Securities Snapshot
March 22, 2022

Northern District of Illinois Grants Motion for Partial Reconsideration of Summary Judgment Decision Regarding Whether Former Walgreens CFO’s Statements Were Actionable

Northern District of Illinois Grants Motion for Partial Reconsideration of Summary Judgment Decision Regarding Whether Former Walgreens CFO’s Statements Were Actionable; Securities Fraud Claims Against Chicken Producer for Statements Touting Company Performance Amidst Price-Fixing Scheme Dismissed With Prejudice; Second Circuit Affirms Dismissal of Stock Drop Class Action Suit Against Bristol-Myers

On March 4, 2022, Judge Sharon Johnson Coleman of the U.S. District Court for the Northern District of Illinois granted a motion for reconsideration filed by retail pharmacy company Walgreen Co. (“Walgreens”), its former CEO Gregory D. Wasson, and its former CFO Wade Miquelon with respect to a November 2, 2021 order granting in part and denying in part the parties’ respective summary judgment motions.

The decision stems from claims against Walgreens, Wasson, and Miquelon for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Plaintiff alleged, among other things, that Miquelon falsely stated in May 2014 that he believed that Walgreens’ fiscal year 2016 earnings before interest and taxes goal “remain[ed] achievable.”

In its November 2, 2021, summary judgment decision, the court denied Walgreens’ motion as to Miquelon’s May 2014 statement, finding that there were genuine disputes of material fact, including whether and when Walgreens knew it would be unable to achieve its 2016 financial goals. The court also denied defendants’ motion for summary judgment concerning certain of defendants’ statements about generic price inflation, finding that there were genuine disputes of material fact as to who made those statements, whether they were false, and whether they were made with scienter. For these same reasons, the court also denied in full plaintiff’s motion for partial summary judgment as to these statements. 

Defendants then moved for partial reconsideration of the court’s summary judgment decision as to Miquelon’s May 2014 statement, or in the alternative, for an order certifying an interlocutory appeal. They argued that the court’s ruling as to that statement was inconsistent with the Private Securities Litigation Reform Act’s safe harbor protecting forward-looking statements.

In granting defendants’ motion for reconsideration, the court ultimately found that Miquelon’s May 2014 statement was not actionable. The court examined the two prongs of the PSLRA’s safe harbor provisions, noting that the first prong protects forward-looking statements that are “accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statement” and that the second prong separately protects forward-looking statements “if the statement is made without actual knowledge that it was false or misleading.” The court agreed with defendants’ argument that it conflated these two prongs in its earlier ruling by focusing only on Miquelon’s actual knowledge and not on any cautionary language accompanying his statement. On reconsideration, the court reasoned that “[e]xamining [Miquelon’s] statement under the safe harbor cautionary language prong, the Court can consider statements made in SEC filings to determine whether the statements were accompanied by meaningful cautionary language.” In viewing the cautionary language in Walgreens’ SEC filings, the court found that the public statements in those filings “explain[ed] . . . the principal risks concerning drug pricing changes and reimbursement pressures” and therefore “place[d] Miquelon’s . . . forward-looking remarks within the PSLRA’s safe harbor provision,” rendering Miquelon’s May 2014 statement not actionable.

Securities Fraud Claims Against Chicken Producer for Statements Touting Company Performance Amidst Price-Fixing Scheme Dismissed With Prejudice

On March 9, 2022, Judge Raymond P. Moore of the U.S. District Court for the District of Colorado dismissed a securities class action complaint, asserting that Pilgrim’s Pride and three of its officers made false and misleading statements regarding the company’s performance while engaged in an undisclosed and illegal bid-rigging conspiracy to fix broiler chicken prices. In dismissing the case, Judge Moore concluded that the complaint failed to adequately plead falsity under the burden imposed by the Private Securities Litigation Reform Act of 1995.

The complaint, which asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, was filed after the U.S. Department of Justice indicted certain top Pilgrim’s Pride executives in June 2020 for criminal antitrust violations stemming from their alleged participation in a conspiracy involving the company and several other large broiler producers to fix prices and rig bids for broiler chickens. Pilgrim’s Pride’s stock price fell by 12.4% following news of the indictment. In October 2020, the DOJ filed a superseding indictment naming additional defendants and brought separate criminal charges against the company. Pilgrim’s Pride ultimately pleaded guilty for participating in a conspiracy to suppress competition from 2012 through 2017 and agreed to pay a criminal fine of approximately $108 million. Plaintiff alleged that the indicted officers and the company deceived investors by touting Pilgrim’s Pride’s performance while this bid-rigging conspiracy was ongoing.

