In the latest AI-washing related securities class action lawsuit to be filed, a plaintiff shareholder has filed a securities suit against AI-based health care company Tempus AI, alleging, among other things, that the company overstated its AI capabilities. The lawsuit comes after the company’s share price declined following the publication of a short seller report critical of the company and its management. A copy of the June 12, 2025, complaint against Tempus AI can be found here.
Background
Tempus bills itself as providing Artificial Intelligence (AI) enabled precision medicine solutions. It claims to develop intelligent diagnostics through the application of AI In healthcare to make laboratory tests and connect laboratory results to a patient’s own clinical data. The securities lawsuit complaint alleges that Tempus “branded itself as an AI company despite little history of generating significant revenues from AI solutions.” Instead, the complaint alleges, Tempus “generated most of its revenue from acquisitions, genomic testing, and data licensing agreements.
The complaint also alleges that Tempus “repeatedly” claims that the contract value and quality of its data licensing agreements with life sciences companies were “secure and expanding.” The complaint alleges the company used its relationship with AstraZeneca as an example of these relationships. The company also announced a joint venture with SoftBank as a way to generate revenue growth by entering the Japanese market. The company also claimed potential revenue growth from Ambry Genetics, a company Tempus acquired, due to Ambry’s “strong relationships with health care providers.”
On May 28, 2025, short seller Spruce Point Capital Management LLC issued a research report that raised a number of issues regarding Tempus, including, as the complaint subsequently alleged, “(1) Defendant Eric Lefkofsky and his associates have a history of cashing out of companies before public shareholders incur losses or lackluster returns; (2) Tempus’ actual AI capabilities are overstated; (3) board members and other executives have been associated with troubled companies that restated financial results; (4) signs of aggressive accounting and financial reporting; (4) issues the AstraZeneca and Pathos AI deal that merit scrutiny; and (5) the Company’s recent financial guidance revision reveals weakness in core operations.” According to the complaint, the company’s share price declined nearly 20% on this report.
The Lawsuit
On June 12, 2025, a plaintiff shareholder filed a securities class action lawsuit in the Northern District of Illinois against Tempus; its CEO, Erikc Lefkofsky; and its CFO, Jim Rodgers. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between August 6, 2024 and May 27, 2025.
The complaint alleges that during the class period, the defendants failed to disclose that: “(1) Tempus inflated the value of contract agreements, many of which were with related parties, including non-binding opt-ins and/or were self-funded; (2) the credibility and substance of the joint venture with SoftBank was at risk because it gave the appearance of ‘round-tripping’ capital to create revenue for Tempus; (3) Tempus-acquired Ambry had a business model based on aggressive and potentially unethical business practices that raised scrutiny and unsustainability; (4) AstraZeneca had reduced its financial commitments to Tempus through questionable ‘pass-through payment’ via a joint agreement between it, the Company and Pathos AI; (5) the foregoing issues revealed weakness in core operations and revenue prospects; and (6) as a result, Defendants’ positive statements [sic] Company’ s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.”
The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the plaintiff class.
Discussion
This complaint raises a host of allegations, only some of which are about AI. To be sure, the complaint clearly alleges that the company sought to position itself as an AI company, and the complaint further alleges that the company overstated its AI capabilities and prospects. But if this complaint is indeed AI-related, it is only partially so, as there are many other allegations, many of them having to do with the companies finances and the nature of its transactions and relationships with its trading partners.
Most readers undoubtedly noted that the complaint’s allegations largely rely on the report of a short seller. As I have noted in prior posts (most recently here), courts have over time evinced a continuing skepticism of securities class action lawsuit allegations based on short-seller reports. The short sellers’ financial incentives and their reliance on anonymous sources have caused courts to be wary of securities suit allegations based on their reports. In a recent Fourth Circuit decision in a case in which the plaintiffs’ allegations largely relied on a short-seller’s report, the appellate court affirmed the district court’s dismissal of the case, as discussed in detail here. There were features of the short seller report involved that may have caused the Fourth Circuit to be particularly skeptical in that case, but the Fourth Circuit decision certainly could be useful to the defendants in seeking to oppose this new lawsuit, based as it largely is on the allegations from a short-seller’s report.
While the AI-related allegations in this complaint are only one of several types of allegations raised here, this complaint undoubtedly is AI-washing related. AI-washing claims have been among the important types of securities class action lawsuit complaints filed in recent months. Indeed, according to the Stanford Law School Securities Class Action Clearinghouse, there have now been a total of seven AI-related securities class action lawsuits files so far this year, inclusive of this latest lawsuit.
The rise in the number of AI related lawsuits at one level is hardly surprising, given that AI has in many ways permeated the world of business these days. But what is important to note about these lawsuits is that they involve allegations that the defendant companies overstated or misrepresented their AI capabilities or prospects. It is not the companies’ use of or even reference to AI that is attracting the lawsuits, it is what the company said, and more importantly what the companies wanted to try to get investors to believe about, the companies’ use of AI, that is attracting the lawsuits.