Feinman v. Food Lion
| Decision Date | 04 May 1999 |
| Docket Number | AFL-CIO,CA-92-696-4,NEUFER-DAL,No. 98-2116,CA-92-705-4,R,98-2116 |
| Citation | 197 F.3d 675 |
| Parties | (4th Cir. 1999) DAVID I. LONGMAN; JEFFREY FEINMAN; PAUL M. GARDNER, Defined Plan Trust; EDWARD HANKIN; LINDA HANKIN, Plaintiffs-Appellants, v. FOOD LION, INCORPORATED; TOM E. SMITH, Defendants-Appellees, and LYNNEespondent, ROBERT HARBRANT; JEFFREY FIEDLER; KEITH MESTRICH; SEAN CUNNIFF; FOOD AND ALLIED SERVICE TRADES DEPARTMENT,; RESEARCH ASSOCIATES OF AMERICA; NEEL LATTIMORE; NICHOLAS W. CLARK; MAUREEN DWYER; ALLEN Y. ZACK; CHARLES L. ULSCH; SUSAN BARNETT; COOPERS & LYBRAND, LLP, Movants. (). . Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro.
[Copyrighted Material Omitted] COUNSEL ARGUED: John Francis Bloss, Sr., CLARK & WHARTON, Greensboro, North Carolina, for Appellants. Richard L. Wyatt, Jr., AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P., Washington, D.C.; William Kearns Davis, BELL, DAVIS & PITT, P.A., Winston-Salem, North Carolina, for Appellees. ON BRIEF: David M. Clark, CLARK & WHARTON, Greensboro, North Carolina; Jeffery G. Smith, Shane Rowley, WOLF, HALDERSTEIN, ADLER, FREEMAN & HERTZ, L.L.P., New York, New York; Joseph H. Weiss, David C. Katz, WEISS & YOURMAN, New York, New York; Lubna Faruqi, FARUQI & FARUQI, New York, New York; B. Ervin Brown, II, MOORE & BROWN, Winston-Salem, North Carolina; Bernard Persky, GOODKIND, LABATON, RUDOFF & SUCHAROW, New York, New York, for Appellants. Charles L. Warren, Larry E. Tanenbaum, Thomas P. McLish, AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P., Washington, D.C.; James T. Williams, Reid L. Phillips, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Greensboro, North Carolina, for Appellees.
Before WIDENER, MURNAGHAN, and NIEMEYER, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Widener joined. Judge Murnaghan wrote a dissenting opinion.
On the day after ABC aired its "Prime Time Live" television broadcast on November 5, 1992, detailing allegedly widespread unsanitary practices and labor law violations in grocery stores owned by Food Lion, Inc., the price of Food Lion's Class A stock fell approximately 11%, and the price of its Class B stock fell approximately 14%. A week later, stockholders David Longman, Jeffrey Feinman, and others who had purchased Food Lion stock during the 2-1/2-year period before the broadcast filed these two class actions against Food Lion, which were later consolidated, alleging securities fraud under § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The plaintiffs alleged that Food Lion affirmatively misled the market and failed to disclose that its earnings during the 2-1/2year period were artificially inflated due to its misrepresentations about and failure to disclose widespread violations of federal labor laws and pervasive, unsanitary food handling practices. They alleged that these violations and practices were attributable to Food Lion's "Effective Scheduling System," which required employees to perform certain duties within specified times at the risk of losing their jobs. The district court granted Food Lion's motion for summary judgment, concluding as a matter of law that Food Lion did not knowingly fail to disclose labor or sanitation problems and finding that plaintiffs could not "prove justifiable reliance" as to labor problems because they had already been disclosed and that the alleged sanitation problems were not material. For the reasons that follow, we affirm.
Food Lion is a publicly traded (over the counter) company with headquarters in Salisbury, North Carolina, that operates a chain of approximately 1,000 retail grocery stores in the southeastern part of the United States. During the relevant period, its earnings exceeded $200 million per year, and it employed about 60,000 persons. As a management tool, Food Lion has employed a labor scheduling system, known as "Effective Scheduling," to assist department managers in scheduling their workforces based on the time that it should take an average employee to complete various tasks. While some stores have never met the goals set by the Effective Scheduling guidelines, others consistently have met those goals. In their complaints, plaintiffs alleged that the Effective Scheduling system established guidelines that were not attainable for many employees, thereby causing them to work "off the clock" without additional pay and to cut corners, including disregarding sanitary practices.
During the 2-1/2-year "Class Period" between May 7, 1990, when Food Lion issued its 1989 Annual report, and November 5, 1992, when the PrimeTime Live broadcast aired, plaintiffs purchased stock in Food Lion, allegedly relying on its rosy statements about its relationship with its employees and the cleanliness of its stores. Plaintiffs alleged that during this period, Food Lion "reported optimistically about its future" when, in fact, its profits and optimistic outlook were dependent on a system that required its employees to violate the labor laws and to pursue unsanitary methods, facts which Food Lion failed to report.
In its 1989 Annual Report, circulated on May 7, 1990, Food Lion stated that the Human Resources Department "continues to insure that Food Lion employees receive competitive wages and excellent benefits;" that although inflation led to higher costs, "[t]hese costs were recovered primarily through improved operating efficiencies and an increased average selling price per item;" and that "[w]e will continue to pay close attention to service levels and cleanliness in our stores and believe we will achieve high marks from customers in these areas." The report said nothing about any widespread labor or sanitary problems.
