SmileDirectClub issued a statement following “media inquiries around recent legal actions filed by industry trade organizations and/or certain of its members, as well as a research report issued by a short seller.”
On October 2, the company was hit with a class action suit filed in Michigan federal court arguing that the company misled investors ahead of its $1.3 billion initial public offering (IPO) in mid-September. This follows a class action complaint filed on September 24 in Tennessee federal court by dentists, orthodontists, and consumers against the company alleging false advertising, fraud, negligence, and unfair and deceptive trade practices. The complaint disputes the accuracy of several statements made in the company’s Registration Statement with the SEC and points out that the company is subject to litigation for operating as a dentist without proper licensing in several states, as well as other litigation.
The company’s public statement reads as follows:
“Recently, there have been media statements by dental trade organizations and allegations in a class action lawsuit filed in Nashville federal court that purports to question the safety and legitimacy of SmileDirectClub’s pioneering teledentistry platform. There is no factual basis nor scientific or medical justification in these allegations to substantiate the false claims made about our model and the state-licensed doctors in our affiliated network. Backed by evidence, SmileDirectClub denies the allegations made in the class action lawsuit and by these dental trade organizations and their members, and we will vigorously defend our business model against any entity working to limit consumer choice.
These actions are viewed by SmileDirectClub as nothing more than the latest in a stream of unevidenced and misleading attempts by dental trade organizations, certain of their members and others motivated to thwart legitimate competition. Since previous complaints filed by organized dentistry with state dental boards and federal government institutions have gone nowhere, this class action lawsuit is nothing more than an apparent effort to now abuse the judicial system to promote the same falsehoods previously spread by organized dentistry, and to intentionally mislead media, shareholders and potential customers away from the safe, convenient and affordable benefits of SmileDirectClub’s disruptive business model.
Mimicking an earlier misinformation campaign orchestrated by a dental trade group, the class action falsely states that we do not have our 510k certification for clear aligners, and that we are under investigation by the Food & Drug Administration (“FDA”). As evidenced on the FDA’s website and in our public filing, SmileDirectClub’s manufacturing entity does have a 510k and manufactures aligners in compliance with FDA regulations. In fact, within weeks after the American Dental Association filed a so-called Citizen Petition that first leveled these spurious charges, the FDA declined the ADA’s request to issue an injunction against SmileDirectClub (link); rather than inform its members or the media of this rejection, the ADA continued to promote this filing with its members. The plaintiffs in the class action suit do nothing more than mirror and amplify the ADA’s misleading claims.
Anticompetitive campaigns directed toward SmileDirectClub have not gone unnoticed by federal authorities. Fair competition in the market is the foundation of American business, which is overseen by the United States Department of Justice (“DOJ”) and the U.S. Federal Trade Commission (“FTC”). Both agencies recently filed joint amicus briefs before the 11th Circuit Court of Appeals, SmileDirectClub. LLC. V. Battle, et al., No. 19-12227 in Georgia; and Leeds & SmileDirectClub, LLC v Jackson, et al., Case No. 19-11502 in Alabama federal court, in support of SmileDirectClub.
SmileDirectClub is pleased that the DOJ and FTC have together determined that an amicus brief was necessary in both of our lawsuits to stop the efforts by members of state dental boards to thwart competition from disruptive technology and to short-circuit the litigation against them for violations of antitrust laws.”