Facts of Illegal Activity Must be Plead with Particularity
Investors filed a securities fraud class action accusing a company and its officers of concealing its role in a conspiracy to raise the prices of broiler chickens. The shareholders charged that nondisclosure of the anti-trust conspiracy rendered various Securities and Exchange Commission (SEC) filings false and misleading under Securities Exchange Act. The Second Circuit affirmed dismissal finding the shareholders failed to show with particularity that the company’s financial disclosures were misleading or how its alleged anticompetitive conduct occurred or might have affected trade. The decision provided clarity that if a company's statements are rendered false or misleading through the nondisclosure of illegal activity "the facts of the underlying illegal acts must be pleaded with particularity" before a plaintiff can prevail on a securities fraud claim.