On August 15, 2025, the U.S. Court of Appeals for the First Circuit held that a class action lawsuit against Charles River Laboratories International Inc. (“Charles River”) for securities fraud could proceed after surviving a motion to dismiss for failure to state a claim. (State Teachers Retirement System of Ohio v. Charles River Laboratories International, Inc., 24-1705 (1st Cir. 2025) (“Decision”).) The lawsuit stems from the company’s statements about its importation of macaques to the United States for medical testing.
Background
Charles River is a corporation that derives much of its revenue from providing animals for drug development research and safety testing, as well as conducting that testing. Prior to 2020, Charles River obtained more than 60% of its macaques used for such testing from China. In the spring of 2020, China halted all exports of macaques, and Charles River began obtaining the animals from Cambodia. (Decision at 4–5.)
In August 2021, the United States Department of Justice issued a press release about an ongoing investigation into the importation of macaques from Cambodia to the United States. On November 16, 2022, the department unsealed an indictment alleging a conspiracy to smuggle macaques into the United States, charging several unnamed coconspirators. The following day, one of Charles River’s suppliers, Inotiv Inc., disclosed in a Securities and Exchange Commission filing that its principal supplier of macaques was a target of the indictment. (Decision at 8–10.)
On November 30, 2022, Charles River stated in an SEC filing that it did not have direct supply contracts with the indicted Cambodian supplier. That same day, Charles River’s CEO James C. Foster said in an interview with an analyst that Charles River did not have any direct contracts with the indicted supplier and that the indicted supplier was not a supplier of Charles River. (Decision at 10–11.)
Charles River’s stock value declined following the publication of a research report in January 2023 that stated the company relied on indicted suppliers. The company’s stock value fell further after Charles River issued a press release in February 2023 disclosing it had received a grand jury subpoena related to the importation of macaques. (Decision at 12–13.)
The case originated in May 2023 when an individual investor filed a class action lawsuit against Charles River and its current and former CEOs. Appellant State Teachers Retirement System of Ohio, et al. (“State Teachers”), as lead plaintiff, filed an amended complaint against Charles River seeking recovery, in part, under 15 U.S.C. § 78j(b). Charles River moved to dismiss the action under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. The lower court granted Charles River’s motion to dismiss, finding that the State Teachers’ complaint failed to allege that Charles River made false or misleading statements and did not adequately allege that Charles River had the required intent (scienter)—both elements of a claim under 15 U.S.C. §78j(b). State Teachers appealed. (Decision at 14–15.)
Court of Appeals Opinion
The appeals court closely examined Foster’s statements that “the indictment would ‘have no real short-term impact’ ” and that “the ‘indicted supplier’ was ‘not a supplier of’ Charles River.” (Decision at 18.) The court found that these statements, taken together and in the context of being made in an interview with an analysist, would leave a reasonable investor with the impression that Charles River’s supply chain did not include suppliers implicated or mentioned in the indictment. The court noted that despite Foster’s statements, a shipment of macaques on its way to Charles River had already been seized as part of the DOJ’s investigation. (Decision at 18–19.) The court held that once Foster chose to address the indictment, “he could not do so in a manner that omitted key information” about Charles River’s supply chain. (Decision at 20.)
The court thus concluded that the complaint adequately alleged that Charles River misled investors. Further, assuming the facts in the complaint are true, the court held that “scienter flows inexorably” from Charles River’s misleading statements to investors. (Decision at 23.) Accordingly, the court of appeals reversed the lower court’s dismissal for failure to state a claim.
Prepared by Katherine Palazzolo, Librarian in Residence, under the supervision of Sarah Friedman, Legal Reference Librarian
Law Library of Congress, November 19, 2025
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