`
`
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLORADO
`
`No. 1:20-CV-01966-RM-MEH
`
`UNITED FOOD AND COMMERCIAL WORKERS
`INTERNATIONAL UNION LOCAL 464A,
`THE TRUSTEES OF WELFARE AND PENSION FUNDS OF
`LOCAL 464A – PENSION FUND,
`THE TRUSTEES OF RETIREMENT PLAN FOR OFFICERS,
`BUSINESS REPRESENTATIVES AND OFFICE
`EMPLOYEES OF LOCAL 464A,
`THE TRUSTEES OF LOCAL 464A FINAST FULL TIME
`EMPLOYEES PENSION PLAN,
`THE TRUSTEES OF LOCAL 464A WELFARE AND
`PENSION BUILDING INC., and
`THE TRUSTEES OF NEW YORK-NEW JERSEY
`AMALGAMATED PENSION PLAN FOR ACME
`EMPLOYEES, Individually and on Behalf of All Others
`Similarly Situated,
`
`Plaintiffs,
`
`v.
`
`PILGRIM’S PRIDE CORPORATION,
`JAYSON J. PENN,
`WILLIAM W. LOVETTE, and
`FABIO SANDRI,
`
`Defendants.
`
`
`
`
`DEFENDANT JAYSON PENN’S
`MOTION TO DISMISS LEAD PLAINTIFF’S CONSOLIDATED AMENDED
`CLASS ACTION COMPLAINT
`
`
`
`
`
`
`
`
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 2 of 17
`
`
`
`
`TABLE OF CONTENTS
`
`
`Page
`PRELIMINARY STATEMENT ................................................................................................... 1
`
`FACTUAL BACKGROUND ........................................................................................................ 2
`
`ARGUMENT ................................................................................................................................. 3
`
`I.
`
`II.
`
`III.
`
`IV.
`
`PLAINTIFF’S § 10(B) CLAIM MUST BE DISMISSED BECAUSE
`NONE OF PENN’S STATEMENTS WERE FALSE WHEN MADE. ................ 3
`
`THE § 10(B) CLAIM MUST ALSO BE DISMISSED BECAUSE
`PLAINTIFF FAILS TO ALLEGE THAT PENN ACTED WITH
`SCIENTER. ........................................................................................................... 7
`
`PLAINTIFF HAS NOT PLED LOSS CAUSATION AS TO PENN.................. 11
`
`PLAINTIFF’S § 20(A) CLAIM MUST BE ALSO BE DISMISSED. ................ 11
`
`CONCLUSION ............................................................................................................................ 11
`
`
`
`
`i
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 3 of 17
`
`
`
`
`
`TABLE OF AUTHORITIES
`
`
`Page(s)
`
`Cases
`
`Cats v. Prot. One, Inc.,
`2001 WL 34070630 (C.D. Cal. June 4, 2001) ............................................................................ 8
`
`Cent. Laborers’ Pension Fund v. Integrated Elec. Servs. Inc.,
`497 F.3d 546 (5th Cir. 2007) .................................................................................................... 10
`
`Chipman v. Aspenbio Pharma, Inc.
