Lalonde v. Tyson Foods, Inc. et al

Filing 34

OPINION AND ORDER granting 10 Motion to Consolidate Cases. All pleadings should be filed in LEAD CASE 16-5340. Signed by Honorable Timothy L. Brooks on January 25, 2017. (src)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION

JONAH CHUNG, individually and on
behalf of all others similarly situated

v.

PLAINTIFF

CASE NO. 5:16-CV-5354

TYSON FOODS, INC.; DONNIE SMITH;
and DENNIS LEATHERBY

DEFENDANTS

WILLIAM HUSER, individually and on
behalf of all others similarly situated

v.

PLAINTIFF

CASE NO. 5:16-CV-5371

TYSON FOODS, INC.; DONNIE SMITH;
and DENNIS LEATHERBY

DEFENDANTS

PATRICIA LALONDE, individually and on
behalf of all others similarly situated

v.

CASE NO. 5:16-CV-5362

TYSON FOODS, INC.; DONNIE SMITH;
and DENNIS LEATHERBY

DEFENDANTS

HAROLD VOELLINGER, individually and on
behalf of all others similarly situated

v.

PLAINTIFF

PLAINTIFF

CASE NO. 5:16-CV-5340

TYSON FOODS, INC.; DONNIE SMITH;
and DENNIS LEATHERBY

DEFENDANTS

1

OPINION & ORDER

Currently before the Court are motions to consolidate , appoint lead plaintiffs, and
approve lead counsel filed in the four cases captioned above . For the reasons stated
herein , the Court CONSOLIDATES cases 16-cv-5354 , 16-cv-5371 , 16-cv-5362, and 16cv-5340 ; APPOINTS as lead plaintiffs Employees' Retirement System of the State of
Hawaii ("Hawaii ERS") and Blue Sky 1 ; and APPROVES as lead counsel Hawaii ERS's
and Blue Sky's choice of Bernstein Litowitz Berger & Grossmann LLP ("Bernstein
Litowitz").

I. BACKGROUND
Plaintiffs in these cases were all shareholders of Tyson Foods, Inc. ("Tyson")
during the time period from November 23 , 2015 to November 18, 2016 (the "class
period ").2 Tyson is a publicly traded corporation headquartered in Springdale, Arkansas
that specializes in producing chicken , beef, and pork products . Donnie Smith served as
the Chief Executive Officer of Tyson from November of 2009 through June 13, 2016 .
Dennis Leatherby has been the Chief Financial Officer of Tyson since June of 2008 . The
allegations made by Plaintiffs in each suit are materially identical for purposes of resolving
the pending motions, and require only a broad overview.
Plaintiffs allege that Defendants violated the Securities Exchange Act of 1934 by
making certain misleading representations , statements, and material omissions in

1

Blue Sky refers to the following related funds : Stichting Blue Sky Global Equity Active
Low Volatility Fund ; and Stichting Blue Sky Active Large Cap Equity USA Fund .

2

All four of the cases allege a class period that begins on November 23, 2015 . Of the
four cases , Voe/linger, 16-5340, has the longest class period , extending to November 18,
2016.

2

Tyson's Securities Exchange Commission ("SEC") filings , and elsewhere. These alleged
misrepresentations , in turn , supposedly caused investors to incur substantial losses after
the price of Tyson 's stock fell significantly. More specifically, beginning with Tyson 's
November 23 , 2015 SEC annual report, and continuing with its quarterly reports through
August 8, 2016 , Defendants made certain representations about Tyson 's financial
condition ,

competition ,

and

operations .

