On September 7, 2001, the United States Court of Appeals for the Tenth Circuit issued its decision. According to the Court of Appeals’ decision, the Court affirms the district court's dismissal of Plaintiffs' complaint.
Plaintiffs filed a Second Amended Class Action Complaint on April 1, 1999, and the defendants responded by filing a motion to dismiss the Second Amended Class Action Complaint. On February 4, 2000, the Court entered the Order signed by U.S. District Judge Vicki Miles-LaGrange granting the motion to dismiss plaintiffs' Second Amended Class Action Complaint and dismissing the case. On March 3, 2000, the plaintiffs filed a Notice of Appeal.
Plaintiffs filed a Consolidated Amended Class Action Complaint on April 30, 1997, which was dismissed with leave to amend by the district court on March 4, 1999. In its dismissal order, the district court found that Plaintiffs had not adequately pled scienter as required by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4, which states that allegations of scienter require a plaintiff to "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).
On March 26, 1997, a district court entered an order which: (1) consolidated the nine class actions; (2) appointed the City of Philadelphia and Ronald T. Goldstein (the Philadelphia Plaintiffs) as lead plaintiffs in the consolidated action; (3) approved the Philadelphia Plaintiffs' counsel as lead counsel in the consolidated action; (4) ordered "[a]ll pleadings in the Consolidated Action [to] be filed by Lead Plaintiffs only"; and (5) ordered "[s]ervice of all papers [to] be made by defendants on Lead Plaintiffs only." The district court took these actions pursuant to Federal Rule of Civil Procedure 42(a) and the Private Securities Litigation Reform Act of 1995 (the PSLRA), codified at 15 U.S.C. § 78u-4.
The nine class actions consolidated in this case were filed starting in March 1996, when the David's Litigation and verdict were specifically disclosed by Fleming. The actions were brought on behalf of all people who purchased stock in Fleming during the class period, and alleged that the individual Defendants had omitted material information regarding the David's Litigation from Fleming's required SEC filings filed during the class period, as well as from quarterly and annual reports distributed to its shareholders and other potential investors. Because the David's Litigation involved significant damages claims that could result in a materially adverse verdict against the company but was nonetheless not explicitly disclosed in Fleming's required SEC filings during the class period, asserted Plaintiffs, Fleming's public disclosures during the class period were materially misleading and thus constituted a violation of Section 10(b) of the Securities Exchange Act of 1934, see 15 U.S.C. §§ 78j, and Rule 10b-5, see 17 C.F.R. § 240.10b-5.
During the early 1990s, David's Supermarkets, Inc. sued Fleming Companies, Inc. in Texas state court for violation of certain purchase agreements. In 1996, the jury in that suit returned a $204.5 million verdict against Fleming.