United States District Court, W.D. Arkansas, Fayetteville Division
IN RE TYSON FOODS, INC. SECURITIES LITIGATION
MEMORANDUM OPINION AND ORDER
TIMOTHY L. BROOKS, UNITED STATES DISTRICT JUDGE.
Currently
before the Court is a Motion for Leave to File an Amended
Complaint (Doc. 54) submitted by Lead Plaintiffs,
Employees' Retirement System of the State of Hawaii and
Blue Sky, [1] a Response in Opposition (Doc. 58)
submitted by Defendants Tyson Foods, Inc.
(“Tyson”), Donald J. Smith, Dennis Leatherby,
Donnie King, and Noel White, and a Reply (Doc. 59) in further
support. Additionally, the parties have each filed Notices of
Subsequent Activity to update the Court about legal
developments in related securities cases around the country.
Plaintiffs filed the first Notice (Doc. 60) to advise the
Court that the Complaint in the In re Broiler Chicken
Antitrust litigation pending in the Northern District of
Illinois had survived a Motion to Dismiss under Rule
12(b)(6). Defendants filed a response (Doc. 61). Defendants
then submitted their own Notice (Doc. 62) that a lawsuit
against Sanderson Farms with allegations strikingly similar
to those in the case at bar had been dismissed with prejudice
in the Southern District of New York. Plaintiffs responded to
that Notice (Doc. 63).[2] Having considered the briefs submitted by
the parties as well as these subsequent Notices, the Court is
now in a position to rule on the Motion for Leave to Amend.
For the reasons provided in this Opinion and Order, the
Motion for Leave to Amend is DENIED.
I.
Factual and Procedural Background
The
Court has previously given a thorough and exhaustive recount
of the factual and procedural background of this case in its
Opinion and Order dismissing the initial Complaint (Docs. 52,
53). Because the Court is not ruling in a vacuum, it
incorporates by reference that prior Opinion (Doc. 52) and,
therefore, will recount here only the most pertinent
facts necessary to resolve the instant Motion. In particular,
this section will focus on Tyson's financial successes,
Tyson's asserted reasons for this success,
Plaintiffs' more nefarious allegations about the true
causes of Tyson's success, and the prior procedural
background of this case, as these are the most important
facts to establish context for the Court's present
ruling.
Plaintiffs
brought this proposed class action lawsuit against Tyson and
certain of its Executive Officers pursuant to Section 10(b)
of the Exchange Act and Rule 10b-5, [3]asserting that these
Defendants made material misrepresentations of fact in public
statements[4] that were false (and therefore actionable)
because they attributed Tyson's recent business success
to internal corporate improvements and not to two antitrust
conspiracies that Plaintiffs contend Tyson was engaged in
with fellow chicken producers. Plaintiffs allege that these
two conspiracies-a large conspiracy to inflate chicken prices
by depressing chicken supply, and a smaller conspiracy to
inflate the price of chicken by manipulating the Georgia
Dock, one of several ‘indices' used to generate
wholesale chicken prices-were the true reasons for
Tyson's record-breaking earnings and new-found ability to
weather the “brutal swings” that previously
characterized the chicken market. (Doc. 54-2, ¶ 37).
A.
Tyson's Boosted Performance
This
uptick in business for Tyson has already been extensively
documented in the Court's prior Opinion.[5] But, the Court
repeats some of the most important details here (often
verbatim) to provide context for its current decision. The
original Complaint in this case (Doc. 43) sets out in great
detail the remarkable difference in Tyson's pre-Great
Recession[6] performance and its
Recession/Post-Recession performance. For instance, in the
decade immediately preceding the Great Recession, Tyson's
chicken margins fluctuated between 1.2% and 7.0%, and in no
two consecutive years was Tyson able to sustain an increase
in profit margin. During this time, or more specifically from
2001-2008, the average price per chicken was $0.696/lb for
“WOG Broilers”[7] and $0.615/lb for “grade A whole
birds.” (Doc. 43, ¶ 206). However, as the Great
Recession took hold and the nation began its recovery,
industry chicken prices increased steadily, hitting an
average of $0.967/lb for WOG Broilers and $0.852/lb for grade
A whole birds between 2009 to mid-2016. Tyson's chicken
margins increased substantially as well. For example, in
2014, Tyson achieved a 7.9% margin. A year later it had
increased its margin to 12.0%, and in each of the first three
quarters of 2016, Tyson posted margins above 13.0%.