Defendants

also

made

alleged

misrepresentations on conference calls with investors during this same time. Those
statements, according to plaintiffs , characterized the food industry as being intensely
competitive . They also attributed increased margins in Tyson 's chicken segment to
certain operational changes made by the company.
On September 2, 2016 , a company named Maplevale Farms , Inc. filed a class
action complaint against Tyson and several other chicken producers in the Northern
District of Illinois. See Maplevale Farms, Inc. v. Koch Foods, Inc., et al., No. 16-cv-08637
(N .D. Ill.) (Dkt. No. 1). The complaint details a price-fixing conspiracy in the broiler
ch icken 3 industry, whereby the industry coordinated to decrease production and
correspondingly increase margins. Following the Maplevale suit, eight other class action
complaints were filed against Tyson and other poultry companies .
On October 7, 2016 , an analyst named Pivotal Research downgraded Tyson 's
stock from "Hold" to "Sell ," based on the allegations of price manipulation contained in the
Maplevale litigation. In response , shares of Tyson fell $6.63 , or 8.91 %, to close at $67 .75

on October 7. As of that day, shares of Tyson had decreased by $8.69 , or 11 .37% , since
Maplevale filed its class action complaint.

3

Broiler chickens are chickens raised specifically for meat production .

3

Two of the cases currently before the Court, Huser, 16-cv-5371, and Chung, 16cv-5354 , were filed on October 17, 2016 , in the Central District of California and the
Southern District of New York, respectively . Plaintiff's counsel in both cases published
notice of the action , as required by the Private Securities Litigation Reform Act ("PSLRA"),
15 U.S.C. § 78u-4(a)(3)(A) , on that same date. On November 28 , 2016 , Voe/linger, 16cv-5340 , was filed in this Court, and four days later, on December 2, 2016 , Lalonde, 16cv-5362 , was filed in the Southern District of Ohio . Huser, Chung, and Lalonde have all
since been transferred to this Court.
On December 16, 2016 , the following parties filed motions for appointment as lead
plaintiff, approval of lead counsel , and consolidation of the cases:4
•

Hawaii ERS and Blue Sky;5

•

John Schodowski and Lewis Miller;6 and

•

Patricia Lalonde .7

As the deadline for moving to be appointed as lead plaintiff has now passed , see 15
U.S.C. § 78u-4(a)(3)(A)(i) , these motions are ripe for decision . After setting forth the legal
principles relevant to these motions, the Court will first determine whether to consolidate
the actions, and then will turn to the appointment of lead plaintiffs and counsel.

4

In addition to the below-listed motions, Doc. 24 in Chung, 16-cv-5354 , is styled on the
docket as if it is a motion to appoint Jonah Chung as lead plaintiff. However, the motion
is actually to appoint Schodowski and Miller as lead plaintiffs.
5

That Motion appears at Chung, 16-cv-5354 (Doc. 28) ; Huser, 16-cv-5371 (Doc. 27) ;
Lalonde, 16-cv-5362 (Doc. 10); and Voe/linger, 16-cv-5340 (Doc. 14).
6

That Motion appears at Huser, 16-cv-5371 (Doc. 26) , and Chung, 16-cv-5354 (Doc. 24).

7

That Motion appears at Huser, 16-cv-5371 (Doc. 23) .

4

II. LEGAL PRINCIPLES
The provisions of the PSLRA codified at 15 U.S.C. § 78u-4 apply in "each private
action arising under [Chapter 28 of Title 15] that is brought as a plaintiff class action
pursuant to the Federal Rules of Civil Procedure. " 15 U.S.C. § 78u-4(a)(1 ). The PSLRA,
in relevant part, sets forth certain procedu ral instructions for class-action plaintiffs and the
courts before which they appear. Within 20 days of filing suit, the law requires plaintiffs to
publish notice advising members of the purported plaintiff class "of the pendency of the
action , the claims asserted therein , and the purported class period ." Id. at (a)(3)(A)(i)(I) .
The notice must also advise that "not later than 60 days after the date on which the notice
is published , any member of the purported class may move the court to serve as lead
plaintiff of the purported class." Id. at (a)(3)(A)(i)(ll) . When multiple actions on behalf of a
class "asserting substantially the same claim or claims" are filed , only the plaintiff "in the
first filed action" is required to publish notice of the suit. Id. at (a)(3)(A)(ii) ; see a/so Turner
v. ShengdaTech, Inc., 2011WL6110438 , at *3 (S.D .N.Y. Dec. 6, 2011) (finding that the

