Disclosing Minimum Commitment Contracts and Inventory Risks in Securities Litigation: Commentary on In re Mobileye Global Securities Litigation (2d Cir. 2025)

Disclosing Minimum Commitment Contracts and Inventory Risks in Securities Litigation: Commentary on In re Mobileye Global Securities Litigation (2d Cir. 2025)

I. Introduction

This commentary analyzes the Second Circuit’s summary order in In re Mobileye Global Securities Litigation, No. 25‑1292 (2d Cir. Dec. 16, 2025), affirming the dismissal of a putative securities class action against Mobileye Global Inc. and several of its executives. The plaintiffs—led by the Retirement Plan for Chicago Transit Authority Employees and the Oklahoma Firefighters Pension and Retirement System—alleged that Mobileye engaged in a “channel‑stuffing scheme” involving its EyeQ chips, and that it failed to properly disclose the impact of minimum purchase commitments and excess customer inventory on its reported financial performance and on a June 2023 secondary offering.

Although issued as a summary order—and therefore non‑precedential under Second Circuit Rule 32.1.1—the decision is legally significant. It offers detailed, practical guidance on:

  • What constitutes an actionable misrepresentation or omission under § 10(b) and Rule 10b‑5 in the context of inventory build‑ups and minimum commitment contracts;
  • The limits of “channel‑stuffing” theories where the underlying contractual practices are lawful and disclosed;
  • The treatment of forward‑looking statements and opinions in investor communications; and
  • How robust risk and trend disclosures under Items 303 and 105 of Regulation S‑K can defeat § 11 Securities Act claims at the pleading stage.

The Court affirmed the district court (Cote, J., S.D.N.Y.), holding that plaintiffs failed to plead any actionable material misstatements or omissions under either the Exchange Act or the Securities Act, and that the “channel‑stuffing” allegations did not state a viable scheme liability claim under Rule 10b‑5(a) or (c).

II. Summary of the Opinion

The core holdings of the Second Circuit’s order can be summarized as follows:

  1. No actionable misstatements about minimum commitment contracts and inventory:
    • Mobileye’s 2022 and 2023 Forms 10‑K adequately disclosed that some major Tier 1 customers had minimum purchase commitments for 2023, that those customers had built excess inventory in prior periods, and that Mobileye expected them to use that inventory before placing new orders.
    • General statements that shipments would “depend upon market conditions” were not misleading in light of these disclosures.
  2. No falsity in earnings call commentary about order “stabilization”:
    • The Court found no plausible allegation that Mobileye’s April and July 2023 statements about quarterly order stabilization were false or rendered misleading by any omitted facts.
  3. Performance and market‑share statements not misleading:
    • Mobileye’s reporting of performance metrics (growth vs prior guidance, market share, etc.) was accurate on its face, and plaintiffs did not allege otherwise.
    • The company did not expressly attribute its financial results “to legitimate market demand,” and in any event had disclosed the existence of minimum commitments and excess inventory.
  4. Inventory explanations were not fraudulent:
    • Mobileye’s explanation that excess inventory partly resulted from customers’ own decisions to build stock in 2021–2022 due to COVID‑related supply chain risks was not shown to be false.
    • Plaintiffs did not offer non‑conclusory facts showing that excess inventory was “primarily” caused by an undisclosed channel‑stuffing scheme rather than by those disclosed dynamics (prior over‑ordering, minimum commitments, and weaker downstream demand).
  5. Forward‑looking statements and opinion statements were non‑actionable:
    • Statements predicting that customers would work down excess inventory in early 2024, and forecasts about future market share and growth, were forward‑looking and accompanied by cautionary language.
    • A February 2023 comment that Mobileye’s “ecosystem is also the cost leader” and that the company felt “comfortable” with its market share was treated as a non‑actionable opinion and forward‑looking observation.
  6. No “scheme liability” under Rule 10b‑5(a) and (c):
    • Under SEC v. Rio Tinto, plaintiffs must allege conduct that is deceptive or fraudulent separate from the alleged misstatements or omissions.
    • The use of lawful, disclosed minimum commitment contracts, without more, did not amount to a fraudulent “scheme” to defraud investors.
  7. Securities Act § 11 and § 15 claims also fail:
    • Because the registration statement and incorporated SEC filings disclosed the key risks and trends (minimum commitments, inventory build‑up, reliance on a few Tier 1 customers, and order volatility), there was no actionable misstatement or omission under § 11.
    • Alleged omissions under Item 303 (known trends) and Item 105 (risk factors) failed because the very trends and risks plaintiffs invoked were already disclosed.
    • Without a primary § 11 violation, control‑person claims under § 15 necessarily failed.

