The original complaint alleges that following the close of trading, defendants shocked investors after they published a release that revealed, for the first time, that the Company was performing well below expectations and that defendants expected to cause the Company to take a material restatement charge in the near term -- rending its prior reported financial statements and reports unreliable, false and materially misleading. SunOpta, which processes and produces organic foods, said it expected to post a profit of 12 cents to 14 cents per share for the year, citing issues within its fruit and BioProcess groups that led to pretax write-downs and provisions of $12 million to $14 million. Among problems the Company cited were inventories within the Company's Fruit Group's berry operations requiring write-down to net realizable value, whereby "preliminary estimates indicated that an adjustment in the range of $9 to $11 million for this issue and related items is necessary." Further, the Company disclosed a charge of "approximately $3 million pre-tax, related to difficulties in collecting for services and equipment provided to a customer under the terms of an existing equipment supply contract within the SunOpta BioProcess Group."
On this news, belatedly revealed on January 24, 2008, shares of SunOpta stock fell precipitously, collapsing over 40%, from a close of $9.50 per share to approximately $6.00 per share in the single trading day -- on very high trading volume of over 11.488 million shares traded.
NOTE: On January 28, 2008, the law firm of Federman & Sherwood announced that class period in its complaint was expanded to include those investors who bought or sold between May 8, 2007 to January 25, 2008.
As summarized by the Company’s Form 10-Q for the quarterly period ended March 31, 2009, several class action lawsuits have now been consolidated into one class action with lead plaintiffs. On January 28, 2009, the Court appointed Western Washington Laborers-Employers Pension Trust and Operating Engineers Construction Industry and Miscellaneous Pension Fund (the “Pension Funds”) as the lead plaintiffs in one consolidated class action aggregating the various class action lawsuits. On April 14, 2009, the lead plaintiffs filed their consolidated and amended complaint in the US District Court in the Southern District of New York. The new complaint includes new allegations under Sections 11, 12 and 15 of the Securities Act of 1933 as well as four new individual defendants, two of whom are former senior management employees (one also a former director and officer), one is a current director and chairman and one is currently a senior employee. The new complaint also added three corporate defendants namely, Cleugh’s Frozen Foods, Inc., Pacific Fruit Processors, Inc. and Organic Ingredients, Inc., former subsidiaries of the Company, and now part of the merged subsidiary, SunOpta Fruit Group, Inc.
On November 13, 2009, the plaintiffs filed a Notice of Unopposed Motion for Preliminary Approval of Settlement as well as a Stipulation and Agreement of Settlement. According to the Stipulation, the proposed settlement is in the amount of $11,250,000. The proposed settlement also includes settlement of the pending Canadian action. On February 2, 2010, the Court granted the motion to preliminarily approve the Stipulation and the Settlement. The U.S. Action is hereby certified as a class action and excludes the Canadian Class. The Settlement Fairness Hearing is set for Monday, May 17, 2010.
On May 17, 2010, the Court approved the settlement, approved the plan of allocation, and approved plaintiff’s counsel motion for attorneys’ fees and expenses. The action is now dismissed with prejudice.