PSLRA does not require publication of a new notice when a subsequent complaint
alleging a longer class period is filed , and listing cases finding the same) ; Cheney v.
Cyberguard Corp., 213 F.R.D . 484, 503 (S .D. Fla . 2003) (same) .8

In deciding which proposed lead plaintiff(s) to appoint, the Court must appoint "the
member or members" of the purported class that it finds to be "the most adequate

8

But see In re Pfizer Inc. Sec. Litig., 233 F.R.D . 334, 337 (S .D.N.Y. 2005) (considering
the proposed lead plaintiffs' financial loss during the more narrow noticed class period ,
rather than the longer unnoticed period , in deciding who to appoint as lead plaintiff).
Ultimately, the Court need not decide whether it would technically be proper for the Court
to only consider the more narrow originally-noticed class period , Chung, 16-cv-5354,
Docs. 29-5 , 29-6 , as doing so would make no difference to the outcome of the pending
motions.

5

plaintiff. " Id. at (a)(3)(B)(i). The PLSRA creates a presumption that the most adequate
plaintiff is "the person or group of persons" that:
(aa) has either filed the complaint or made a motion in response to a notice
under subparagraph (A)(i);
(bb) in the determination of the court, has the largest financial interest in the
relief sought by the class; and
(cc) otherwise satisfies the requirements of Rule 23 of the Federal Rules of
Civil Procedure .
Id. at (a)(3)(B)(iii)(I) . This presumption may be rebutted only "upon proof by a member of

the purported plaintiff class that the presumptively most adequate plaintiff . .. will not fairly
and adequately protect the interests of the class; or . .. is subject to unique defenses that
render such plaintiff incapable of adequately representing the class. " Id. at (a)(3)(B)(iii)(ll).
The "most adequate plaintiff" must also , "subject to the approval of the court, select and
retain counsel to represent the class. " Id. at (a)(3)(B)(v).
Courts generally have "90 days after the date on which a notice is published" to
appoint a lead plaintiff. Id. at (a)(3)(B)(i) . However, where a motion to consolidate has
been filed, the court "shall not" appoint a lead plaintiff "until after the decision on the
motion to consolidate is rendered ." Id. at (a)(3)(B)(ii). Pursuant to Federal Rule of Civil
Procedure 42 , "[i]f actions before the court involve a common question of law or fact, the
court may . .. consolidate the actions."

Ill. DISCUSSION
The PSLRA instructs the Court to decide the question of whether it should
consolidate these actions before turning to appointment of a lead plaintiff. 15 U.S.C.

§ (a)(3)(B)(ii) . As mentioned above, the Court may consolidate the actions if they "involve
a common question of law or fact. " Fed . R. Civ. P. 42(a) . As also mentioned above , in

6

Section I, the allegations made in the four actions before the Court are materially identical.
Each suit alleges violations of Section 1O(b) of the Exchange Act, SEC Rule 1Ob-5
promulgated thereunder, and Section 20(a) of the Exchange Act. 9 These alleged
violations are premised on much the same statements made in annual and quarterly SEC
filings, as well as other public comments. For these reasons, the Court easily concludes
that common questions of law and fact permeate the four actions, and that they should
be consolidated to preserve the parties' and the Court's time and resources .
Next, the Court turns to the issue of appointing a lead plaintiff, or group of lead
plaintiffs. The first step in making this determination is identifying the presumptive most
adequate plaintiff. The Court makes this determination based on the three prongs of 15
U.S.C. § 78u-4(a)(3)(B)(iii)(I). As to the first prong, all three proposed lead plaintiff groups
either filed a complaint or made a motion in response to a notice of the suit. Looking to
the second prong, the Court finds that the Hawaii ERS and Blue Sky plaintiff group has,
by far, the largest financial interest in the relief sought by the class . Combined, the group
incurred an alleged $2,925 ,150.66 loss calculated on a FIFO (first in, first out) basis , and
an alleged $2 ,877,901.82 loss calculated on a LIFO (last in , first out) basis . Chung, 16cv-5354, Doc. 29-3 . These amounts dwarf the Schodowski and Miller group's alleged
$26,281.00 loss, Chung, 16-cv-5354, Doc. 26-4 , and Lalonde's alleged $43,604 .00 loss,
Huser, 16-cv-5371 , Doc. 25-3.