III. Background and Context

A. Parties and Business Context

Mobileye Global Inc. develops advanced driver‑assistance systems (ADAS), including its flagship EyeQ chip. The alleged misconduct centers on Mobileye’s sales to Tier 1 customers—large suppliers that integrate Mobileye’s chips and related components into systems sold to automakers (downstream manufacturers).

Plaintiffs are institutional investors and individual purchasers of Mobileye securities who allegedly bought shares between January 26, 2023, and August 1, 2024 (the “class period”), including in a June 2023 secondary public offering.

B. The Alleged “Channel‑Stuffing Scheme”

Plaintiffs alleged that Mobileye abused its market power to require Tier 1 customers to enter into annual minimum commitment contracts for EyeQ chips in volumes exceeding actual demand. According to plaintiffs:

  • This practice inflated Mobileye’s reported revenues and market share by “pulling forward” future sales into the present—“cannibalizing future growth.”
  • Customers accumulated large inventories of EyeQ chips that they did not need in the near term.
  • Mobileye failed to disclose that its reported results and offering documents were materially affected by this strategy and by the ensuing inventory overhang.

The alleged omissions and misstatements fell into two broad categories:

  1. Exchange Act claims (Section 10(b)/Rule 10b‑5 and Section 20(a)): statements in Forms 10‑K and earnings calls, plus an alleged undisclosed “scheme.”
  2. Securities Act claims (Sections 11 and 15): statements and omissions in the registration statement for the June 2023 offering and incorporated SEC filings, including alleged failures to comply with Items 303 and 105 of Regulation S‑K.

Judge Cote dismissed all claims. Plaintiffs appealed, and the Second Circuit affirmed, reviewing de novo.

IV. Analysis of the Court’s Legal Reasoning

A. Exchange Act Claims under § 10(b) and Rule 10b‑5

1. Pleading Standards: Rule 9(b) and the PSLRA

The Court began by reciting the familiar heightened pleading standards for securities fraud:

  • Fed. R. Civ. P. 9(b) requires that fraud be pleaded “with particularity”—who said what, when, where, how it was false, and why it mattered.
  • The PSLRA, 15 U.S.C. § 78u‑4(b), adds two key requirements:
    • Plaintiffs must specify each allegedly misleading statement and “the reason or reasons why” it is misleading, including the factual basis if alleged on information and belief.
    • Plaintiffs must plead particularized facts giving rise to a strong inference of scienter (fraudulent intent or at least recklessness).

Although scienter is not the focus of the order, the Court resolves the case on an even more basic element: the absence of any material misrepresentation or omission.

Quoting Stoneridge Investment Partners, LLC v. Scientific‑Atlanta, Inc., 552 U.S. 148, 157 (2008), the Court reiterates that a § 10(b) plaintiff must allege “a material misrepresentation or omission.” Materiality and misleadingness are assessed from the perspective of a reasonable investor, consistent with Basic Inc. v. Levinson and TSC Industries v. Northway.

2. Misstatements Regarding Minimum Commitment Contracts

Plaintiffs first targeted statements in Mobileye’s 2022 Form 10‑K (filed March 2023) suggesting that shipments to customers would “depend upon market conditions.” They argued this was misleading because, in reality, annual minimum commitments for EyeQ chips locked in volumes independent of demand.

The Court rejected this theory by examining the full context of the Form 10‑K:

  • Mobileye stated that it “generally” does not have minimum commitment contracts, but that some customers, including the “top three Tier 1” customers, had committed to minimum purchase quantities in 2023.
  • Mobileye disclosed that certain Tier 1 customers had increased orders in prior periods, leading to accrued inventory.
  • Critically, Mobileye disclosed its expectation that these Tier 1 customers would use their existing inventory before placing new orders to meet downstream demand.