The court concluded that plaintiff failed to state with particularity any factual basis for their assertion that the bid-rigging scheme significantly contributed to Pilgrim’s Pride’s success during the class period, such that plaintiffs did not adequately demonstrate that the company’s statements attributing its success to other factors were materially false or misleading. In so holding, the court explained that nearly all of the alleged conduct in the complaint relating to the bid-rigging scheme preceded the class period, and that plaintiff failed to connect defendants’ conduct to any specific statements made during the class period. The court also held that the complaint failed to sufficiently plead that Pilgrim’s Pride’s success was driven by defendants’ illegal bid-rigging scheme, noting that plaintiff made “almost no attempt to quantify the financial impact of the scheme” and that the volume of sales implicated by the company’s anticompetitive conduct was relatively small when compared against the total net sales throughout the class period. In addition, the court held that the bulk of statements cited in the complaint were not actionable because they constituted vague statements of corporate optimism incapable of objective verification, such as statements regarding Pilgrim’s Pride’s “[l]eading marketing position in the growing chicken industry,” “[b]road product portfolio,” and “[r]obust cash flow generation with disciplined capital allocation.” The court also rejected plaintiff’s contention that defendants had a duty to disclose the bid-rigging scheme, reasoning that imposing a requirement to disclose uncharged, unadjudicated wrongdoing would allow plaintiffs to bring securities fraud lawsuits merely by piggybacking on allegations raised in antitrust cases. 

The court did not grant plaintiffs leave to file an amended complaint.

Second Circuit Affirms Dismissal of Stock Drop Class Action Suit Against Bristol-Myers

On March 11, 2022, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a class action lawsuit brought by investors in Bristol-Myers Squibb Company (“Bristol-Myers”) over a drop in the pharmaceutical company’s share price following the announcement of a failed clinical trial studying whether cancer drug Opdivo would be more effective than chemotherapy in treating a certain type of lung cancer.

In their amended complaint, plaintiffs asserted claims under Sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934, alleging that Bristol-Myers misled investors by saying that the clinical trial focused on patients who exhibited a “strong” or “highly positive” expression of a biomarker known as PD-L1 in their cancerous cells. Plaintiffs alleged that these classifications were descriptors that the market generally understood to mean an expression that is 50% or higher, and that Bistol-Myers’ clinical trial instead allegedly targeted patients with a minimum expression of only 5%. Plaintiffs alleged that this small expression threshold increased the risks associated with the trial, and ultimately resulted in the conclusion that the trial failed to demonstrate that Opdivo was more effective than chemotherapy, thus affecting the company’s share price. The U.S. District Court for the Southern District of New York dismissed plaintiffs’ amended complaint with prejudice, holding that plaintiffs failed to show that there was industry-wide agreement on the meaning of “strong” PD-L1 expression. The district court therefore held that plaintiffs failed to allege a material misstatement or omission made by the company. 

On appeal, the Second Circuit agreed. The three-judge panel unanimously found that the rates of PD-L1 expression “remained a topic of research throughout the putative class period; there was no generally understood meaning of ‘strong’ expression that contradicted Bristol-Myers’ use of the term to mean 5%.” Additionally, the court found that Bristol-Myers did not have an obligation to disclose the precise PD-L1 expression threshold that it would impose for participation in the Opdivo trial and that Bristol-Myers had cautioned the public that it would not disclose the threshold.

The Second Circuit also found that plaintiffs’ amended complaint failed to allege facts giving rise to a strong inference of scienter. In so finding, the Second Circuit declined to credit plaintiffs’ argument that Bristol-Myers’ “knowledge of the industry understanding of PD-L1 expression rendered its misstatements intentional or reckless” because the complaint failed “to allege such an industry understanding.” The Second Circuit also found that certain individual defendants’ sales of shares were not evidence of scienter because the sales were either similar to those made in prior periods, were made pursuant to existing stock trading plans, or were made in accordance with broker’s procedures to cover exercise price and tax considerations. Further, the Second Circuit found that allegations concerning Bristol-Myers’ reaction to the clinical trial’s failure—including the company’s explanation of the clinical trial’s failure and the departure of two high-level Bristol-Myers employees—did not support a strong inference of scienter, characterizing those events as “unremarkable responses to” the failed clinical trial that did “not signify anything nefarious.”


Lawyers in Goodwin’s Securities and Shareholder Litigation and White Collar Defense practices have extensive experience before U.S. federal and state courts, legislative bodies and regulatory and enforcement agencies. We continually monitor notable developments in these venues to prepare the Securities Snapshot — a bi-weekly compilation of securities litigation news delivered to subscribers via email. This publication summarizes news from the civil and criminal securities law arenas in a succinct, digestible format. Topics covered include litigation and enforcement matters, legislation, rulemaking, and interpretive guidance from regulatory agencies.

Editorial Board
Charles A. Brown
Meghan K. Spillane

Contributing Authors
Zoe Bellars
Virginia Calistro