District of Colorado Dismisses Securities Fraud Claims Against Poultry Company Premised on Purported Price-Fixing Conspiracy

Skadden, Arps, Slate, Meagher & Flom LLP

Hogan v. Pilgrim’s Pride Corp., No. 16-cv-02611-RBJ (D. Colo. Mar. 14, 2018)

Judge R. Brooke Jackson dismissed putative class claims against a poultry company alleging that the company violated Section 10(b) of the Securities Exchange Act by failing to disclose that it was engaging in a price-fixing conspiracy that only came to light when the company was sued for antitrust violations. The plaintiff alleged that the company colluded with other poultry companies to depress production of broiler chickens so as to artificially stabilize their prices and artificially inflate the value of the company’s securities. The plaintiff further alleged that the company effected the reduction by, among other means, destroying eggs, reducing breeder flocks, destroying chicks and shutting down facilities. The plaintiff alleged that evidence of this conspiracy was that the Georgia Department of Agriculture’s Georgia Dock pricing index — an industry index of broiler prices compiled by telephone calls to top broiler producers — was higher than other industry indexes that performed verification of prices reported by broiler producers.

The court first determined that because the complaint was premised on an alleged underlying antitrust conspiracy, the plaintiff was required to plead with particularity the facts “that establish the existence of the antitrust conspiracy.” Although the court determined that the plaintiff met the PSLRA’s heightened pleading standard with respect to the alleged falsity of the company’s statements, the plaintiff failed to meet the standard with respect to the underlying conspiracy. The court found that the plaintiff failed to adequately allege a Sherman Antitrust Act claim because the allegations “lack[ed] facts about the means and amounts by which the alleged conspirators cut production or when those particular cuts occurred,” making it “difficult to determine whether the conspirators were acting in parallel.” The court also determined that even if the plaintiff had adequately pleaded parallel conduct, the plaintiff failed to plead that there was any agreement among the alleged co-conspirators, noting that “membership in industry associations, attendance at industry conferences” were insufficient indicia of an agreement. The court concluded that the complaint essentially “plead[ed] fraud by innuendo” and dismissed it without prejudice.

This summary can be found in the June 2018 issue of Inside the Courts.