In light of these disclosures, the statement that shipments would “depend upon market conditions” was not misleading. The Court interprets “market conditions” here as referring to conditions affecting Mobileye’s ability to supply agreed‑upon quantities, not as a promise that customers had unrestricted flexibility regarding volume, nor as a statement tying all shipments solely to contemporaneous end‑user demand.

The Court further holds that no obligation existed to provide granular detail about:

  • Which specific products (EyeQ vs Supervision) were subject to minimum commitments; or
  • The precise volumes under each contract.

Citing Setzer v. Omega Healthcare Investors, Inc., 968 F.3d 204, 214 n.15 (2d Cir. 2020), the Court reiterates a crucial principle:

Once a company speaks on a topic, it must “tell the whole truth,” meaning that it may not “omit material facts” necessary to make its statement not misleading, not that it must “disclose all the facts that pertain to a subject.”

Applied here, Mobileye’s disclosures gave investors a fair picture: some key customers were subject to minimum purchase commitments, had built up inventory, and were expected to work off that inventory before placing new orders. The law did not require line‑item disclosure of volumes or specific product allocations.

3. Statements About Quarterly Order Fluctuations and Stabilization

The plaintiffs next pointed to statements on earnings calls:

  • April 2023 call: A Mobileye executive explained that the company was in discussions with Tier 1 customers subject to yearly commitments to “balance” their orders from quarter to quarter “rather than lumping it into 1 or 2 quarters towards the end of the year.”
  • July 2023 call: The same executive said that requests to “move volume around” had largely ceased and that customers’ EyeQ inventory “has stabilized.” He added: “We don’t see any requests to push volumes from quarter to quarter.”

The Court held that:

  • No falsity was alleged: plaintiffs did not plausibly claim that these statements—describing actual observed behavior and requests by customers—were factually wrong.
  • No material omission was identified: plaintiffs did not point to any specific omitted fact that rendered these statements misleading when read together.

Plaintiffs instead argued that, due to the minimum commitments, it was “impossible” for customers to adjust quantities, so the talk of “moving volume around” was inherently misleading. The Court notes that this argument collides with the disclosed reality: the existence of yearly minimum commitments was already disclosed, making it apparent that customers had limited flexibility about total annual volumes, even if they could negotiate intra‑year timing of shipments.

4. Performance Metrics and Market Share Statements

Plaintiffs challenged Mobileye’s positive statements about:

  • Growth relative to prior guidance;
  • Market share; and
  • Other performance measures.

They did not assert that these metrics were numerically false. Instead, they argued the statements were misleading because Mobileye implicitly attributed its performance to “legitimate market demand” when, in plaintiffs’ view, the results were artificially supported by channel stuffing.

The Court found this insufficient for several reasons:

  • The identified statements did not actually attribute the performance metrics solely or explicitly to robust end‑user demand.
  • Throughout the relevant period, Mobileye had “consistently disclosed”:
    • The existence of minimum commitment contracts with main Tier 1 customers; and
    • That those customers were expected to use accrued inventory before placing new orders.
  • Against that backdrop, accurately reporting performance metrics does not become misleading simply because plaintiffs believe investors might have drawn different inferences about sustainability.

The Court also addressed a January 2024 statement in which Mobileye estimated that accumulated excess inventory contributed “1% or 2%” to its prior market share. That estimate, the Court held, did not retroactively render prior reported market share figures misleading, since it merely offered an ex post analytical perspective on how inventory dynamics might have affected share.

5. Explanations of Excess Customer Inventory

Mobileye attributed excess inventory held by customers, in part, to customers’ decisions in 2021–2022 to increase orders as a hedge against COVID‑related supply‑chain disruptions, combined with weaker‑than‑expected downstream production in 2023.

The Court found no basis to treat that explanation as fraudulent:

  • There was no allegation that customers did not in fact increase orders during those years to guard against supply chain risk.
  • There was no plausible allegation that, at the time customers entered minimum commitment contracts, they agreed to buy more EyeQ chips than they actually wanted, or that Mobileye then knew the contracts would force sales exceeding genuine customer needs.
  • The record, as alleged, reflected that after entering these contracts, some customers later attempted to reduce their commitments—not that Mobileye had tricked them into undesired volumes at the outset.