`2012 WL 4069353 (D. Colo. Sept. 17, 2012) ............................................................................. 7
`
`City of Philadelphia v. Fleming Companies, Inc.,
`264 F.3d 1245 (10th Cir. 2001) .................................................................................................. 8
`
`City of Pontiac Policemen's & Firemen’s Ret. Sys. v. UBS AG,
`752 F.3d 173 (2d Cir. 2014) ....................................................................................................... 4
`
`Exkae Ltd. v. Domo, Inc.,
`2020 WL 7352735 (D. Utah Dec. 15, 2020) .............................................................................. 9
`
`Fogel v. Vega,
`759 F. App’x 18 (2d Cir. 2018) .................................................................................................. 4
`
`Greebel v. FTP Software, Inc.,
`194 F.3d 185 (1st Cir. 1999) ....................................................................................................... 8
`
`Grossman v. Novell, Inc.,
`120 F.3d 1112 (10th Cir. 1997) .................................................................................................. 6
`
`In re Gold Res. Corp. Sec. Litig.,
`776 F.3d 1103 (10th Cir. 2015) ................................................................................................ 11
`
`In re Gold Res. Corp. Sec. Litig.,
`957 F. Supp. 2d 1284 (D. Colo. 2013) ........................................................................................ 7
`
`In re Level 3 Commc’ns, Inc. Sec. Litig.,
`667 F.3d 1331 (10th Cir. 2012) ............................................................................................ 6, 10
`
`In re Oppenheimer Rochester Funds Grp. Sec. Litig.,
`838 F. Supp. 2d 1148 (D. Colo. 2012) ...................................................................................... 10
`
`In re PetroChina Co. Ltd. Sec. Litig.,
`120 F. Supp. 3d 340 (S.D.N.Y. 2015) .................................................................................. 3, 11
`
`ii
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 4 of 17
`
`
`
`
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`
`In re Sofamor Danek Grp., Inc.,
`123 F.3d 394 (6th Cir. 1997) ...................................................................................................... 4
`
`In re Williams Sec. Litig-WCG Subclass,
`558 F.3d 1130 (10th Cir. 2009) ................................................................................................ 11
`
`In re Zagg, Inc. Sec. Litig.,
`797 F.3d 1194 (10th Cir. 2015) ............................................................................................ 9, 10
`
`Menora Mivtachim Ins. Ltd. v. Int’l Flavors & Fragrances Inc.,
`2021 WL 1199035 (S.D.N.Y. Mar. 30, 2021) ............................................................................ 3
`
`Peace Officers’ Annuity & Benefit Fund of Georgia v. DaVita Inc.,
`372 F. Supp. 3d 1139 (D. Colo. 2019) ...................................................................................... 11
`
`Ronconi v. Larkin,
`253 F.3d 423, 432 (9th Cir. 2001) .......................................................................................... 4, 8
`
`SEB Asset Mgmt. S.A. v. The Western Union Co.,
`2015 WL 5708532 (D. Colo. Sept. 29, 2015) ......................................................................... 5, 6
`
`Smallen v. The Western Union Company,
`950 F.3d 1297 (10th Cir. 2020) .................................................................................................. 8
`
`Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
`551 U.S. 308, 321 (2007) ............................................................................................................ 8
`
`
`Statutes
`
`15 U.S.C. § 78u-4(b)(2)(A)............................................................................................................. 8
`
`15 U.S.C. § 78u-5(c)(1)(A)(i) ......................................................................................................... 7
`
`15 U.S.C. § 78u–5(i)(1)(A)–(C) ..................................................................................................... 7
`
`
`
`
`iii
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 5 of 17
`
`
`
`Defendant Jayson Penn joins the motions to dismiss filed by Defendants Pilgrim’s Pride
`
`Corporation (“the Company” or “Pilgrim’s”) and Fabio Sandri, and by Defendant William
`
`Lovette.1 Penn further submits this motion to dismiss Plaintiff’s Amended Complaint (“AC”)
`
`under 12(b)(6), and submits this incorporated memorandum of law in support.2
`
`PRELIMINARY STATEMENT
`
`Plaintiff’s attempt to manufacture a securities claim based on years-old conduct fails
`
`against all Defendants—but especially Penn. The AC alleges no underlying wrongdoing by Penn
`
`during the proposed 2017–2020 Class Period. And it alleges no wrongful conduct by any Pilgrim’s
`
`employee during Penn’s 2019–2020 tenure as CEO. Instead, Plaintiff seeks to drag Penn into this
`
`putative class action based on nothing more than a handful of statements in press releases and
`
`earnings calls he made as CEO—allegations that account for fewer than two dozen of the AC’s
`
`292 numbered paragraphs. But even on those paltry allegations, Plaintiff fails to plead any
`
`particularized facts to show Penn’s statements were false when made. And Plaintiff’s attempt to
`
`plead scienter for Penn—based on statements he made some four to seven years after the
`
`underlying misconduct—comes nowhere close to satisfying Plaintiff’s burden under the PSLRA.
`
`The claims against Penn must be dismissed.
`
`
`1 The Court granted Penn’s Unopposed Motion for Leave to Incorporate by Reference
`Defendants’ Motions to Dismiss (Dkt. 59) on July 16, 2021. See 7/16/2021 Order (Dkt. 61). Penn
`refers to the Pilgrim’s Pride Corporation and Fabio Sandri’s Motion to Dismiss Plaintiff’s
`Amended Class Action Complaint and Incorporated Memorandum of Law as the “Company
`Mot.” and William W. Lovette’s Motion to Dismiss the Amended Complaint and Incorporated
`Memorandum of Law as the “Lovette Mot.”