Tyson's
financials and its stock prices increased significantly along
with these improved margins. From fiscal year 2011 to fiscal
year 2014, Tyson's chicken segment's annual operating
income “rose from $164 million to $883 million, a more
than five-fold increase.” Id. at ¶ 38.
“In 2013 and 2014, Tyson's chicken segment achieved
best-in-history earnings and record-breaking earnings per
share.” Id. Tyson's $778 million profit in
2013, in fact, was a record high for the company.
Id. at ¶ 205. On November 13, 2015, Tyson
reported its fiscal year 2015 financial results. They
included “full year chicken segment revenues of $11.39
billion and overall revenues of $41.3 billion, chicken
segment net income of $1.36 billion and overall net income of
$2.17 billion.” Id. at ¶ 281. The market
responded favorably to these results, and Tyson's stock
price rose from $43.65 on November 20, 2015, to $48.09 by
close of market on November 23. Id. at ¶ 288.
Tyson's
record results continued into the next year. On February 5,
2016, Tyson announced its first quarter financials. It
reported “chicken segment revenues of $2.63 billion,
overall revenues of $9.15 billion, chicken segment net income
of $358 million, [and] overall net income of $776
million.” Id. at ¶ 292. Once again the
market responded favorably, and Tyson's stock price shot
up from $51.95 on February 4, 2016, to $57.10 on the 5th.
Id. at ¶ 302. Tyson's second quarter
financials were similarly impressive. It achieved
“chicken segment revenues of $2.73 billion, overall
revenues of $9.17 billion, chicken segment net income of $347
million, [and] overall net income of $704 million.”
Id. at ¶ 304. And, Tyson's third quarter
results followed suit. Its August 8, 2016, disclosures listed
“chicken segment revenues of $2.74 billion, overall
revenues of $9.4 billion, chicken segment net income of $380
million, [and] overall net income of $767 million.”
Id. at ¶ 323. In the days following this
announcement, Tyson's stock price topped $75.00.
Id. at ¶ 333. By September 22, 2016, its stock
had reached a high of $76.76. Id. at ¶ 7.
B.
Tyson's Stated Reasons for the Improved
Performance
Tyson
and certain of its executives attributed this financial
success to a variety of factors. One was Tyson's decision
to improve its “product mix” by increasing its
offerings of “value-added products”; that is,
processed chicken products that can be sold for a higher
price than commodity chicken parts. Id. at ¶
42. As Defendant Donald J. Smith, Tyson's former
President and CEO, explained in a 2015 conference call with
investors, Tyson's “chicken business model is
primarily value-added as a large branded component and is
anchored in consumer insights and demand, and has only a
small amount of commodity exposure.” Id. at
¶ 273. Defendant Noel White, Tyson's COO and former
President of Poultry, echoed this sentiment in a 2016 press
release, stating that Tyson had “upgraded its product
mix into more branded, value-added items.” Id.
at ¶ 321. Smith reiterated in early 2016 that Tyson was
“finding ways to upgrade . . . raw materials into
value-added, high margin opportunities.” Id.
at ¶ 298. Defendant Donnie King, who was Tyson's
President of North American Operations and who Smith labelled
“the architect” who had “led the
charge” in expanding Tyson's chicken margins,
declared in May of 2016 that Tyson “made a conscious
decision” to change its business model to be “in
a number one brand position” and to “add value to
products.” Id. at ¶ 314. Defendant Dennis
Leatherby, Tyson's CFO, described Tyson's business
model as being in “a much better position, ” in
August of 2016, “because [Tyson has] the value-added
mix.” Id. at ¶ 328.
