On March 8, 2022, the United States District Court for the District of Colorado dismissed with prejudice a putative class action asserting claims under the Securities Exchange Act of 1934 against a chicken producer and certain of its executives. United Food & Com. Workers Int'l Union Local 464A v. Pilgrim's Pride Corp., No. 20-CV-01966-RM-MEH, 2022 WL 684169 (D. Colo. Mar. 8, 2022). The crux of plaintiff's allegations was that the company made various statements touting its performance and attributing those positive results to factors such as its market position, product portfolio, customer base, and management team; when in fact those results were supposedly inflated by an alleged bid-rigging scheme that was revealed through an indictment by the Department of Justice, in connection with which the company later entered a plea agreement and agreed to pay a criminal fine. The Court held that plaintiff failed to allege an actionable misrepresentation with respect to any of the challenged statements.
The Court first observed that the alleged bid-rigging scheme largely occurred prior to the claimed class period, and that plaintiff failed to allege with particularity facts showing that the alleged scheme rendered any of the challenged class period statements misleading. Id. at *3. While plaintiff pointed to the company's plea agreement purportedly acknowledging that its participation in the alleged scheme continued until a later date, the Court explained that the plea agreement identified only one customer contract affected in the later period and plaintiff failed to allege that any other contracts were involved at that time. Id.
In addition, the Court emphasized that plaintiff failed to adequately allege that the alleged bid-rigging scheme had a significant impact on the company's financial results at any point in time. Id. at *4. The Court observed that plaintiff made “almost no attempt to quantify the financial impact of the scheme” and in fact pleaded facts suggesting the lack of any such impact. Id. In particular, the Court noted that the company had net sales of approximately $54.5 billion over a five-year period, and that the commerce impacted by the alleged anticompetitive conduct—according to the company's plea agreement—amounted to only $361 million. Id.
Further, the Court concluded that the challenged statements were non-actionable. Id. First, the Court noted that the statements were generally not capable of objective verification, as with the company's statements that it had strong customer relationships. Id. at *5. Second, the Court concluded that reasonable investors would not rely on generic expressions of optimism associated with a corporation's “efficient operations,” “strong relationships with its key customers,” “results-oriented corporate culture,” or collective “vision,” which the Court found “are the kinds of rosy affirmations commonly heard from corporate managers and numbingly familiar to the marketplace.” Id.
Finally, the Court rejected the suggestion that the company had a duty to disclose the alleged scheme. Id. The Court explained that corporate disclosures are “not a rite of confession, and companies do not have a duty to disclose uncharged, unadjudicated wrongdoing.” Id. The Court further determined that, although the company later entered a plea agreement with respect to certain of the alleged misconduct, plaintiff's allegations failed to tie the facts that formed the basis of that plea agreement to the challenged statements regarding the company's performance. Id.
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