`2 On July 13, 2021, all parties met and conferred, consistent with Civil Practice Standard
`IV.N.2.a., in an effort to resolve the issues identified in this motion. Parties were unable to come
`to any resolution.
`
`1
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 6 of 17
`
`
`
`FACTUAL BACKGROUND
`
`Piggybacking on a Department of Justice investigation, Plaintiff seeks to exploit an alleged
`
`history of bid-rigging in the poultry industry between 2012 and 2017—conduct that predates both
`
`Plaintiff’s Class Period and Penn’s time as CEO. The AC spills much ink on the cast of characters
`
`drawn into the DOJ’s investigation, but it identifies only three instances—November 2012, August
`
`2014, and March/April 2015—in which Penn had any alleged connection to that activity. AC
`
`¶¶ 225–27. The last date the Complaint alleges any Pilgrim’s employee engaged in wrongdoing is
`
`September 2017. Id. ¶ 122. The Class Period begins that same year, on February 9, 2017. AC ¶ 1.
`
`In March 2019, long after Plaintiff alleges any underlying wrongdoing by Penn or any
`
`Company employee, Penn became the Company’s CEO. In that role, Penn made a number of
`
`statements related to the Company through press releases and earnings calls, and he also signed
`
`the Company’s 2019 10-K. Id. ¶¶ 187–211. While the AC identifies a total of 15 allegedly false
`
`statements by various Company executives during the Class Period, it alleges that Penn made just
`
`five: (i) May 2, 2019, (ii) August 1, 2019, (iii) October 31, 2019, (iv) February 21, 2020, and
`
`(v) April 30, 2020. Id. Penn’s statements, many of them containing similar or even identical
`
`language, repeatedly highlighted Pilgrim’s “key customer” strategy, competitive advantages, and
`
`optimistic outlook. Under Plaintiff’s theory, the alleged bid-rigging scheme—rooted in activity
`
`from 2012 to 2017—rendered portions of those 2019–2020 statements false. Id.
`
`Plaintiff, a purported purchaser of Pilgrim’s stock, asserts claims under federal securities
`
`laws on behalf of a putative class of all persons and entities that acquired Pilgrim’s shares between
`
`February 9, 2017, and June 2, 2020. Id. ¶ 1. The AC alleges two counts against Penn: for violation
`
`of § 10(b) and control-person liability under §20(a) of the Securities Exchange Act of 1934.
`
`2
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 7 of 17
`
`
`
`ARGUMENT
`
`Plaintiff fails to plead a § 10(b) claim for the reasons stated by the Company and Lovette
`
`in their briefs, which Penn adopts and incorporates. See Company Mot. 10–24; Lovette Mot. 4–
`
`15. Plaintiff’s § 10(b) claim must also be dismissed against Penn because the AC does not show
`
`that Penn’s statements were false when made, that he acted with scienter, or that the statements
`
`caused any economic loss. And because Plaintiff fails to plead any claim against Pilgrim’s,
`
`Plaintiff’s § 20(a) claim against Penn must be dismissed.
`
`I.
`
`PLAINTIFF’S § 10(b) CLAIM MUST BE DISMISSED BECAUSE NONE OF
`PENN’S STATEMENTS WERE FALSE WHEN MADE.
`
`Plaintiff’s § 10(b) claim fails for the simple reason that the AC does not show that any of
`
`Penn’s statements contained a misrepresentation or omission of material fact when he made them.
`
`Pointing to years-old conduct that is far outside the Class Period, Plaintiff attempts to fashion a
`
`securities claim on the premise that Penn’s 2019–2020 statements must be tainted by the outdated
`
`2012–2017 activity. But § 10(b) requires more than chronological alchemy. At a minimum,
`
`Plaintiff must plead particularized facts that the conduct continued into the period covered by the
`
`statements. See In re PetroChina Co. Ltd. Sec. Litig., 120 F. Supp. 3d 340, 358 (S.D.N.Y. 2015)
`
`(“Plaintiffs are required . . . to establish—at a bare minimum—that the underlying fraud took place
`
`during the time period covered by the purportedly false public statements.”), aff’d (Mar. 21, 2016);
`
`Menora Mivtachim Ins. Ltd. v. Int’l Flavors & Fragrances Inc., 2021 WL 1199035, at *10
`
`(S.D.N.Y. Mar. 30, 2021) (dismissing claims based on acts years before class period because
`
`plaintiffs failed to show activity continued).