The Court does note that, while some courts have approved of the practice, others
have expressed skepticism about the propriety of combining unrelated plaintiffs into a

9

Chung, 16-cv-5354 (Doc. 5, pp . 12-16); Huser, 16-cv-5371(Doc.1, pp. 11-15); Lalonde,
16-cv-5362 (Doc. 1, pp. 15-19); Voe/linger, 16-cv-5340 (Doc. 1, pp . 23-25) .

7

lead-plaintiff group for the purpose of increasing the group's financial interest. Compare
In re Gentiva Sec. Litig. , 281F.R.D. 108, 118-19 (E .D.N.Y. 2012) (approving the pairing
of unrelated plaintiffs and collecting cases approving of the same) , and In re Nw. Corp.
Sec. Litig., 299 F. Supp. 2d 997, 1006 (D .S.D. 2003) (quoting In re Baan Co. Sec. Litig.,
186 F.R.D. 214, 216 (D .D.C. 1999) for the proposition that "[t]he text of the PSLRA does
not limit the composition of a 'group of persons' to those only with a pre-litigation
relationship"), with In re Petrobras Sec. Litig., 104 F. Supp. 3d 618 , 621 (S.D.N .Y. 2015)
("Although the PSLRA expressly permits the Court to appoint a 'group of persons' to serve
as lead plaintiff, many courts , including this one , are skeptical of such arrangements when
they are the product of an artificial grouping designed merely to qualify as lead plaintiff
under the PSLRA."). This skepticism leads courts to "require proposed lead plaintiff
'groups' to demonstrate their ability to function as a cohesive and independent unit to
protect the interests of the class ." In re Petrobas Sec. Litig., 104 F. Supp . 3d at 622 . The
Court finds that, to the extent such groups warrant judicial skepticism, Hawaii ERS and
Blue Sky have demonstrated that they can work cohesively and protect the interests of
the class. See Chung, 16-cv-5354, Doc. 29-4, 11119-11 (discussing the actions that Hawaii
ERS and Blue Sky have taken together in preparation for this litigation). Moreover, both
Hawaii ERS and Blue Sky would , independently, have a greater financial interest in this
litigation than the other proposed lead plaintiffs . Therefore, even if they were paired-at
least in part-for the purpose of qualifying as lead plaintiffs , the Court does not believe
the concerns normally associated with such a pairing are as significant in this case .
Turning now to the third prong , the Court finds that Hawaii ERS and Blue Sky have
made a prima facie showing of typicality and adequacy under Federal Rule of Civil

8

Procedure 23 . See Fed. R. Civ. P. 23(a)(3), (4); Reese v. Bahash, 248 F.R.D. 58, 62
(D .D.C. 2008) ("Significantly, although Rule 23(a) includes four requirements ... the
presumptive lead plaintiff need only make a preliminary showing that it satisfies the
typicality and adequacy requirements of Rule 23." (quotation omitted)) . The typicality
requirement is satisfied "when each class member makes similar legal arguments to
prove the defendant's liability." Minneapolis Firefighters' Relief Ass'n v. MEMC Elec.
Materials, Inc. , 2008 WL 5233106, at *2 (E.D . Mo. Dec. 12, 2008). In MEMC, the class

consisted of those who "purchased [the defendant's] securities during the class period at
inflated prices and suffered damages as a result." Id. This described exactly the injury
alleged by the proposed lead plaintiff, who accordingly satisfied Rule 23's typicality
requirement. Id. In the instant case , the legal arguments made by Hawaii ERS and Blue
Sky-that defendants violated the Securities Exchange Act by making misleading
statements that inflated Tyson's stock price and caused them damages-are identical to
those of the purported class. For that reason , Hawaii ERS and Blue Sky have made a
prima facie showing that they satisfy Rule 23's typicality requirement.