Plaintiffs asserted that the true cause of excess inventories was Mobileye’s undisclosed channel‑stuffing, but the Court noted that this assertion was unsupported by non‑conclusory factual allegations. Bare labeling of a business practice as “channel stuffing” does not substitute for particularized facts showing falsity or deception.

Moreover, Mobileye’s explanation did not purport to be exhaustive; it cited multiple contributing factors:

  • Customers’ prior inventory‑building decisions; and
  • Lower‑than‑expected downstream production in 2023.

Given:

  • The company’s longstanding disclosure of minimum commitment contracts and accrued customer inventory;
  • The absence of allegations that its historical statements about supply chain‑driven over‑ordering were false; and
  • The lack of specific facts showing an alternative, concealed primary cause;

the Court held that plaintiffs had not alleged a materially misleading description of inventory causes.

6. Forward‑Looking Statements and Opinion

The Court then addressed several forward‑looking statements, invoking the principles reaffirmed in In re Vivendi, 838 F.3d 223 (2d Cir. 2016):

  • Statements in the 2023 Form 10‑K that Mobileye expected customers to use the “vast majority” of excess inventory in the first quarter of 2024 and that orders would “normalize” over the remainder of the year, coupled with an explicit caution that “there is no guarantee that they will do so,” were forward‑looking and non‑actionable.
  • Statements on a January 2024 earnings call about projected market share over the decade and growth prospects in Western markets were also forward‑looking predictions, rather than misstatements of existing fact.

The Court additionally characterized a February 2023 conference statement as both an opinion and forward‑looking. In response to a question about sustaining market share amid competition, a Mobileye executive:

  • Discussed the cost‑optimization pressures faced by downstream manufacturers;
  • Described Tier 1 customers’ capacity to integrate cameras, housings, chips, and printed circuit board (PCB) assemblies and deliver them to automakers; and
  • Concluded that “we think that our ecosystem is also the cost leader pretty significantly” and that Mobileye felt “comfortable with our share.”

The Court observed that:

  • This statement did not address current inventory levels or immediate absorption capacity for additional EyeQ shipments.
  • It concerned the longer‑term competitive position and cost structure of Mobileye’s ecosystem—quintessentially an opinion about future prospects.

Under Second Circuit precedent such as Tongue v. Sanofi, 816 F.3d 199 (2d Cir. 2016), statements of opinion are actionable only if they:

  • Omit material facts about the speaker’s inquiry or knowledge that make the opinion misleading to a reasonable investor; or
  • Imply facts that are not true.

Nothing in plaintiffs’ allegations met that standard; nor did they allege that Mobileye actually disbelieved its own expressed comfort with its market share.

7. Rejection of “Scheme Liability” Under Rule 10b‑5(a) and (c)

Plaintiffs attempted to salvage their Exchange Act claims by invoking “scheme liability” under Rule 10b‑5 subsections (a) and (c), arguing that Mobileye’s “channel‑stuffing” conduct itself—aside from any misstatements—constituted a fraudulent scheme.

Relying on SEC v. Rio Tinto, 41 F.4th 47 (2d Cir. 2022), the Court emphasized a critical limitation:

To plead scheme liability, plaintiffs must allege “something beyond misstatements and omissions” that renders the challenged conduct a scheme to defraud.

Applied here:

  • Minimum commitment contracts are not unlawful per se; they are common commercial arrangements.
  • Mobileye disclosed the existence of these contracts and their foreseeable implications for inventory and ordering.
  • Plaintiffs did not plead any separate deceptive act—such as sham transactions, round‑trip deals, secret side agreements, or fake customers—beyond the very conduct underlying the alleged misstatements.

Therefore, the Court held that plaintiffs failed to state a scheme liability claim under either Rule 10b‑5(a) or (c). Consistent with ATSI Communications, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007), the absence of a primary violation also doomed the § 20(a) control‑person claims.

B. Securities Act Claims Under §§ 11 and 15

1. Pleading Standard and Elements of § 11

The Court next addressed the Securities Act claims tied to the June 2023 secondary offering. Plaintiffs asserted:

  • That the registration statement (and incorporated documents) contained untrue statements of material fact; and
  • That Mobileye omitted material facts required to be stated or necessary to make existing statements not misleading.

