Securities Regulation Daily Wrap Up, LITIGATION AND ENFORCEMENT—D. Mass.: Organ transplant technology company hid that it forced product bundling on customers, (Jul 23, 2026)

By Kristin J. Angelino, J.D.

Plaintiffs’ securities fraud claims regarding TransMedics’ alleged misleading statements about forced bundling of its products survived dismissal, but the remainder of plaintiffs’ fraud claims were dismissed.

The district court for the District of Massachusetts granted in part and denied in part defendants’ motion to dismiss securities fraud and control person liability claims in a putative class action brought against TransMedics Group, Inc. and two of its executives for alleged misleading statements regarding the success and cost-effectiveness of the company’s National OCS Program (NOP), a bundle of organ retrieval, transport and logistics services. The court held that plaintiffs sufficiently pleaded their securities fraud claims in one category of challenged statements: statements denying allegations of forced bundling of the company’s NOP with the company’s organ care system product (OCS). The court also held that plaintiffs sufficiently pleaded control person liability against the company’s executives (In re TransMedics Group, Inc., No. 1:25-cv-10385 (D. Mass. July 21, 2026)).

TransMedics Group is a medical technology company whose sole product is the OCS, a portable, perfusion-based device designed to keep donated organs viable outside the human body until they reach their recipients. TransMedics also offers end-to-end logistics and transport of donated organs with its NOP.

Plaintiffs alleged that defendants made misleading statements regarding the success and cost-effectiveness of the NOP. The court grouped the challenged statements into five categories: (1) statements regarding the pricing of the NOP, (2) statements denying allegations of forced bundling, (3) statements regarding insurance reimbursement, (4) statements regarding customer retention, and (5) statements regarding the cause of TransMedics’ decline during the third quarter of 2024. The amended complaint included a short-sellers report from Scorpion Capital (the Scorpion Report) and statements from 11 confidential witnesses. Defendants argued that the amended complaint should be dismissed because it failed to plead materially false or misleading statements, scienter, and loss causation.

Materially false and misleading statements. The court examined each group of challenged statements separately. Turning to statements touting the cost advantages of the NOP and denying price gouging, the court held that all of the statements in this category that broadly praised the “efficiency” and “cost savings” of the NOP offerings constituted inactionable puffery. The court also held that allegations that TransMedics charged high prices for aviation and other services, without more, failed to allege the falsity of those challenged statements “with plausibility or particularity.” Similarly, the court held that plaintiffs failed to allege sufficient facts to show that any of defendants’ statements denying price gouging were false and misleading.

Regarding forced bundling, the court concluded that plaintiffs adequately pleaded the falsity of statements by the company’s CEO, Waleed Hassanein, denying allegations of forced bundling of the NOP and OCS. The court reasoned that these allegations were adequately pleaded because they included multiple sources who asserted that TransMedics forced customers to bundle the NOP with the OCS and many of these sources worked at hospitals that used TransMedics and held positions that involved directly working with TransMedics personnel.

Turning to insurance reimbursement statements, plaintiffs alleged that four statements made by the CEO asserting that insurance companies “fully” reimburse NOP charges were false. The court held that these allegations, which were sourced from hospital professionals who directly used the company’s transplant services and products, were sufficient to plead falsity. The court held that plaintiffs also adequately alleged the materiality of these statements.

The court next turned to customer retention statements, which concerned the CEO’s comments during a health care conference that the NOP was “very sticky” with customers and that no NOP-using center has “walked away” from NOP. The court held that plaintiffs’ allegations that customers left TransMedics for more affordable competitors did not plausibly support the falsity of the CEO’s statement because describing the NOP as “very sticky” constituted inactionable puffery. As for the CEO’s statement that no center has walked away from NOP, the court held that none of plaintiffs’ allegations alleged that such statement was false at the time it was made.

Finally, the court looked at the statements regarding the company’s third quarter 2024 revenue losses, in which Hassanein asserted that the losses were due to “seasonality.” Plaintiffs alleged that the company’s revenue decline was due to customers leaving TransMedics because of high pricing, rather than seasonality, and they presented evidence from a confidential witness that the third quarter revenue losses mainly were caused by the loss of hospital customers in Texas, one of TransMedics’ major markets. The court held that the allegations from the confidential witness plausibly alleged the falsity of the CEO’s statement with particularity and plaintiffs adequately pleaded that these misrepresentations were material.