`
`Plaintiff fails to connect the dots here. Based on Plaintiff’s own allegations, there is a four-
`
`year gap between the last of Penn’s alleged wrongdoing (April 1, 2015) and the first of his
`
`3
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 8 of 17
`
`
`
`challenged statements (May 2, 2019). AC ¶¶ 189–190. And there is a 20-month gap between
`
`Penn’s statements and alleged wrongdoing by any Pilgrim’s employee, which under Plaintiff’s
`
`own allegations does not extend past 2017. Id. ¶ 122. Plaintiff’s case relies almost entirely on the
`
`assertion that the activity continued into 2019, see id. ¶ 132, but Plaintiff offers nothing more than
`
`speculation and conclusory statements. That is not enough. Absent particularized allegations
`
`showing that Penn’s statements were false when he made them, Plaintiff has no § 10(b) claim. See
`
`Ronconi v. Larkin, 253 F.3d 423, 432 (9th Cir. 2001) (under PSLRA “complaint must contain
`
`allegations of specific contemporaneous statements or conditions that demonstrate the intentional
`
`or the deliberately reckless false or misleading nature of the statements when made” (emphasis
`
`added)).
`
`Because Plaintiff does not allege any wrongdoing by Penn or any other Pilgrim’s employee
`
`contemporaneous with Penn’s statements, Penn had no obligation to address such conduct.
`
`“[C]ompanies do not have a duty to disclose uncharged, unadjudicated wrongdoing.” City of
`
`Pontiac Policemen’s & Firemen’s Ret. Sys. v. UBS AG, 752 F.3d 173, 184 (2d Cir. 2014). Nor
`
`does Plaintiff allege that Pilgrim’s reported inaccurate financials while Penn was CEO.
`
`“Accurately reported financial statements thus cannot become actionable simply because
`
`companies do not simultaneously disclose some wrongdoing that may have contributed to the
`
`company’s financial performance.” Fogel v. Vega, 759 F. App’x 18, 24 (2d Cir. 2018) (citing In
`
`re Sofamor Danek Grp., Inc., 123 F.3d 394, 401 & n.3 (6th Cir. 1997)). Plaintiff instead merely
`
`argues that because Penn’s statements omitted any discussion of the alleged bid-rigging, those
`
`statements are rendered misleading. But that assertion fails to establish how a single one of Penn’s
`
`statements was false when made.
`
`4
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 9 of 17
`
`
`
`Indeed, Plaintiff has no basis to challenge anything in the five statements attributed to Penn,
`
`which include such expressions of corporate strategy as:
`
`• May 2, 2019: Company’s success due to “heavily investing in further
`differentiating our portfolio”; “key customer approach is strategic and creates a
`basis to further accelerate growth”; citing “our relentless pursuit of operational
`excellence.” AC ¶¶ 187–190.
`• August 1, 2019: Key customer strategy is “relevant to [Pilgrim’s] growth,” “gives
`us a clear long-term competitive advantage,” and “promotes trust.” Id. ¶¶ 192–194.
`• October 31, 2019: “We remain committed to our Key Customer strategy, which is
`the basis for our growth”; key customer approach also “promotes trust, enhances
`long-term relationships and strengthens our margin structure.” Id. ¶¶ 198–200.
`• February 21, 2020: “Our results have remained well balanced and are the result of
`our vision to become the best and most respected company”; expressing
`commitment to create “an environment for safe people, safe products and healthy
`attitudes.” Id. ¶¶ 207–209.
`• April 30, 2020: Key customer approach gives Company “a clear, long-term,
`sustainable competitive advantage.” Id. ¶¶ 211–213.
`
`Plaintiff takes particular issue with Penn’s statements about Pilgrim’s “key customer”
`
`strategy—which prioritized relationship-building with important customers—but Plaintiff offers
`
`only conclusory statement allegations to explain how Penn’s description of Pilgrim’s key customer
`
`strategy was false. Plaintiff fails to make the critical showing that the prior alleged bid-rigging
`
`contradicted Penn’s later statements about key customer strategy. See SEB Asset Mgmt. S.A. v.