Under In re Morgan Stanley Information Fund Securities Litigation, 592 F.3d 347, 358–59 (2d Cir. 2010), § 11 requires, among other things, proof that “the registration statement contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading.”

The applicable pleading standard depends on whether the § 11 claim “sounds in fraud”:

  • If framed as negligence, Rule 8(a)’s “short and plain statement” standard applies;
  • If effectively alleging fraud, Rule 9(b) particularity is required (Hutchison v. Deutsche Bank Securities Inc., 647 F.3d 479, 484 (2d Cir. 2011)).

The Court did not resolve that debate because, under either standard, plaintiffs failed to state a claim: again, there was no actionable misstatement or omission.

2. No False or Misleading Statements in Offering Materials

To the extent plaintiffs’ § 11 theory recycled the same statements from the 2022 Form 10‑K and other filings, the Court disposed of them for the same reasons as under § 10(b): Mobileye’s disclosures about minimum commitments, customer inventory, order patterns, and reliance on key customers undermined any claim of misleading half‑truths. There was no specific, concrete allegation that the offering documents contained statements that were factually untrue.

3. Item 303: Known Trends and Uncertainties

Plaintiffs alleged that Mobileye violated Item 303 of Regulation S‑K, which requires the disclosure of:

“known trends or uncertainties” that the registrant reasonably expects will have a material “unfavorable impact” on net sales or revenues.

See 17 C.F.R. § 229.303; Panther Partners Inc. v. Ikanos Communications, Inc., 681 F.3d 114, 120 (2d Cir. 2012). In essence, Item 303 obligates issuers to discuss significant, reasonably likely headwinds to future performance, not to guarantee outcomes.

Plaintiffs argued that Mobileye should have disclosed a “known trend or uncertainty” that excess EyeQ inventories held by Tier 1 customers posed a serious risk to future revenue.

The Court held that this theory fails because Mobileye did disclose the alleged trend:

  • The offering materials disclosed that certain Tier 1 customers were subject to minimum commitment contracts.
  • They explained that those customers had increased orders in prior periods and had accumulated inventory.
  • They stated that these customers were expected to use existing inventory before making new orders, thereby signaling a .

Because “the registration statement disclosed the alleged trend,” plaintiffs could not sustain an Item 303 claim. Item 303 does not require perfect foresight or exact quantification; it requires that known, reasonably likely, material trends be described. Mobileye did so.

4. Item 105: Material Risk Factors

Plaintiffs also invoked Item 105 of Regulation S‑K, which requires disclosure of the “most significant factors that make an investment in the registrant or offering speculative or risky.” 17 C.F.R. § 229.105.

The Court concluded that Mobileye’s offering materials satisfied Item 105 because they:

  • Warned that Mobileye depended on a small number of Tier 1 customers—highlighting customer concentration risk.
  • Warned that order volumes could fluctuate.
  • Disclosed minimum commitment contracts and acknowledged that customers had accrued inventory expected to affect the timing of new orders.

Plaintiffs’ complaint, in the Court’s view, boiled down to a desire for greater detail—for instance, more precise information about the volume of inventory build‑up. But Item 105 requires disclosure of significant risks, not exhaustive data:

  • The risk that reliance on a few large customers and their inventory positions could produce volatility in orders and revenue was plainly disclosed.
  • Demanding exact inventory quantities amounts to a preference for more granular disclosure, not the exposure of a materially omitted risk.

With no primary § 11 violation, the derivative control‑person claims under § 15 necessarily failed, mirroring the logic applied to Exchange Act § 20(a).

C. Role of Key Precedents in the Court’s Analysis

Although this is a summary order, it is grounded firmly in established Second Circuit and Supreme Court precedent. Several cases are particularly important:

1. Stoneridge Investment Partners, LLC v. Scientific‑Atlanta, Inc., 552 U.S. 148 (2008)

Cited for the core proposition that § 10(b) requires a “material misrepresentation or omission.” It underscores that liability cannot be fashioned solely from disfavored business practices or outcomes; there must be a misstatement or omission that significantly alters the “total mix” of information.

