Tyson Foods 2005 Annual Report Download - page 60

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TYSON FOODS, INC. 2005 ANNUAL REPORT
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Securities Matters: Between June 22 and July 20, 2001, various plain-
tiffs 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 the defendants violated federal securities laws
by making, causing or allowing to be made, certain allegedly false
and misleading statements 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 deflation in the price of IBP’s stock
during the proposed class period. The various actions were subse-
quently 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 District Court granted in part and denied in part the
defendants’ motion to dismiss. On October 6, 2003, the District
Court certified 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
District 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 District Court to modify its order to include
judgment in defendants’ favor against the class and on July 30,
2004, the District Court entered such an order. On August 6, 2004,
plaintiffs filed a Notice of Appeal. Plaintiffs filed their brief on
the appeal on December 8, 2004. Defendants filed their response
on January 24, 2005. Plaintiffs filed their reply brief on February 24,
2005. Oral arguments on the appeal were heard by the Court
of Appeals September 13, 2005, and on November 9, 2005, the
Court of Appeals affirmed the decision of the District Court. On
November 23, 2005, plaintiffs filed a petition for rehearing with the
Court of Appeals. The Company is not permitted to file a response
to the petition unless requested to do so by the Court of Appeals.
General Matters: 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 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, show-
ing 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 District Court
to enter a judgment as a matter of law (JMOL) for TFM. On March 1,
2004, the plaintiffs filed motions asking the District 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 District Court denied the plaintiff’s motions for entry of a
damages award. On April 23, 2004, the District 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 appealed the District Court’s
entry of judgment in favor of TFM to the 11th Circuit Court of Appeals,
and the Circuit Court issued an opinion on August 16, 2005 affirm-
ing the District Court’s judgment. The plaintiffs requested an en banc
hearing in front of the entire 11th Circuit Court of Appeals, and this
request was denied. The plaintiffs have indicated they will seek an
appeal to the United States Supreme Court, but a petition has not
yet been filed.