"In determining adequacy of representation, the Court makes a two-fold inquiry to
determine whether: 1) the class representatives have common interests with the
members of the class , and 2) whether the class representatives will vigorously prosecute
the interest of the class through qualified counsel." Bradford v. Union Pac. R.R. Co. , 2007
WL 2893650, at *7 (W.D. Ark. Sept. 28, 2007) .10 As is obvious from this two-prong
standard , adequacy "is tied to both [Rule 23's] commonality and typicality" requirements,
and in PSLRA cases, it is tied to the Court's obligation to approve of a lead plaintiff's

10

The Hon . Harry F. Barnes.
9

choice of counsel. Id. The Court has already explained that Hawaii ERS's and Blue Sky's
interest align with , and are typical of, the class of plaintiffs in this case. And , the Court will
explain below that counsel selected by Hawaii ERS and Blue Sky is "qualified ." Id. Hawaii
ERS and Blue Sky also appear, at this early juncture in the litigation , to be working with
their selected counsel to ensure that prosecution of the case is both efficient and effective .
See Chung, 16-cv-5354, Doc. 29-4 (outlining the interactions between the proposed lead
plaintiffs and the ir counsel) . Therefore , Hawaii ERS and Blue Sky have made a prima
facie showing that they satisfy Rule 23's adequacy requirement.
Having met the three prongs of 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I) , Hawaii ERS and
Blue Sky are entitled to a presumption that they are the most adequate plaintiffs . Since
none of the other proposed lead plaintiffs have offered anything to even attempt to rebut
this presumption , the Court finds that Hawaii ERS and Blue Sky are , indeed , the most
adequate plaintiffs , and appoints them as lead plaintiffs.
Lastly, the Court must decide whether to approve of Hawaii ERS's and Blue Sky's
choice of Bernstein Litowitz as lead counsel. The Court finds that Bernstein Litowitz is
well qualified to serve as lead counsel in this case . The firm has previously served as lead
counsel in class actions that have resulted in recoveries of hundreds of millions of dollars
for agg rieved classes. See Voe/linger, 16-cv-5340, Doc. 15, pp . 15-16. The specific
attorneys who appear to be heading up this case for Bernstein Litowitz are both
experienced in class action securities litigation. See Chung, 16-cv-5354 , Doc. 29-7 , pp .
20-21 , 32-33 . And , Bernstein Litowitz has selected a local "Liaison Counsel" who regularly
practices in front of this Court. For these reasons , the Court approves Hawaii ERS's and
Blue Sky's choice of Bernstein Litowitz as lead counsel.

10

IV. CONCLUSION
For the reasons stated herein , the Court ORDERS :
•

That

cases

16-cv-5354;

16-cv-5371 ;

16-cv-5362;

and

16-cv-5340

are

CONSOLIDATED under Case No. 16-cv-5340;

•

That the consolidated action shall bear the following caption :
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF ARKANSAS
FAYETTEVILLE DIVISION

IN RE TYSON FOODS, INC.
SECURITIES LITIGATION

Case No. 5:16-cv-05340

•

That Hawaii ERS and Blue Sky are APPOINTED as lead plaintiffs ; and

•

That Hawaii ERS's and Blue Sky's choice of Bernstein Litowitz as lead counsel is
APPROVED.

IT IS SO ORDERED on

~

this~ day of January
OKS
S DISTRICT JUDGE

11