2. In re Vivendi, S.A. Securities Litigation, 838 F.3d 223 (2d Cir. 2016)

Vivendi is referenced for two important principles:

  • Many forward‑looking statements are non‑actionable, especially where accompanied by meaningful cautionary language.
  • Corporate optimism and generalized growth projections often amount to puffery rather than factual assertions.

The Second Circuit’s reliance on Vivendi here confirms that earnings calls and forecasts, when properly framed and caveated, are not easily converted into securities fraud claims.

3. Tongue v. Sanofi, 816 F.3d 199 (2d Cir. 2016)

Although only mentioned by name, Tongue provides the governing framework for evaluating opinion statements. A statement of opinion is actionable only if:

  • The speaker did not actually hold the belief professed;
  • The opinion contains an embedded false statement of fact; or
  • The speaker omits material facts about the basis for the opinion that make the opinion misleading in context.

Mobileye’s expression of “comfort” with its market share and its view that its ecosystem was a “cost leader” fit squarely within the type of guarded, qualitative opinion Tongue protects, absent contrary factual allegations.

4. Setzer v. Omega Healthcare Investors, Inc., 968 F.3d 204 (2d Cir. 2020)

Setzer’s footnote is central to the Court’s rejection of plaintiffs’ “granularity” demands. Once an issuer speaks about a subject, it must avoid misleading half‑truths but is not required to disclose every detail related to that topic. Here, Mobileye’s disclosures about minimum commitments and customer inventory satisfied that “whole truth” requirement without spelling out all volumes and product‑level specifics.

5. SEC v. Rio Tinto, 41 F.4th 47 (2d Cir. 2022)

Rio Tinto is pivotal to the “scheme liability” analysis. The Second Circuit held there that Rule 10b‑5(a) and (c) cannot be used to sidestep the heightened requirements applicable to misstatements under Rule 10b‑5(b). Plaintiffs must show deceptive conduct independent of the alleged misstatements or omissions.

By invoking Rio Tinto, the Court made clear that:

  • Simply repackaging alleged misstatements about disclosures into a “scheme” narrative is insufficient;
  • Lawful, disclosed business arrangements (like minimum commitments) are not “schemes to defraud” absent further deceptive acts.

6. Panther Partners Inc. v. Ikanos Communications, Inc., 681 F.3d 114 (2d Cir. 2012)

Panther Partners defines the contours of Item 303 liability:

  • Issuers must disclose known trends and uncertainties that are reasonably likely to have a material impact on revenues.
  • However, liability arises only where such a trend is both known and not adequately disclosed.

Mobileye’s offering materials discussed the precise trend plaintiffs identified—excess inventory at Tier 1 customers and its expected effect on future orders—so Panther Partners leads to dismissal of the Item 303 theory.

7. In re Morgan Stanley Information Fund Securities Litigation, 592 F.3d 347 (2d Cir. 2010)

This case provides the statutory framework for § 11 claims: plaintiffs must show that a registration statement contained an untrue statement of material fact or omitted a material fact required to be stated or necessary to prevent existing statements from being misleading. The Court applied that standard and found that plaintiffs had not identified any such untrue or materially incomplete statements.

8. Hutchison v. Deutsche Bank Securities Inc., 647 F.3d 479 (2d Cir. 2011)

Hutchison clarifies that § 11 claims may be subject to Rule 9(b) if they sound in fraud, but the Court here sidestepped that debate because the claims failed even under the more lenient Rule 8 standard—highlighting just how weak the alleged misstatements and omissions were.

9. Gimpel v. The Hain Celestial Group, Inc., 156 F.4th 121 (2d Cir. 2025)

The order cites Gimpel—a 2025 Second Circuit case—for the general standard that:

  • The “reasonable investor” test is objective; and
  • A misstatement or omission is material only if it would significantly alter the total mix of available information.

Although the commentary cannot go beyond what the order quotes, it is evident that Gimpel reaffirms the longstanding TSC Industries/Basic materiality framework and applies it in the securities‑fraud context.

V. Simplifying Key Legal and Financial Concepts

For readers without a securities‑law background, several core concepts merit plain‑language explanation.

