According to the Company’s FORM 10-K for the fiscal year ended May 29, 2005, the company reached an agreement, which received final approval by the court on May 24, 2005, to settle the lawsuit for $14 million. The settlement, which is largely covered by insurance, is without admission of liability or wrongdoing.
In June 2003, the United States Court of Appeals for the Eighth Circuit upheld plaintiff's complaint against ConAgra Foods, Inc. In the securities class action filed on behalf of investors against ConAgra Foods, Inc. ('ConAgra'), and several other defendants, the Eighth Circuit Court of Appeals reversed the judgment of the lower court dismissing the complaint for failure to state a claim. The appellate court reversed the judgment of the district court. The case has been restated.
The lower court had dismissed the complaint for failing to state a claim upon which relief could be granted for two reasons: 1) the defendants' misrepresentations were immaterial as a matter of law; and 2) the plaintiffs suffered no loss attributable to the defendants. The Court of Appeals disagreed with both conclusions considering that the District Court erred in deciding on a motion to dismiss that the plaintiffs had failed to plead either transaction or loss causation. A reasonable investor might be concerned about one of ConAgra's subsidiaries reporting earnings not yet received, especially if this was done under orders from ConAgra's senior management. 'The fraud-on-the-market theory then would allow the fact finder to presume that the stock's price reflected the inflated earnings, and it makes sense to conclude that the plaintiffs were harmed when they paid more for the stock than it was worth. This is a sufficient allegation.' 335 F.3d 824; 2003 U.S. App. LEXIS 13257; Fed. Sec. L. Rep. (CCH) P92,445.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between August 28, 1998 and May 23, 2001, concerning its financial performance for the Company's fiscal years 1998, 1999, and 2000. Throughout the Class Period, defendants issued press releases reporting ConAgra's quarterly and year-end financial performance, and filed reports confirming such performance with the Securities and Exchange Commission (the ``SEC''). These statements, as alleged in the complaint, were materially false and misleading because United Agri Products, a ConAgra subsidiary, engaged in improper accounting throughout the Class Period, including improperly recognizing revenue and insufficiently reserving for bad debt. On May 23, 2001 ConAgra issued a press release announcing that the Company will restate its financial results for the fiscal years 1998, 1999 and 2000. The press release revealed that ConAgra will restate revenues for the Company's fiscal years 1998-2000, inclusive, which will be reduced by an estimated total of $349 million. The press release further revealed that the Company estimated that, upon restatement, earnings per share will be reduced from $1.35 to $1.32 for 1998, from $1.46 to $1.41 for 1999, and from $1.67 to $1.60 for 2000. In addition, according to the press release, the Company is cooperating with an ongoing investigation by the SEC into the matter.