Coupled
with its efforts to change its product mix to include more
branded, value-added items, Tyson implemented a newly
developed “buy-versus-grow” strategy. Formerly,
Tyson would grow-that is, raise from egg to
slaughter-substantially all of the chicken it brought to
market, rather than purchasing some of its chicken from
competing producers. Indeed, as late as 2008, Tyson's
then-CFO openly rejected the idea of purchasing some of its
supply, stating, “we're not going to . . . go out
and buy open market meat to subsidize other people's
growth.” Id. at ¶ 158 (alteration
omitted, ellipses in original) (quoting Tyson's then-CFO,
Wade Miquelon). But, by 2012, Tyson had adopted a markedly
different strategy: it began buying chicken from other
producers to re-sell to its customers. For example, where
Tyson's value-added products called for just a part of
the chicken-say, a breast-Tyson would purchase the part from
another producer, rather than growing the whole chicken
itself. By 2014, this strategy led Tyson to purchase over 4
million pounds of broiler chicken on the open market per
week. This figure increased to approximately 10% of
Tyson's chicken sales by late 2015, or about 17.6 million
pounds per week. Id. at ¶ 160-61.
The
buy-versus-grow strategy, according to Tyson executives, had
important benefits. For one, it allowed Tyson to better hedge
against the cyclical price changes in the broiler chicken
industry. As Smith explained in November of 2015, Tyson had
“proven that by purchasing up to 10% of [its] chicken
needs on the open market and further processing it into
value-added convenience foods, [Tyson] can produce strong
stable returns even in times of falling commodity chicken
pricing.” Id. at ¶ 283. King described
the strategy's benefit similarly: Tyson's business
model is built “with the flexibility so that if chicken
margins are really low, if there is excess supply . . . we go
buy the raw material. In a situation where chicken might be
tight, where sales came in much higher than what was
projected . . . then we would grow the animal.”
Id. at ¶ 316.
The
buy-versus-grow business model also meant that Tyson was able
to eliminate certain inefficiencies from its production. For
example, because certain parts of the chicken, namely, the
breast-were most desirable, Tyson could buy those products
from competitors rather than ending up with an excess supply
of less desirable chicken parts-the leg quarters-if it opted
to grow the animals instead. Smith remarked in February of
2016 that he couldn't remember Tyson ever “selling
fewer leg quarters than we are today-and the Buy vs. Grow
certainly plays a part of that.” Id. at ¶
298. King confirmed this benefit a few months later, stating
that Tyson doesn't “have excess chicken pieces or
parts to sell.” Id. at ¶ 314.
Tyson
also attributed its increased financial outlook to
cost-reduction measures. King declared in May of 2016 that
Tyson had “taken well over $1 billion out of [its] cost
structure.” Id. at ¶ 314. White
acknowledged these savings a month later, explaining:
We've invested a fair amount of money in our plants and
facilities to make sure those structures are right. We've
invested in what we call one piece flow, which means that the
production processes are all in flow. We gain from an
efficiency standpoint, yield standpoint, and more processes
we put in place, the better we've gotten. So there's
about $1 billion in costs that have come out of our system.
Id. at ¶ 319. Tyson complimented these
cost-reduction measures with changes to its pricing
structure. For example, Tyson “mov[ed] away from fixed
price contracts in its chicken business and towards contracts
that relied on spot prices, thereby allowing Tyson to benefit
from rising chicken prices . . . .” Id. at
¶ 119. In 2009, Smith described this change as
“dramatically” reducing “the amount of
fixed-price contracts that we have over 90 days with our
customers.” Id.
C.
