The Weight Watchers mobile app.
Bloomberg Bloomberg via Getty Images
By Daniel Bentley
May 12, 2016

Weight Watchers International Inc on Wednesday won the dismissal of a lawsuit claiming it defrauded shareholders about how badly enrollment declines and the proliferation of free mobile weight loss applications were hurting its bottom line.

U.S. District Judge Lewis Kaplan in Manhattan said the plaintiffs in the proposed class action failed to show that Weight Watchers deliberately overstated its business and growth prospects and inflated its stock price in 2012 and early 2013.

The case long predated the October 2015 announcement that talk show host and media mogul Oprah Winfrey had taken a 10 percent stake in the New York-based company.

Kaplan said the plaintiffs failed to show that Weight Watchers intended to hide its troubles signing up paying clients as more rivals began offering free apps to track food intake, exercise and weight-loss goals.

He also rejected a claim that Weight Watchers improperly concealed how badly disruptions to a new software platform were impeding prospective business clients from signing up.

“Even if the online business was cannibalizing customers from the traditional business and the traditional meetings business was in decline, plaintiffs have not here pled facts sufficient to demonstrate that this necessarily would be inconsistent with an optimistic growth forecast,” Kaplan wrote.

The plaintiffs were led by the Oklahoma Police Pension & Retirement System, and KBC Asset Management NV of Brussels, Belgium.

They sued on behalf of shareholders from Feb. 14, 2012, to Feb. 13, 2013, when Weight Watchers cited competitive threats in projecting 2013 profit that would fall well below analyst forecasts. Its share price fell 17 percent the next day.

Lawyers for the plaintiffs did not immediately respond to requests for comment.

Weight Watchers said it is gratified by Kaplan’s decision, and always believed that the lawsuit had no merit.

The case is In re: Weight Watchers International Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 14-01997.

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