Keurig K-Cups.
Keurig K-Cups. (Photo: Keurig Green Mountain Inc.)

Somewhere along the way from small-town cafe to multibillion-dollar company, Keurig Green Mountain Inc. (formerly Green Mountain Coffee Roasters Inc.) became a magnet for litigation. The courtroom woes are far from over, but the company can at least thank its lawyers at Ropes & Gray for finishing off a securities fraud class action premised on allegations of insider trading by the company’s founder.

In a brief order issued Tuesday, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a 2012 lawsuit alleging that Keurig Green Mountain duped investors about increased competition from Starbucks Co. in the market for single-serve coffee brewers. Agreeing with U.S. District Judge William Sessions III in Burlington, Vt., the appeals court ruled that plaintiffs counsel at Kahn Swick & Foti couldn’t point to actionable misstatements by Keurig Green Mountain and hadn’t adequately alleged scienter—i.e., knowledge of wrongdoing.

In a February 2012 filing, Keurig Green Mountain told investors that sales of coffee brewers had exceeded expectations. A month later, the company disclosed that longtime partner Starbucks was launching a rival single-serve coffee brewer. The news caused Keurig Green Mountain’s stock price to drop 16 percent. It later emerged that the company’s founder, Robert Stiller, sold off 1 million shares shortly before the Starbucks threat was made public.

In a 2012 complaint that quoted interviews with confidential witnesses, Kahn Swick and local counsel Johnson & Perkinson alleged that Keurig Green Mountain lacked the sort of sophisticated models needed to predict consumer demand, and that it knew its upbeat statements in February 2012 were misleading. One of the confidential witnesses was quoted as saying that “one of Green Mountain’s big problems was that they were using antiquated software and that nearly all numbers in the company were being maintained in Excel.” The plaintiffs firms argued that Stiller’s fortuitously timed trades showed he had a motive to mislead shareholders.

Judge Sessions dismissed the case in a September 2013. Siding with defense lawyers at Ropes & Gray and the Burlington firm Gravel & Shea, the judge ruled that the plaintiffs didn’t meet the high bar for showing fraud. He noted that Keurig Green Mountain’s February 2012 revenue forecast “contained a litany of disclaimers and warnings.” Sessions also wrote that, in light of earlier trades, Stiller’s dumping of shares was “neither unusual nor suspicious.”

In Tuesday’s decision, a Second Circuit panel praised Sessions for a “thorough” ruling.

Randall Bodner of the Boston office of Ropes & Gray argued for Keurig Green Mountain at the Second Circuit, facing off against Kim Miller of Kahn Swick.

Keurig Green Mountain can now devote more of its attention to a different batch of lawsuits alleging that it violated antitrust laws by adding “lock-out” technology to its latest Keurig coffee brewer that prevents the machines from accepting coffee pods sold by rivals. Those suits have been consolidated into multidistrict litigation in Manhattan. Cleary Gottlieb Steen & Hamilton represents Keurig Green Mountain in those cases.