Plaintiffs' Explanations of Tyson's Success
Plaintiffs
have a different, more sinister, explanation for Tyson's
sustained period of financial success. According to them,
Tyson engaged in an industry-wide antitrust conspiracy aimed
at depressing the domestic supply of broiler chickens, thus
keeping prices and margins high. The broiler chicken industry
is one characterized by steady, inelastic demand. When supply
is low relative to the market's demand, chicken prices
are naturally high. But, when chicken prices are high,
producers make more money per chicken, creating an incentive
for them to sell more chicken, lest their competitors gain
market share by taking advantage of the high prices. The
supply of chicken thus increased, correspondingly driving the
price down. Paradoxically, then, it is advantageous for the
industry as a whole to keep supply low (and prices
high), but for the individual producers in the
industry to increase supply when prices are high
(consequently making prices low again). To counteract this
paradox, chicken producers would all have to agree to keep
supply low when prices are high, so that all can enjoy the
high price of chicken without the risk of ceding market share
to their competitors. This was the nature of the alleged
conspiracy run by the broiler chicken industry, including
Tyson, from 2008-2016. Plaintiffs also allege that Agri
Stats, a company that according to Lead Plaintiffs provided a
mechanism to facilitate the monitoring by chicken producers
of their competitors activities to ensure compliance with the
conspiracy.
Tyson
is alleged to have planned the industry conspiracy with its
competitors during a series of industry conferences. The
industry's higher-ups, including Tyson executives,
gathered at the National Chicken Council's annual meeting
on October 2, 2008, in the midst of significant turmoil in
the economy at large and the chicken industry specifically.
Shortly thereafter, the industry's leading chicken
producers began announcing cuts to production levels.
Pilgrim's Pride, Perdue, Wayne Farms, and Sanderson Farms
all made such announcements in late 2008. Tyson followed by
announcing a 5% production cut in January of 2009. Later that
month, Tyson's senior executives met with leaders from
other major chicken producers at the International Poultry
Expo in Atlanta, Georgia. Another round of production cuts
across the industry followed. Similar meetings continued
throughout 2009, and producers sustained the agreed-upon
production cuts during that time.
One of
the methods used across the industry for cutting production
was reducing the size of broiler breeder flocks. As its name
implies, a broiler breeder is a hen that lays the fertilized
eggs that become broiler chickens. From 2008 to 2009, the
industrywide broiler breeder population dropped from north of
58 million hens to south of 54 million. By reducing the size
of their broiler breeder flocks, and by sharing that
information through Agri Stats, participants in the alleged
conspiracy could be assured of their allies' commitments
to long-term production cuts.
By
mid-2010, the industry had enjoyed sustained high prices for
a year. This consistent high price, according to Plaintiffs,
caused some members of the conspiracy to lose discipline and
start increasing production to capitalize on the higher
prices.
Tyson
and its co-conspirators sought to rectify the issue promptly.
Following the January 2011 International Poultry Expo, Tyson
signaled the continuing need to cut supply of chicken in the
United States. The complaint alleges that chicken producers
then began taking a number of different actions, including
reducing production at a deboning operation (Cagle's),
delaying the development and construction of a North Carolina
Broiler complex (Sanderson Farms), reducing egg sets (House
of Raeford), abandoning already planned increased (Mountaire
Farms), and pulling eggs from incubators (Tyson). (Doc. 54-2,
¶ 130).
Two
other facets of the alleged conspiracy are worth describing.
The first involves the industry's efforts to suppress
domestic supply by increasing exports. During 2013 and 2014,
Mexico experienced an outbreak in the avian flu. This led to
the culling of Mexican breeder hens, and gave the industry
“guise” to further reduce the size of its
domestic breeder flock by exporting breeders and their eggs
to Mexico. Exportation continued through 2015, with Tyson
noting in May that “it was sending 3% of its eggs to
Mexico to ‘fill incubators.'” Id. at
¶ 173. Later in 2015, the avian flu outbreak caused
export limitations on American-hatched chickens. Facing
decreased exports and a potential corresponding rise in
supply, the industry undertook further measures to keep
domestic supply low. Chicken producers allegedly began
breaking eggs instead of setting them for growth. And,
producers began “dumping” large quantities of
chicken thighs in Vietnam, selling then from 29% less than
they could obtain in the domestic market.