`
`The Western Union Co., 2015 WL 5708532, at *4 (D. Colo. Sept. 29, 2015) (dismissing allegations
`
`based on statements concerning business activities where plaintiffs did not allege particularized
`
`facts undermining statements).
`
`For similar reasons, Plaintiff fails to plead that Penn’s statements about Pilgrim’s strategic
`
`vision and competitive advantage were false when made. Plaintiff challenges Penn’s statements
`
`about Pilgrim’s investments in its operations (AC ¶ 187); diversified portfolio and competitive
`
`5
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 10 of 17
`
`
`
`position (id. ¶¶ 189, 190); pursuit of operational excellence (id. ¶¶ 190, 209, 211); and “vision to
`
`become the best” (id. ¶¶ 209, 211). But Plaintiff does not provide a single particularized allegation
`
`that establishes how an alleged years-old bid-rigging scheme contradicted Penn’s assessments that
`
`Pilgrim’s product portfolio, capital investments, and operational vision contributed to Pilgrim’s
`
`financial success. See SEB, 2015 WL 5708532, at *4 (dismissing claims where plaintiffs did not
`
`show statements on competitive advantage were false).
`
`Similarly, the 2019 10-K that Penn signed for Pilgrim’s accurately describes the chicken
`
`industry as “highly competitive” and notes that the “competitive factors in our business include
`
`price, product quality, product development, brand identification, breadth of product line and
`
`customer service.” AC ¶ 203. Contrary to Plaintiff’s assertion that the alleged bid-rigging scheme
`
`rendered Pilgrim’s 2019 10-K false, id. ¶ 204, this broad statement concerns the entire “chicken
`
`industry,” not Pilgrim’s own financial performance or operations. If anything, this statement
`
`underscores how many other factors—not just pricing—fuel competition in the chicken industry.
`
`Penn’s statements are also not actionable because his generalized expressions of optimism
`
`are too vague and nonspecific to be material. See Grossman v. Novell, Inc., 120 F.3d 1112, 1124
`
`(10th Cir. 1997) (“Vague, optimistic statements are not actionable because reasonable investors
`
`do not rely on them in making investment decisions.”). Plaintiff does not allege that any of Penn’s
`
`statements—about competitive advantages, good customer relationships, and investments—are
`
`accompanied by timeframes, related financial data, or any other metric quantifying the extent of
`
`these “advantages.” The statements are thus “nothing more than puffery,” “vague (if not
`
`meaningless) management-speak upon which no reasonable investor would base a trading
`
`decision.” In re Level 3 Commc’ns, Inc. Sec. Litig., 667 F.3d 1331, 1340 (10th Cir. 2012).
`
`6
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 11 of 17
`
`
`
`Several of Penn’s statements are inactionable for the further reason that they concern
`
`forward-looking statements about Pilgrim’s future prospects,3 and as such, are protected by the
`
`PSLRA’s safe harbor. 15 U.S.C. § 78u–5(i)(1)(A)–(C). If forward-looking statements are
`
`“accompanied by meaningful cautionary statements identifying important factors that could cause
`
`actual results to differ materially from those in the forward-looking statement[s],” they are not
`
`actionable, and are immune from suit under the PSLRA. Id. § 78u-5(c)(1)(A)(i); In re Gold Res.
`
`Corp. Sec. Litig., 957 F. Supp. 2d 1284, 1297 (D. Colo. 2013) (dismissing claims based on
`
`forward-looking statements as protected if it is either immaterial or “accompanied by meaningful
`
`cautionary statements”), aff’d, 776 F.3d 1103 (10th Cir. 2015). Every single statement that the AC
`
`attributes to Penn contains cautionary language about forward-looking statements.4 They are not
`
`actionable here.
`
`II.
`
`THE § 10(b) CLAIM MUST ALSO BE DISMISSED BECAUSE PLAINTIFF
`FAILS TO ALLEGE THAT PENN ACTED WITH SCIENTER.
