Tyson Foods 2004 Annual Report Download - page 63

61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
wastes and wastewater into Grand Lake. The class certification hearing
was held in October 2003. On December 11, 2003, the trial court
entered an order which granted class certification. On January 12,
2004, the Company, Simmons and Peterson filed a Petition in Error
(the Petition) in the Oklahoma Supreme Court which challenges
and seeks appellate level review of the trial court’s certification order.
The Oklahoma Supreme Court has not yet scheduled proceedings
on the Petition.
Between June 22 and July 20, 2001, various plaintiffs
commenced actions (the Delaware Federal Actions) against the
Company, Don Tyson, John Tyson and Les Baledge in the U.S. District
Court for the District of Delaware, seeking monetary damages on
behalf of a purported class of those who sold IBP, inc. (IBP) stock
from March 29, 2001, when the Company announced its intention
to terminate its merger agreement with IBP, through June 15, 2001,
when a Delaware state court rendered its Post-Trial Opinion ordering
the merger to proceed. Plaintiffs in the various actions alleged that the
defendants violated federal securities laws by making, causing or
allowing to be made, certain allegedly false and misleading state-
ments in a March 29, 2001, press release issued in connection with
the Company’s attempted termination of the Merger Agreement. The
plaintiffs alleged that, as a result of the defendants’ alleged conduct,
purported class members were harmed by an alleged artificial defla-
tion in the price of IBP’s stock during the proposed class period. The
various actions were subsequently consolidated under the caption
In re Tyson Foods, Inc. Securities Litigation and, on December 4, 2001,
the plaintiffs in the consolidated action filed a Consolidated Class
Action Complaint. On January 22, 2002, the defendants filed a motion
to dismiss the consolidated complaint. By memorandum order dated
October 23, 2002, the court granted in part and denied in part the
defendants’ motion to dismiss. On October 6, 2003, the court certi-
fied a class consisting of those who purchased IBP securities on or
before March 29, 2001, and subsequently sold such securities from
March 30 through June 15, 2001, inclusive, and sustained damages as
a result of such transaction. Following the conclusion of discovery
in the case, plaintiffs and defendants each filed motions for summary
judgment. On June 17, 2004, the court rendered an opinion in favor
of defendants and against plaintiffs on all of plaintiffs’ claims, and
entered an order to that effect. On June 28, 2004, defendants filed
a motion requesting the court to modify its order to include judg-
ment in defendants’ favor against the class and on July 30, 2004, the
court entered such an order. On August 6, 2004, plaintiffs filed a
Notice of Appeal. No hearing date on the appeal has been set.
In July 1996, certain cattle producers filed Henry
Lee Pickett, et al. v. IBP, inc. in the U.S. District Court, Middle District
of Alabama, seeking certification of a class of all cattle producers.
The complaint alleged that TFM used its market power and alleged
“captive supply” agreements to reduce the prices paid by TFM on
purchases of cattle in the cash market in alleged violation of the
Packers and Stockyards Act (PSA). Plaintiffs sought injunctive and
declaratory relief, as well as actual and punitive damages. Plaintiffs
submitted an amended expert report on November 19, 2003, showing
alleged damages on all cash market purchases by TFM of approxi-
mately $2.1 billion. Trial of this matter began on January 12, 2004,
and concluded on February 10, 2004. On February 17, 2004, a jury
returned a verdict against TFM on liability and gave an “advisory”
verdict on damages that estimated the impact on the cash market
(i.e., a group larger than the class) to be $1.28 billion. On February 25,
2004, TFM filed a renewed motion requesting the Court to enter a
judgment as a matter of law (JMOL) for TFM. On March 1, 2004, the
plaintiffs filed motions asking the Court to enter the $1.28 billion
advisory verdict as an award of damages to the plaintiffs and requesting
prejudgment interest. On March 22, 2004, the Court denied the
plaintiff’s motions for entry of a damages award. On April 23, 2004,
the Court granted TFM’s JMOL motion, and held (i) TFM had legitimate
business reasons for using “captive supplies,” (ii) there was “no
evidence before the Court to suggest that [TFM’s] conduct is illegal,”
and (iii) “plaintiffs failed to present evidence at trial to sustain their
burden with respect to liability and damages.” The plaintiffs have
appealed the Court’s entry of judgment in favor of TFM to the
11th Circuit Court of Appeals, and oral arguments are scheduled to
be heard by the Circuit Court on December 17, 2004.
On September 12, 2002, 82 individual plaintiffs filed Michael Archer,
et al. v. Tyson Foods, Inc. and The Pork Group, Inc., CIV 2002-497, in
the Circuit Court of Pope County, Arkansas. On August 18, 2002,
the Company announced a restructuring of its live swine operations
which, among other things, resulted in the discontinuance of rela-
tionships with approximately 130 contract hog producers, including
the plaintiffs. In their complaint, the plaintiffs allege that the
Company committed fraud and should be promissorily estopped
from terminating the parties’ relationship. The plaintiffs seek an
unspecified amount of compensatory damages, punitive damages,
attorney fees and costs. The Company filed a motion to Stay All
Proceedings and Compel Arbitration which was denied. That decision
was appealed to the Arkansas Supreme Court by the Company and
affirmed. The case was remanded to the Circuit Court and discovery
is proceeding. Trial is currently scheduled to begin March 25, 2005.