On October 6, 2026, Saxena White secured a significant victory when the Honorable Jeffrey I. Cummings of the United States District Court for the Northern District of Illinois, Eastern Division, denied the defendants’ motion to dismiss in its entirety in the case styled in Employees’ Retirement System of the City of Baltimore v. Sprout Social, Inc., et al., Case No. 24-cv-3867.
The Court sustained all claims against the social media management company Sprout Social, Inc. and its current and former executives. Saxena White serves as Court-appointed lead counsel for lead plaintiff the Employees’ Retirement System of the City of Baltimore and the proposed class.
The complaint alleges that, between September 22, 2021 and May 2, 2024, as Sprout pushed to sell its platform to larger enterprise customers, defendants repeatedly assured investors that its marketing management software was up to the task and that the company was succeeding in expanding with the larger clients. According to the complaint, company executives repeatedly assured investors that Sprout’s existing sales strategy, product capabilities, and partnerships positioned the company for strong enterprise growth.
The Complaint alleged that those assurances were misleading because Sprout was struggling behind the scenes. As alleged, the company’s signature “inbound” sales model, which relied heavily on free trials and online interest from prospective customers, was not effective for large enterprise clients. Former employees cited in the complaint allegedly described enterprise sales cycles as much longer and more complicated than the company publicly represented.
The lawsuit also alleges that Sprout overstated the readiness of its software platform for large enterprise customers. According to former employees, the product allegedly lacked several capabilities that enterprise customers viewed as important, including influencer marketing tools, advanced analytics, and other features offered by competitors. Yet executives allegedly told investors that the company had no meaningful product gaps and was well positioned to compete for enterprise business.
According to the complaint, the truth emerged through a series of disclosures. In 2023 and 2024, Sprout reported slowing growth, disclosed the need to shift resources and revise its sales strategy, acquired influencer marketing platform Tagger to address product shortcomings, disclosed lengthening sales cycles, and ultimately announced significant changes to its enterprise approach. Following these disclosures, Sprout’s stock price declined sharply, including a drop of more than 40% after its May 2024 announcement.
In sustaining the complaint in its entirety, Judge Cummings found that falsity, scienter, and loss causation were each adequately pleaded. The court emphasized that investors had presented detailed allegations from numerous former employees, as well as alleged admissions by company executives, supporting their claims. The Court rejected defendants’ puffery, opinion, and safe-harbor arguments, noting that many statements were concrete, verifiable, and made in response to direct analyst questions.
The court also found a strong inference of scienter based on the centrality of enterprise growth to Sprout’s core operations, executives’ claims of real-time access to sales data, corroborating witness accounts, and insider trading by certain executives. The Court described defendants’ motion as “built on a faulty foundation” that attempted to viewed the complaint in defendants’ favor.
The ruling clears the way for discovery, where investors will have the opportunity to obtain additional evidence supporting their claims.
