Opinion ID: 1541285
Heading Depth: 1
Heading Rank: 7

Heading: Disclosures Concerning Price-Fixing and Improper Bonuses

Text: Plaintiff contends that the trial court improperly dismissed his claims concerning ADM's failure to disclose various allegedly improper bonuses and illegal price-fixing activities. The complaint stated, in pertinent part, that the Proxy Statement failed to disclose: (1)  whether ... Michael Andreas was captured on video tape by the FBI discussing and agreeing to prices, production volumes and market share goals with officials from other companies; and (2)  whether James R. Randall and other ADM directors ... approved bonuses to ADM officers ... through the use of false invoices.... (emphasis supplied). The trial court correctly concluded that these portions of the complaint do not state the omission of a material fact. Rather, they pose a question, the answer to which would seem to require the ADM Board to engage in self-flagellation. Nowhere does the complaint allege that, at the time the complaint was filed, an adjudication of these activities had occurred. Nevertheless, plaintiff's argument would have the ADM Board confess to wrongdoing prior to any adjudication of guilt. This is precisely the situation the self-flagellation rule was designed to prevent. [41] Plaintiff attempts to skirt the self-flagellation rule by stating that the ADM Board was not required to characterize the activities as wrongful or improper. In the absence of such a qualifying statement, however, these activities would not be material to a reasonable stockholder's determination of how to vote in the directorial election. Absent any adjective describing the activity in a pejorative light, the relatively uncontroversial act of meeting with representatives of other market participants would not be of any importance to a stockholder faced with the directorial ballot. Similarly, the payment of bonuses to ADM officers is not particularly noteworthy, absent well-pleaded facts alleging that the bonuses were improper. Thus, the trial court correctly concluded that this portion of the complaint failed to state a legally cognizable claim.