Second,
participants in the alleged antitrust conspiracy engaged in a
scheme to manipulate the Georgia Dock-an important industry
price index upon which a high volume of sales contracts
(especially with grocers) were based. As the Complaint
describes it, four indices tracked broiler chicken prices.
Each index relied on producers to report the prices of their
sales to customers, allowing the index to compile the
industry-average price. The Georgia Dock was the most
important of the four, as it influenced chicken prices for
approximately 25% of the entire U.S. market. The Georgia Dock
was the only index that did not verify the sales prices
reported to it by producers. Beginning in mid-2014, the
broiler chicken price listed by the Georgia Dock began
diverging significantly from the Urner Barry and USDA
indices.[8] By January 11, 2016, the divergence
between the Georgia Dock and the USDA indices reached a high
of $0.46/lb. The Georgia Dock listed a price of $1.12/lb,
while the USDA's listed price was only $0.66/lb.
Id. at ¶ 182.
The
alleged conspiracy began to crest on September 2, 2016, when
a group of customers in the broiler chicken industry filed a
lawsuit in Chicago alleging an industrywide antitrust
conspiracy to fix prices. See Maplevale Farms, Inc. v.
Koch Foods, Inc., et al., No. 16-cv-08367 (N.D. Ill.).
Then, on October 7, 2016, a veteran industry analyst at
Pivotal Research Group issued a report supporting the theory
that Tyson had been engaged in an antitrust conspiracy.
D.
Subsequent Procedural History
A
number of shareholder suits followed. In fact, plaintiffs
initiated four lawsuits around the country against the
company and certain of its executives. Cases filed in the
Central District of California, Southern District of New
York, and Southern District of Ohio were subsequently
transferred to this Court, where the fourth case had been
filed. This Court issued an Opinion and Order on January 25,
2017, consolidating the cases, appointing Hawaii ERS and Blue
Sky as Lead Plaintiffs, and approving their selection of lead
counsel. The Court also set a deadline to file an Amended
Complaint[9] and a Motion to Dismiss, which were both
filed in due course. Defendants' Motion to Dismiss was
predicated on the argument that the original Complaint failed
to meet certain heightened pleading requirements-namely the
requirement to plead certain allegations with particularity
imposed by the PSLRA. The Court heard oral argument on the
Motion to Dismiss on June 30, 2017, and subsequently granted
the Motion to Dismiss in its Opinion on July 26, 2017 (Doc.
52). About a month later, Plaintiffs filed the present Motion
for Leave to Amend (Doc. 54), and the Court has subsequently
benefitted from reading the Defendants' Response in
Opposition (Doc. 58) and Plaintiffs' Reply in Support
(Doc. 59) as well as the aforementioned Notices of Subsequent
Activity and Responses thereto (Docs. 60-63).
II.
LEGAL STANDARDS
As a
preliminary matter, the Court must resolve a disagreement
between the parties as to whether Rule 15 or a post-judgment
rule, Rule 59, provides the appropriate legal standard by
which to assess Plaintiffs' Motion. Although Plaintiffs
have styled the instant Motion as one for Leave to Amend,
Defendants assert that Rule 59, which pertains to Motions to
Alter or Amend a Previous Judgment, provides the appropriate
rule. In support of their position, Defendants cite to a
number of cases where courts have applied Rule 59 (or Rule
60) to motions to amend following entry of judgment. However,
Defendants fail to appreciate that these cases involve
appeals where the trial court initially dismissed the action
with prejudice, often entering judgment contemporaneously
with the 12(b)(6) dismissal opinion. That fact readily
distinguishes those cases from the case at bar, where the
dismissal was one without prejudice and where the
Court's opinion, at various points, specifically
contemplated that a revised version of the Complaint could
theoretically cure the pleading deficiencies of the original
Complaint.[10]
Thus,
unlike the plaintiffs in the cases Defendants cite, there is
no need here for Plaintiffs to seek alteration of the
judgment, or, therefore, to meet the more exacting standards
of Rule 59. Indeed, this approach comports with the way that
courts nationwide have recently handled proposals to amend
complaints that have previously been dismissed as deficient
under the PSLRA. See, e.g., Kader v. Sarepta
Therapeutics, Inc., 2017 WL 72396, at *3 (D. Mass. Jan.