A. Channel Stuffing

“Channel stuffing” typically refers to the practice of pushing more product into a distribution channel (wholesalers, distributors, retailers, or in this case Tier 1 integrators) than those customers can realistically sell in the near term, often to:

  • Meet revenue targets or growth expectations; or
  • Give the appearance of stronger demand than actually exists.

Channel stuffing can be legitimate (customers genuinely want the goods and expect to sell them) or fraudulent (sales are coerced, heavily incentivized, or otherwise non‑economic only to boost reported numbers). Distinguishing the two often hinges on:

  • Contractual rights (returns, chargebacks, rights of refusal);
  • Customer behavior (whether inventory is being returned, discounted, or written down); and
  • What management knew and disclosed about these dynamics.

In Mobileye, the Court did not find that channel stuffing (in the pejorative sense) was adequately pleaded. The sales were made under disclosed, lawful minimum commitment contracts, and plaintiffs did not allege concrete facts showing that customers bought quantities they did not want at the time of contracting or that Mobileye concealed such knowledge.

B. Minimum Commitment Contracts

These contracts require a customer to purchase at least a minimum volume of products over a set period (here, annually). From a legal and commercial standpoint:

  • They are common and economically rational, particularly where suppliers invest heavily in capacity and customers desire guaranteed supply.
  • They may shift risk: customers bear some demand risk; suppliers bear some production and capacity risk.
  • They can lead to temporary inventory build‑ups if downstream demand slows or if customers over‑anticipated their needs.

In this case, the Court treated minimum commitment contracts as ordinary, lawful commercial arrangements. Their existence was disclosed and thus not inherently deceptive.

C. Tier 1 Customers and Downstream Manufacturers

“Tier 1 customers” in the automotive supply chain are large integrators that purchase subsystems (like EyeQ chips and cameras) and assemble them into full systems delivered to automakers (“downstream manufacturers”). This layered structure means:

  • Mobileye’s immediate customer is the Tier 1 supplier;
  • End demand ultimately comes from automakers and consumers; and
  • Inventory can build up at the Tier 1 level even if final consumers have not yet purchased vehicles containing the chips.

D. Forward‑Looking Statements

A forward‑looking statement is a prediction, plan, or projection about future events or performance—e.g., “we expect customers to consume most of their excess inventory in the first quarter of 2024.” Under both case law and the statutory safe harbor:

  • Such statements are generally non‑actionable if identified as forward‑looking and accompanied by meaningful cautionary language about risks and uncertainties.
  • Liability typically requires proof that the statement was made with actual knowledge of falsity, and even then, plaintiffs must show materiality and other elements.

E. Items 303 and 105 of Regulation S‑K

  • Item 303 (MD&A): Requires management to discuss “known trends and uncertainties” that are reasonably likely to materially affect revenues or income. This is forward‑looking but must be based on known information at the time.
  • Item 105 (Risk Factors): Requires disclosure of the most significant risks that make the investment speculative or risky. This is not a catalog of every possible risk but a discussion of material ones.

In Mobileye, the Court concluded that both:

  • The trend of excess customer inventory impacting future orders; and
  • The risk inherent in dependence on a small pool of Tier 1 customers and volatile order volumes

were adequately disclosed in the registration statement and incorporated filings.

VI. Practical Impact and Broader Significance

A. For Issuers and Their Counsel

This decision—though formally non‑precedential—offers valuable practical guidance:

  1. Robust, contextual disclosures can defeat fraud claims early:
    • Mobileye’s detailed discussion of customer contracts, inventory dynamics, and order expectations allowed the Court to rule, as a matter of law, that alleged misstatements were not misleading.
    • Firms should ensure that MD&A and risk factors candidly address:
      • Customer concentration;
      • Minimum commitments or long‑term contracts;
      • Inventory build‑ups at key customers; and
      • Reasonably foreseeable impacts on future orders.
  2. Level of granularity: “whole truth,” not “every detail”:
    • The Court reaffirmed that once a company speaks, it must avoid half‑truths, but need not disclose all minutiae (such as exact contracted volumes or customer‑by‑customer data).
    • This provides issuers some comfort that well‑framed, high‑level disclosures can suffice without turning SEC filings into data dumps.
  3. Handling inventory and channel‑stuffing issues:
    • Companies facing inventory overhangs should describe:
      • How and why the inventory accumulated (e.g., supply chain risk hedging, contractual minimums);
      • The expected timeline and uncertainty of inventory normalization; and
      • Potential impacts on future orders and revenue.
    • Where such issues are thoroughly disclosed, plaintiffs will have a harder time recasting them as undisclosed “channel‑stuffing schemes.”
  4. Careful use of forward‑looking language and opinions:
    • Forward‑looking statements should be expressly identified as such and paired with specific cautionary language about risks.
    • Opinions (e.g., comfort with market share, competitive positioning) should avoid implying undisclosed concrete facts and should reflect genuinely held beliefs.

