Generator-maker Generac Holdings Inc. no longer faces proposed investor class action claims it concealed struggles to rightsize its production and inventory levels following pandemic-linked fluctuations, a Wisconsin federal judge has determined after finding the suit didn't show intentional misrepresentations.

In a Tuesday order in Milwaukee federal court, U.S. District Judge Pamela Pepper tossed the investor suit against Generac, finding the latest version of the allegations failed to include claims supporting the inference that the company or a pair of its executives had lied to Generac shareholders about the company's post-COVID "channel destocking process."

"The court finds it just as likely that the alleged false statements were 'the result of merely careless mistakes at the management level based on false information fed it from below' as that the alleged false statements were a reflection of 'an intent to deceive or a reckless indifference to whether the statements were misleading,'" Judge Pepper said Tuesday, quoting the Seventh Circuit's 2008 opinion in the case Makor Issues & Rights Ltd v. Tellabs Inc.

Judge Pepper's Tuesday order didn't state whether the plaintiffs will be allowed to amend their suit. The docket shows the case was terminated Tuesday.

The lawsuit, first filed in November 2023, says Generac's share price fell almost 25% to under $116 in August 2023 after the company said its efforts to bring down its heightened inventory levels were dragging on into the second half of its fiscal year.

This was a change from what Generac said the previous May, when it projected "a return to year-over-year sales growth in the second half of the year" following a first quarter that Generac said "marked the trough" for its current business cycle, the lawsuit said.

In its dismissal bid, Generac argued that the complaint didn't meet heightened pleading requirements laid out by the Private Securities Litigation Reform Act. For example, the complaint didn't state what the company or its executives allegedly knew about its inventory levels during the proposed class period, or when they allegedly knew it.

On Tuesday, Judge Pepper agreed, finding that the complaint doesn't show that Generac CEO Aaron P. Jagdfeld or Chief Financial Officer York A. Ragen "had actual knowledge of specific information that contradicted the allegedly false statements at the time they were made."

Absent such claims, the judge said, "what remains are the amended complaint's description of circumstantial evidence" that doesn't reveal deceptive intent or recklessness on the part of the defendants.

Because of the scienter finding, Judge Pepper said she need not rule on the plaintiffs' falsity claims.

Representatives for the parties did not immediately respond to requests for comment Thursday.

Walling is represented by Adam M. Apton of Levi & Korsinsky LLP and Andrew G. Frank of Mallery SC.

Generac and the individual defendants are represented by Joseph De Simone and Jacqueline M. Vallette of Mayer Brown LLP, and Glenn K. Vanzura of Willkie Farr & Gallagher LLP.

The case is Walling v. Generac Holdings Inc et al., case number 2:24-cv-00240, in the U.S. District Court for the Eastern District of Wisconsin.