6, 2017) (analyzing a proposed amended complaint under Rule
15(a) after having previously dismissed without prejudice the
initial complaint); In re Nuverra Envtl. Solutions
Securities Litig., 2015 WL 1120000, at *2 (D. Ariz. Mar.
12, 2015) (same); In re Stemline Therapeutics, Inc. Sec.
Litig., 2018 WL 1353284, at *6 (S.D.N.Y. Mar. 15, 2018)
(dismissing complaint but giving Plaintiffs a period of 30
days in which to move under Rule 15 for leave to amend).
Therefore, Rule 15, and not Rule 59, is the appropriate
standard by which to assess Plaintiffs' proposed AC.
Under
Federal Rule of Civil Procedure 15(a)(2), the Court
“should freely give leave” to amend a pleading
“when justice so requires.” However, leave to
amend is not an absolute right, and when there is “good
reason for denial, ‘such as undue delay, bad faith, or
dilatory motive, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the
non-moving party, or futility of the amendment, '”
it is within the Court's discretion to deny leave to
amend. Becker v. Univ. of Neb. at Omaha, 191 F.3d
904, 907-08 (8th Cir. 1999) (quoting Brown v.
Wallace, 957 F.2d 564, 566 (8th Cir. 1992)). An
amendment is considered futile if it would not survive a
subsequent motion to dismiss. See Hintz v. JPMorgan Chase
Bank, N.A., 686 F.3d 505, 511 (8th Cir. 2012).
In this
case, in determining whether the proposed amended Complaint
would be futile because it could not withstand a subsequent
Motion to Dismiss, the Court must employ a modified version
of the usual 12(b)(6) standard because of the burdens imposed
upon Plaintiffs by the PSLRA. Because this is, at bottom, a
securities case, the PSLRA imposes certain heightened
pleading requirements distinct and apart from those normally
governing pleading in the federal courts. Indeed, as the
Court explained in much greater detail in its prior Opinion,
Congress passed the PSLRA after finding that litigation
brought pursuant to Section 10(b)[11] of the Exchange Act was
wrought with abuses and frivolities, such as “nuisance
filings, targeting of deep-pocket defendants, vexatious
discovery requests, and manipulation by class action lawyers
of [their] clients.” Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Dabit, 547 U.S. 71, 81 (2006)
(quotation omitted). To counteract these perceived abuses of
the litigation process, Congress imposed the following
requirements:
First,
“the complaint shall specify each statement alleged to
have been misleading, the reason or reasons why the statement
is misleading, and, if an allegation regarding the statement
or omission is made on information and belief, the complaint
shall state with particularity all facts on which that belief
is formed.” 15 U.S.C. § 78u-4(b)(1); see also
In re Cerner Sec. Litig., 425 F.3d 1079, 1083 (8th Cir.
2005) (“[T]he plaintiff must plead falsity by
specifying each allegedly misleading statement and the
reasons why each statement is misleading.”). To satisfy
this heightened pleading standard, “a securities
plaintiff often must plead the ‘who, what, when, where
and how' of the misleading statements or
omissions.” Cornelia I. Crowell GST Trust v. Possis
Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008)
(quoting In re K-tel Int'l, Inc. Sec.
Litig., 300 F.3d 881, 890 (8th Cir. 2002)).
Second,
the complaint must “state with particularity facts
giving rise to a strong inference that the defendant
acted with the required state of mind.” 15 U.S.C.
