its directors and officers. The complaint purports to be filed on behalf of investors who purchased the company’s share between May 25, 2022, and February 8, 2023.

The complaint is based on the allegation that the defendants’ “failure to disclose Baxter’s true problems relating to its supply chain deceived investors (including Plaintiff) about the Company’s true financial health.” The company, according to the complaint, provided the market with false and misleading guidance “in order to prop up investor expectations and share prices in the hopes of outperforming and/or perpetuating investor expectations long enough for its supply chain problems to subside.” The defendants, the complaint alleges, “knew the supply chain issues were going to continue to be an insurmountable problem but strung the investing public along to prop up the Company’s share price.”

Specifically, the complaint alleges that the defendants made false or misleading statements or failed to disclose that: “(i) the Company concealed the true extent of the supply chain problems it was experiencing while simultaneously exaggerating its ability to maintain a health supply chain in the face of global pressures; (ii) as a result, the Company’s projected earnings were materially misleading during the Class Period; (iii) the foregoing, once revealed, was reasonably likely to have a material negative impact on the Company’s financial condition; and (iv) as a result, the Company’s public statements were materially false and misleading at all relevant times.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.


At a minimum, the filing of this lawsuit shows that supply chain issues continue to translate into securities class action lawsuit filings. To be sure, the supply chain issues that are at the heart of this new lawsuit took place in 2022. In 2023, there have been increasing signs that many supply chain constraints have eased, and that companies in many industries are experiencing fewer disruptions and even lower freight rates. It could well be that the recent easing of supply chain constraints could mean fewer supply chain-related suits going forward. In the meantime, however, it does appear (at least for now) that supply chain issues, along with other macro factors, are continuing to contribute to securities litigation filing frequency.

The company statements quoted in the complaint say relatively little about the causes of the supply chain difficulties the company was experiencing. The complaint cites only one public statement, attributing the supply chain difficulties to “challenges that COVID brought, the semiconductor shortage, oil prices, and the war in Ukraine.” It is sort of a grab bag kind of statement, but it does at least raise the question of whether this case, in addition to being supply chain-related, also qualifies as COVID-related.

Although it does seem plausible that the disruption related to COVID was at least a contributing cause to the supply chain disruption, the COVID causal connection is not a key part of the complaint. COVID is in fact barely mentioned in the complaint, and then only in passing. Different minds could conclude differently, but in my mind the minimal references in the complaint are not enough for this complaint to qualify as “COVID related.”

The lawsuit has only just been filed, and it remains to be seen how it will fare. I will say that the plaintiffs will face an uphill battle demonstrating that the defendants’ statements were false, misleading, or made with scienter. Even the disclosures and public remarks that the plaintiff quotes at length in the complaint contain many statements in which company officials described the difficulties the company was having with the supply chain. Indeed, as the complaint acknowledges, during the class period, the company lowered its guidance in recognition of the supply chain difficulties.

The plaintiff theorizes that the defendants nevertheless sought to soft-pedal the difficulties – along the lines of: sure they told us it was bad, but they knew it was a lot worse than they were saying – in the hopes that they could prop up the share price until the problems eased. That is one theory. An obvious alternative inference is that the defendants recognized and disclosed the problems as they saw them at the time but that the problems proved to be worse and more persistent than even they recognized. It is a tall order to suggest that the defendants, who acknowledged the problems and lowered guidance during the period, set out to defraud investors.