What are the disclosure obligations of a publicly traded company when the CEO is ill? That is the question raised in a new securities class action lawsuit filed on August 22, 2025, against C3.ai, in which the plaintiffs allege that the defendants insufficiently disclosed the seriousness of and potential impact from the illness of the company’s CEO, Thomas Siebel. The lawsuit touches on long-standing concerns about company disclosures concerning senior executives’ health. A copy of the complaint can be found here.

Background

C3 is an artificial intelligence application software company. Thomas Siebel is the company’s founder, and its CEO and Chairman. In February 2025, Siebel circulated a note internally reporting that he had “suffered a health setback.” He said that he had contracted “an autoimmune disease” that resulted in “significant vision impairment.” He also said that it would not affect his ability to continue to actively manage the business in a hands-on manner.

In a February 25, 2025, analyst conference call, Siebel was asked about his health. Among other things, he said that “I am fully engaged, managing every detail of the business every day… My health is excellent, okay? So beyond all the infirmities that I had, I just can’t see.” In this and subsequent calls, Siebel his health would not affect his ability to continue to serve as the company’s CEO.

In July 2025, the company announced that it had initiated a search for Siebel’s successor as the company’s CEO. The announcement quoted Siebel as saying that he would continue his engagement until a successor was found.

On August 8, 2025, the company announced its quarterly financial results, in which, among other things, the company quoted Siebel as saying that its sales results for the quarter “were completely inacceptable.” It quoted Siebel further as saying that this was attributable to two factors: “One: It is clear that in the short time, the reorganization with new leadership had a disruptive effect. Two: As we previously announced, I have had a number of health issues in the past six months… Dealing with these health issues prevented me from participating in the sales process as actively as I have in the past. With the benefit of hindsight, it is now apparent that my active participation in the sales process may have had a great greater impact than I previously thought.”

According to the subsequently filed securities lawsuit, the company’s share price declined more than 25% on this news.

The Lawsuit

On August 22, 2025, a plaintiff shareholder filed a securities class action lawsuit against C3.ai, Siebel, and other company executives. The complaint purports to be filed on behalf of investors who purchased the company’s securities between February 25, 2025, and August 8, 2025.

The complaint alleges that during the class period the defendants tried to reassure investors that Siebel was in sufficient health to effectively conduct his role, without any indication that his health or the necessary accommodations would jeopardize the company’s health or financial performance. The complaint further alleges that “In truth, C3 AI’s optimistic reports of growth, earning potential and anticipated margins fell short of reality as they relied far too heavily on the health and effectiveness of the Company’s CEO. Despite repeated assurances, Defendant Siegel had not sufficiently recovered from his ailments to act in the same capacity for C3 AI as he had previously.”

The plaintiffs allege 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.

Discussion

There have been numerous past high-profile examples where a company’s disclosures about their CEOs’ health have been questoined. Readers will recall the controversy that followed the death of Steve Jobs, and the questions that followed about whether the company should have told investors earlier about his pancreatic cancer. In another example, investors also questioned Oracle’s handling of issues surrounding CEO Mark Hurd’s health, after Hurd took a medical leave and died shortly thereafter.

The situation with Siebel’s health at C3 arguably is different. This is not a case where there was a cover-up that Siebel was having health issues. Siebel himself distributed the note revealing his illness and the impact on his vision. The plaintiff’s theory in this case would seem to be not that the illness was not reported, but rather that the seriousness of and impact from Siebel’s illness was soft-pedaled, and in particular the extent to which Siebel’s health issues would impact the company’s financial performance was under-reported.

It may be that there was a lot of wishful thinking in Siebel’s messages about his health. It may also be that both he and the company underestimated what the impact from his health issues will be. Establishing falsity could be a challenge in this case; while it is true that in retrospect that the statements about Siebel’s health could be questioned, it will be hard to show that the statements were false at the time they were made. It will also be a challenge for the plaintiffs to establish that the statements were made with scienter, unless somehow positive thinking about one’s health in the face of adversity can be said to be tantamount to fraud.

As the examples above about Steve Jobs and Mark Hurd show, the questions about disclosure duties with respect to the CEO’s health are perennial concerns. For readers interesting in thinking more about these issues, I recommend the January 2020 memo from the Fenwick & West law firm, published in the Harvard Law School Forum on Corporate Governance and entitled “Best Practices for Disclosing Executive Health Issues.” The memo helpfully reviews the legal principles governing the issues and examines specific instances where companies have taken different approaches to the issue.