§ 78u-4(b)(2)(A) (emphasis added); see also McCrary
v. Stifel, Nicolaus & Co., 687 F.3d 1052, 1056 (8th
Cir. 2010) (“[T]he allegations should give rise to more
than just a plausible or reasonable inference of
scienter.”). “[I]n determining whether the
pleaded facts give rise to a ‘strong' inference of
scienter, the court must take into account plausible opposing
inferences.” Tellabs, Inc. v. Makor Issues &
Rights, Inc., 551 U.S. 308, 323 (2007). The Eighth
Circuit has stated that the “strong inference”
requirement can be satisfied in three ways: “(1) from
facts demonstrating a mental state embracing an intent to
deceive, manipulate, or defraud; (2) from conduct which rises
to the level of severe recklessness; or (3) from allegations
of motive and opportunity.” Cornelia I.
Crowell, 519 F.3d at 782.
In
resolving two disagreements between the parties on the Motion
to Dismiss, the Court set forth its understanding of how
these heightened pleading requirements interact with the
usual legal standard under Rule 12(b)(6). As to falsity, the
relevant case law makes clear that the Plaintiffs' burden
under the particularity requirement is to set forth the
who, what, when, where,
and how of the actionable statement itself.
And, to the extent that the Plaintiffs' allegations of
underlying wrongdoing regarding the statement are made on
information and belief, those allegations must be supported
by particularized facts. 15 U.S.C. § 78u-4(b)(1).
Plaintiffs' theory of the case is, and indeed has always
been, that Tyson's statements were false and materially
misleading (and therefore actionable) because Tyson was
participating in these two alleged conspiracies and because
it did not disclose this information to investors. Therefore,
because these statements are alleged to be false and
materially misleading solely because of these
conspiracies, which Plaintiffs allege Tyson participated in
on information and belief, Plaintiffs must support their
allegations as to these conspiracies with particularized
facts.[12]
As to
scienter, while the Court must still draw reasonable
inferences in the Plaintiffs' favor (just like with any
other 12(b)(6) motion), it must, uniquely for these types of
actions, also weigh those reasonable inferences against
“plausible opposing inferences.”
Tellabs, 551 U.S. at 323. In fact, the Supreme Court
has mandated this very type of weighing, explaining in
Tellabs that because “the strength of an
inference cannot be decided in a vacuum” that “a
court must consider plausible, nonculpable explanations for
the defendant's conduct, as well as inferences favoring
the plaintiff” in “[determining] whether the
plaintiff has alleged facts that give rise to the requisite
‘strong inference' of scienter.”
Tellabs, 551 U.S. at 323-24.
III.
DISCUSSION
The
Court noted in its prior order that the AC, just as the
original, alleges two separate antitrust conspiracies-a
larger conspiracy to suppress chicken supply and a smaller
one to manipulate the Georgia Dock. As the Court determined
above, Rule 15 provides the appropriate standard by which to
assess Plaintiffs' Motion. Rule 15(a)(2) provides that a
“court should freely give leave when justice so
requires.” Nevertheless, before proceeding to the
analysis of the AC's pleading of these conspiracies under
Rule 15(a), the Court would note that there appears to be an
active circuit split among the Courts of Appeals as to
whether the heightened pleading requirements of the PSLRA
alter the otherwise applicable Rule 15(a) “when justice
so requires” standard. Compare, ACA Fin.
Guar. Corp. v. Advest, Inc., 512 F.3d 46, 56 (1st Cir.
2008) (“We hold that the PSLRA does not itself modify
the liberal amendment policy of Rule 15(a).”) with
Miller v. Champion Enters., Inc., 346 F.3d 660, 692 (6th
Cir. 2003) (“[W]e think it is correct to interpret the
PSLRA as restricting the ability of plaintiffs to amend their
complaint, and thus as limiting the scope of Rule 15(a) of
the Federal Rules of Civil Procedure.”). Nevertheless,
the Court need not wade into this debate at the present time
to resolve the conflict. That is because, after careful
review of the original Complaint, the proposed AC, and the
red-lined version showing the changes between the two, the
Court ...