During the Class Period, Food Lion continued to face and to resist the efforts of the United Food and Commercial Workers Union ("UFCW") to organize Food Lion workers. When the union called for a boycott of Food Lion, the company issued a press release on August 30, 1990, stating:
How ironic it is on this Labor Day weekend for a union leader to call for the destruction of more than 45,000 jobs of Food Lion employees in retaliation for their desire to remain union free. Such blatant threats and arrogant disregard of true employee free choice is the kind of coercion of employees that totally desecrates the purpose and spirit of Labor Day.
The fact is, Food Lion opens more than 100 stores each year and adds more than 5,000 employees each year. Food Lion could not do this without offering competitive wages and excellent benefits. On average, Food Lion receives three to four applications for every available job.
About a year later, on September 11, 1991, the UFCW announced that it had filed a lengthy complaint with the Department of Labor, accusing Food Lion of widespread labor violations in tacitly encouraging employees to work "off the clock" without pay. In its press release, the union stated:
More than 37 percent of the after-tax profit of the nation's fastest-growing retail food chain, Food Lion, is derived from illegal off-the-clock work of employees.
* * *
"Food Lion's profit is reported to exceed the industry average," the complaint [filed with the Department of Labor] states,
* * *
Food Lion could owe as much as $194 million in back wages. With liquidated damages allowed by law, its liability could be "as high as $388 million."
Food Lion responded with its own press release the same day:
Food Lion has a very clear policy against working off the clock. Employees, including managers, who have violated this policy have received discipline up to and including discharge.
This Complaint and news release by the UFCW union is simply one more example of the union's attempt to harass and coerce Food Lion management into recognizing the union without regard to the sentiments of our employees.
Food Lion employees have repeatedly rejected the UFCW union despite union efforts for more than ten years.
* * *
As has been the case in all other attacks on Food Lion by this union, the company intends to defend itself vigorously in this matter.
On the following day, Food Lion issued another press release, stating:
The UFCW's most recent claims of illegal employment practices by Food Lion and its employees insult the hard work and integrity of all Food Lion employees. Those ingredients are the key to Food Lion's success and ability to bring customers extra low prices. It is not off the clock work by employees or other illegal employment practices as the UFCW-sponsored propaganda alleges.
* * *
Food Lion denies union claims of employee mistreatment, but the public doesn't have to accept the word of either the Company or the union. Let employees and the free marketplace decide that.
* * *
Nothing has been proven and nothing has been decided. Nevertheless, Food Lion is immediately commencing a detailed investigation of all the allegations in the Complaint and will take appropriate action.
Several months later, on February 27, 1992, Food Lion made further public statement with respect to the union's claims:
As before, the UFCW union is simply exploiting administrative charges and other litigation as part of its effort to unionize Food Lion. The fact is, Food Lion strictly forbids working off-the-clock or other wage/hour law violations. UFCW sponsored claims of extensive wage/hour violations are simply untrue. Food Lion management diligently works to prevent even isolated occurrences. When management discovers them, those responsible receive...
To continue reading
Request your trial
-
Monroe Employees Retirement v. Bridgestone, 03-5505.
...The statements are analogous to those deemed immaterial by a broad spectrum of federal courts. See, e.g., Longman v. Food Lion, Inc., 197 F.3d 675, 684 n. 2 (4th Cir.1999) (concluding that the statements that "Food Lion is one of the best-managed high growth operators in the food retailing ......
-
City of Monroe Employees v. Bridgestone, 03-5505.
...The statements are analogous to those deemed immaterial by a broad spectrum of federal courts. See, e.g., Longman v. Food Lion, Inc., 197 F.3d 675, 684 & n. 2 (4th Cir.1999) (concluding that the statements that "Food Lion is one of the best-managed high growth operators in the food retailin......
-
Burns v. Duplin Land Development, Inc., 7:07-CV-172-D.
...have viewed the total mix of information made available to be significantly altered by disclosure of the fact." Longman v. Food Lion, Inc., 197 F.3d 675, 683 (4th Cir.1999) see Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988); TSC Indus., Inc. v. Northway, ......
-
Appert v. Morgan Stanley Dean Witter, Inc.
...that a reasonable shareholder would consider it important in deciding whether to buy or sell a security. See Longman v. Food Lion, Inc., 197 F.3d 675, 683 (4th Cir.1999) (citing Basic Inc. v. Levinson, 485 U.S. 224, 231–32, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988)). The “reasonable investor” st......
-
SECURITIES FRAUD
...(quoting Southland Sec. Corp. v. INSpire Ins. Sols., Inc., 365 F.3d 353, 372 (5th Cir. 2004))); see also Longman v. Food Lion, Inc., 197 F.3d 675, 683–84 (4th Cir. 1999) (holding that a corporation’s public statements that it provides employees with job security, good work conditions, “some......
-
Securities Fraud
...company was exploring “strategic opportunities” but that it would be “very premature” to discuss the matter); Longman v. Food Lion, Inc., 197 F.3d 675, 683–84 (4th Cir. 1999) (holding a corporation’s public statements that it provides employees with job security, good work conditions, compe......
-
Securities Fraud
...fraud action” (quoting Southland Sec. Corp. v. INSpire Ins. Sols., Inc., 365 F.3d 353, 372 (5th Cir. 2004))); Longman v. Food Lion, Inc., 197 F.3d 675, 683–84 (4th Cir. 1999) (holding that a corporation’s public statements that it provides employees with job security, good work conditions, ......
-
Securities fraud.
...but that it would be "very premature" to discuss the matter further immaterial as a matter of law); see also Longman v. Food Lion, Inc., 197 F.3d 675, 683-84 (4th Cir. 1999) (holding a corporation's public statements that it provided employees with job security, good work conditions, and "s......