Scienter. The court next looked at whether plaintiffs adequately pleaded scienter for the three remaining challenged statements. Looking at forced bundling, the court found that the plaintiffs sufficiently alleged scienter based on the “core-operations” theory combined with several other factors that “tip the scales toward scienter.” The first factor was a published letter from a U.S. Representative to Hassanein that raised various concerns about TransMedics’ business practices and included allegations of forced bundling. The second factor was a statement in the Scorpion Report from an organ procurement expert who reported hearing from a transplant center that Hassanein threatened to withhold the center’s OCS machine access unless it paid TransMedics’ transportation charges. Finally, the court held that plaintiffs’ claims of insider trading against the CEO and director “add[ed] color to their scienter allegations.” Considered in their totality, the court concluded that plaintiffs’ allegations sufficiently alleged scienter.

Turning to insurance reimbursement, the court concluded that plaintiffs failed to sufficiently allege scienter. The court noted that plaintiffs relied on the allegations of three TransMedics customers who described challenges in getting TransMedics’ costs fully reimbursed by insurance. The court held that these accounts failed to plead that Hassanein acted with scienter since none of the customers stated that they informed the CEO about their reimbursement difficulties. Additionally, the allegations failed to raise a strong inference that the reimbursement challenges were so widespread and blatant that Hassanein knew or should have known about them. Although one fact in the Scorpion Report raised the possibility that Hassanein knew that a customer was absorbing NOP costs, neither the complaint nor the Scorpion Report stated when this occurred. The court added that “with few facts pointing to Hassanein’s culpable state of mind, the collateral allegations about suspicious stock sales are not enough to build a strong inference of scienter.”

Finally, turning to statements about the company’s Q3 2024 loss, the court held that plaintiffs failed to allege that Hassanein acted with scienter when he told investors that neither pricing pressure nor competitive dynamics caused the company’s revenue decline. Although plaintiffs presented evidence from a confidential witness (CW) that the company’s third quarter decline mainly was due to the loss of Texas customers, the court found that the CW’s account did not indicate that the CEO knew about the Texas market losses. Additionally, the court held that a lower-level employee’s knowledge cannot be imputed to the CEO without additional facts going towards his scienter. The court added that, although plaintiffs alleged that Hassanein made unusually large, off-plan stock sales at a time when he “undoubtedly knew about the steep decline in the company's revenue,” plaintiffs failed to allege either that the CEO knew that pricing pressure or competitive dynamics played a role in declining revenue, or that the customer losses in Texas occurred before the stock sales.

Loss Causation. The court next examined whether the surviving category of challenged statements--Hassanein’s statements denying forced bundling—sufficiently pleaded loss causation. The court examined the corrective disclosures provided by plaintiffs and held that one of them--the Scorpion Report--sufficed for pleading loss causation since it unveiled information from multiple CWs who reported that TransMedics forced customers to bundle the NOP services with use of its OCS device. The court noted that the CWs included several transplant surgeons who used TransMedics services and a former TransMedics reimbursement executive. The court also noted that the complaint alleged that the market quickly absorbed and responded to the Scorpion Report’s bundling allegations since TransMedics’ stock price dropped approximately 12% within two days of the report’s publication. The court rejected defendants’ objection to plaintiffs’ reliance on the Scorpion Report as a corrective disclosure and held that the relevant question is whether the market reasonably perceived the allegations in the Scorpion Report as true and acted upon them accordingly.

Control person liability. Since the amended complaint sufficiently stated an underlying securities fraud claim, the court concluded that plaintiffs sufficiently pleaded control person liability against Hassanein and director and former CFO Stephen Gordon. The court held that Hassanein cannot escape control person liability in instances where he made allegedly false or misleading statements; however, Gordon did not make or sign off on any of the surviving false statements and his status as a director is not sufficient to establish control person liability. Since defendants moved for dismissal of the control person claims only on the basis that plaintiffs failed to state an underlying fraud claim, the court declined to dismiss the claims against Gordon but suggested that the parties should discuss whether Gordon is a proper defendant moving forward.

The case is No. 1:25-cv-10385.

Judge: Sorokin, L.

Attorneys: Joshua Baker (The Rosen Law Firm, P.A.) for Merly Jewik. Jeffrey C. Block (Block & Leviton LLP) for Antonio Echeverria Gutierrez. Joseph Edward White, III (Saxena White P.A.) for Peace Officers Annuity and Benefit Fund of Georgia. Margaux Malasky (Wilmer Cutler Pickering Hale and Dorr LLP) for TransMedics Group, Inc.

Companies: Peace Officers Annuity and Benefit Fund of Georgia; TransMedics Group, Inc.

LitigationEnforcement: FraudManipulation MassachusettsNews