`
`Penn should also be dismissed from this case because Plaintiff fails to meet its burden to
`
`
`3 See AC ¶¶ 189 (key customer approach “creates a basis to further accelerate growth”), 190
`(concerning plans “for the long term”), 194 (key customer approach “give[s] us a clear long-term
`competitive advantage” and Pilgrim’s “will leverage” the strategy), 198 (Pilgrim’s “will continue
`to support” key customer revenues), 200 (key customer approach “give[s] us a clear long-term
`competitive advantage” and Pilgrim’s will “continue to leverage” the strategy), 209 (Pilgrim’s is
`“continuing [its] strategy” to support its “vision to become the best and most respected
`company”), 211 (same), 213 (key customer approach “give[s] a clear, long-term” advantage).
`4 See Ex. 1 (May 2, 2019 Earnings Call Transcript) at 4; Ex. 2 (May 1, 2019 8-K Press Release)
`at 3; Ex. 3 (August 1, 2019 Earnings Call Transcript) at 4; Ex. 4 (August 1, 2019 8-K Press
`Release) at 3; Ex. 5 (October 31, 2019 Earnings Call Transcript) at 4; Ex. 6 (October 31, 2019 8-
`K Press Release) at 3; Ex. 7 (February 21, 2020 Earnings Call Transcript) at 4; Ex. 8 (February
`21, 2020 8-K Press Release) at 3; Ex. 9 (April 30, 2020 Earnings Call Transcript) at 4; Ex. 10
`(April 30, 2020 8-K Press Release) at 3. See also Declaration of Caroline Zalka In Support of
`Pilgrim’s Pride Corporation and Fabio Sandri’s Motion to Dismiss Plaintiff’s Amended Class
`Action Complaint (“Zalka Decl.”) Ex. 1 (February 21, 2020 Pilgrim’s Pride 2019 10-K) at 1. See
`also Chipman v. Aspenbio Pharma, Inc., 2012 WL 4069353, at *2 (D. Colo. Sept. 17, 2012)
`(court may take judicial notice of documents referenced in complaint).
`7
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 12 of 17
`
`
`
`plead that Penn acted with scienter. Under the PSLRA, § 78u-4(b)(2)(A), Plaintiffs must “state
`
`with particularity facts giving rise to a strong inference that the defendant acted with the required
`
`state of mind.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 321 (2007). A strong
`
`inference “must be cogent and at least as compelling as any opposing inference of nonfraudulent
`
`intent.” Id. at 314.
`
`For claims based on nondisclosure of material facts, a plaintiff must show that the
`
`defendant knew both of the material fact and that failure to reveal the fact likely would mislead
`
`investors. City of Philadelphia v. Fleming Companies, Inc., 264 F.3d 1245, 1261 (10th Cir. 2001).
`
`Plaintiff must also plead that the defendant knew of contemporaneous wrongdoing at the time the
`
`alleged misstatement was made. See Larkin, 253 F.3d at 432.
`
`Moreover, where there is a significant lag between the time of the pre-class period
`
`wrongdoing and defendant’s alleged misstatements—and “scant else from which to infer that” the
`
`activity continued during the class period—then “the allegations are not enough to support a strong
`
`inference of scienter.” Greebel v. FTP Software, Inc., 194 F.3d 185, 202 (1st Cir. 1999); see also
`
`Smallen v. The Western Union Company, 950 F.3d 1297, 1314 (10th Cir. 2020) (statement by
`
`executive allegedly demonstrating a culpable state of mind before the class period “fails to support
`
`the inference [executive] knew about or consciously disregarded ongoing legal violations during
`
`the Class Period”); Cats v. Prot. One, Inc., 2001 WL 34070630, at *15 (C.D. Cal. June 4, 2001)
`
`(alleged wrongdoing “occurring prior to the Class Period cannot meet the heightened pleading
`
`standards of the PSLRA in the absence of specific facts showing that the practice continued during
`
`the Class Period”). Here, Plaintiff alleges only that Penn was—at most—aware of misconduct
`
`8
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 13 of 17
`
`
`
`from 2012–2015.5 But Plaintiff does not allege that Penn made any purported misstatements until
`
`four years after those alleged acts. Plaintiff alleges nothing in that time gap suggesting Penn had
`
`knowledge of any wrongdoing at the time he made his statements.6
`
`Plaintiff’s remaining scienter allegations are even more contrived. First, Plaintiff alleges
`
`without authority that scienter can be inferred because Penn was involved in Pilgrim’s business
`
`and strategy. See AC ¶ 235–41. “But the Tenth Circuit has ‘rejected the notion that knowledge
`
`may be imputed solely from an individual’s position within a company.’” Exkae Ltd. v. Domo,
`
`Inc., 2020 WL 7352735, at *9 (D. Utah Dec. 15, 2020) (quoting In re Zagg, Inc. Sec. Litig., 797
`
`F.3d 1194 at 1205 (10th Cir. 2015)). “Mere access to information does not equate to knowledge
`
`or even recklessness.” Id.