B. For Plaintiffs and Securities Litigators

The decision underscores the evidentiary and pleading hurdles plaintiffs face in channel‑stuffing and inventory‑related cases:

  • Conclusions are not enough: Courts will require non‑conclusory, particularized facts establishing:
    • That specific statements were false when made; and
    • That omitted information would have materially changed the total mix of information.
  • Disclosed trends and risks cannot be re‑pled as omissions:
    • Where offering materials and SEC filings already identify the trend (e.g., excess inventory, minimum commitments, dependence on a few customers), plaintiffs cannot rely on those same trends to assert Item 303 or Item 105 violations simply because they wanted more detail.
  • Scheme liability is narrow:
    • After Rio Tinto and now this order, plaintiffs must plead distinct deceptive acts beyond alleged misstatements to sustain Rule 10b‑5(a)/(c) claims.
    • Mere use of aggressive but lawful and disclosed commercial arrangements is not enough.

C. For the Development of Securities Law

Even without precedential force, In re Mobileye contributes to the evolving landscape of securities litigation in several ways:

  • Integration of disclosure doctrines: The Court harmonizes:
    • The “total mix” materiality test;
    • The “whole truth” rule from Setzer;
    • Item 303 trend disclosure obligations; and
    • Item 105 risk factor requirements.
    It shows how robust disclosures on a given topic (here, customer commitments and inventory) can simultaneously defeat Exchange Act and Securities Act claims.
  • Channel‑stuffing and modern supply chains:
    • In an era of complex, multi‑tier supply chains—especially in technology and automotive sectors—inventory and contracting issues will recur.
    • The Court’s approach suggests that:
      • Plaintiffs must distinguish between known, disclosed risks and concealed, deceptive practices;
      • Courts will look carefully at the actual text of SEC filings and calls, not plaintiffs’ characterizations.
  • Signals on materiality and investor expectations:
    • The citation to Gimpel reinforces that the materiality inquiry remains rooted in the expectations of a reasonable investor, not in after‑the‑fact allegations that any negative development should have been more fully forecast.
    • Investors are expected to read entire filings and risk factors in context, understanding that not all granular data will (or must) be disclosed.

VII. Conclusion

The Second Circuit’s summary order in In re Mobileye Global Securities Litigation affirms a comprehensive dismissal of both Exchange Act and Securities Act claims arising from allegations of channel stuffing, minimum purchase commitments, and excess customer inventory. The decision emphasizes:

  • That truthful, contextual risk disclosure can preclude liability for later‑realized inventory and demand issues;
  • That not every aggressive sales strategy or unfavorable outcome translates into securities fraud, especially where contracts are lawful and fully disclosed;
  • The limited reach of scheme liability under Rule 10b‑5(a) and (c) after Rio Tinto; and
  • The importance of understanding Items 303 and 105 as tools for meaningful, but not all‑encompassing, disclosure of trends and risks.

For issuers, the case illustrates the protective value of candid, well‑structured disclosures about customer behavior, contractual arrangements, and inventory dynamics. For plaintiffs, it underscores the need for concrete factual allegations of falsity and material omission, rather than post hoc disagreement with business decisions or disclosure granularity. Although non‑precedential, Mobileye offers a clear, pragmatic roadmap for how federal courts in the Second Circuit are likely to approach future securities suits involving inventory build‑ups, customer commitments, and alleged channel‑stuffing schemes.

Case Details

Year: 2025
Court: Court of Appeals for the Second Circuit

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