Court Opinion

ID: 6984570
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:49:38.861127+00
Date Added: 2024-06-11T16:09:22.746532
License: Public Domain

MURNAGHAN, Circuit Judge,
dissenting:
I respectfully dissent. The majority opinion claims that Food Lion’s failure to disclose its “off the clock” policy was not material because the market was fully in*687formed of any risks in the price of Food Lion’s stock. The majority relies on the press reports reflecting the dispute between Food Lion and the UFCW over Food Lion’s employment practices. In doing so, the majority cites Hillson Partners Ltd. Partnership v. Adage, Inc., 42 F.3d 204 (4th Cir.1994), and Raab v. General Physics Corp., 4 F.3d 286 (4th Cir.1993).
In Hillson Partners and Raab, the corporation-defendants made misleading statements to the market about their economic situations. In both cases, however, the defendants admitted their financial problems through additional public disclosures. See Hillson Partners, 42 F.3d at 212 (defendant disclosed the financial problems of its subsidiary in its Annual Report and a Form 10K filing); Raab, 4 F.3d at 289 (defendant issued a press release informing the market of an impending reduction in its earnings on the same day as the misleading statements in its Annual Report). Because the market had access to the defendants’ financial problems, we held that the misleading statements were not material to the plaintiffs’ decisions to purchase stock. See Hillson Partners, 42 F.3d at 212-13; Raab, 4 F.3d at 289.
Hillson Partners and Raab do not control the case at bar. The majority incorrectly suggests that any public information contradicting Food Lion’s misleading statements forecloses the possibility of finding that those statements were material. However, the controlling principle is that “in a fraud on the market case, Food Lion’s failure to disclose material information may be excused where that information has been made credibly available to the market by other sources.” Raab, 4 F.3d at 289 (quoting In re Apple Sec. Litig., 886 F.2d 1109, 1115 (9th Cir.1989) (emphasis added)); see also Basic Inc. v. Levinson, 485 U.S. 224, 248^49, 108 S.Ct. 978, 99 L.Ed.2d 194 (1988). The majority does not analyze whether the allegations against Food Lion came from a credible source.1
Here, the market first heard about Food Lion’s problems through an employment dispute between Food Lion and the UFCW. Food Lion had been resisting the efforts of the UFCW to organize Food Lion’s workers. In August of 1990, the UFCW called for a boycott of Food' Lion’s stores to- protest Food Lion’s opposition to the union. Food Lion responded by accusing the UFCW of “the kind of coercion of employees that totally desecrates the purpose and spirit of Labor Day.” The public thus was aware that Food Lion and the UFCW were involved in a bitter dispute over whether Food Lion’s stores would unionize.
In September of 1991, the UFCW filed its complaint with the Department of Labor, citing Food Lion’s policy of encouraging “off the clock” work by employees. Food Lion responded by denying the UFCW’s claim. Food Lion also suggested that the claim was an effort to use unmeri-torious litigation to force Food Lion to unionize. Food Lion stated in a public statement that “[a]s before, the UFCW union is simply exploiting administrative charges and other litigation as part of its effort to unionize Food Lion.... UFCW sponsored claims of extensive wage/hour violations are simply untrue.” Food Lion thus characterized the UFCW’s claim as merely another tactic in an ongoing labor dispute.
The information available to the public when the plaintiffs purchased Food Lion stock came from an admitted adversary of Food Lion. Given the history of antagonism between the parties and Food Lion’s vehement denials, the information about Food Lion’s policies did not come from a credible source. A dispute of fact, therefore, exists as to whether Food Lion’s representations were material to the plain*688tiffs’ decisions to purchase Food Lion stock.
Because a dispute of fact exists as to whether Food Lion’s representations were material, the district court’s grant of summary judgment to Food Lion was inappropriate. I would reverse the district court’s grant of summary judgment in favor of Food Lion.2

. Obviously, we did not have to analyze whether the negative information in Hillson Partners and Raab came from a credible source. In both cases, the information came from the defendant's own statements.

. For the same reasons, I would reverse the district court’s grant of summary judgment in favor of defendant Tom Smith.