`
`That a CEO stayed active in strategic plans and major customer relationships does not mean
`
`he had knowledge of every business activity. See Zagg, 797 F.3d at 1205. But even if he did,
`
`Plaintiff does not plead what facts Penn was supposed to have discovered. Plaintiff’s bid-rigging
`
`allegations end in 2017; the Complaint pleads no allegations related to any bid-rigging while Penn
`
`was CEO from 2019 to 2020. See Exkae Ltd., 2020 WL 7352735, at *9 (rejecting allegations that
`
`defendants should have known of wrongdoing by virtue of their position where “there are no
`
`
`5 Plaintiff’s allegations themselves, which assert that Penn was a recipient of information he is
`never alleged to have collected himself, are insufficient to show Penn was aware of or
`participated in any wrongdoing.
`6 For the same reason, Plaintiff fails to show how Penn’s leave of absence following the DOJ
`indictment creates an inference of scienter for his statements during the Class Period. As the AC
`itself alleges, Penn took a leave of absence in the wake of the indictment to focus on clearing his
`name. AC ¶ 245. But the indictment alleges nothing about Penn’s statements during the Class
`Period, and Plaintiff includes no allegations that would suggest Penn’s statements about
`Pilgrim’s financial results in 2019–20 were in any way relevant to his leave of absence. Here, as
`elsewhere, Plaintiff’s only argument is that allegations ending in 2015 taint statements made by
`Penn in 2019, despite alleging nothing that suggests the activity continued.
`9
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 14 of 17
`
`
`
`allegations as to what information was available that contradicted Defendants’ public statements”).
`
`Plaintiff also alleges without support that scienter can be inferred because Penn sold stock
`
`during the Class Period. AC ¶ 243. But Penn’s stock ownership actually increased over that
`
`period—and by a considerable amount. His Form 4s show that, while he sold 55,210 shares during
`
`the Class Period, Penn acquired over 150,000 shares during the same period, rising to more than
`
`250,000, including deferred stock compensation.7 In other words, the number of shares Penn
`
`acquired during this period was approximately triple the number he sold. These are not the actions
`
`of an executive without faith in his company: Penn’s acquisitions of Pilgrim’s stock rebut any
`
`inference that can be drawn from his much smaller sales. See Level 3, 667 F.3d at 1346 (fact that
`
`an executive retained a large percentage company stock “rebut[s] any inference of scienter we
`
`might otherwise draw regarding” the sale of some portion of shares).
`
`Plaintiff also makes the baseless argument that scienter can be inferred from Penn’s
`
`certifications under the Sarbanes-Oxley Act (SOX), which requires signatories to certify that the
`
`company’s SEC filings, “based on [their] knowledge,” do “not contain any untrue statement of a
`
`material fact.” AC ¶¶ 215–18, 247–50. But as many courts have observed, if signing a SOX
`
`certification alone supported an inference of scienter without particularized facts suggesting the
`
`signatory knew of falsehoods, such a broad standard would “eviscerat[e] the pleading requirements
`
`for scienter set forth in the PSLRA.” Cent. Laborers’ Pension Fund v. Integrated Elec. Servs. Inc.,
`
`497 F.3d 546, 555 (5th Cir. 2007); see also Zagg,, 797 F.3d at 1205 (“Plaintiffs’ bare allegation
`
`
`7 See Ex. 11 (Jayson Penn Form 4 (May 2, 2019)); Ex. 12 (Jayson Penn Form 4 (Aug. 8, 2019));
`Ex. 13 (Jayson Penn Form 4 (Feb. 20, 2020)); Ex. 14 (Jayson Penn Form 4 (Mar. 27, 2020)). See
`also In re Oppenheimer Rochester Funds Grp. Sec. Litig., 838 F. Supp. 2d 1148, 1156 (D. Colo.
`2012) (“In securities cases, moreover, a court may take judicial notice of the contents of SEC
`filings that are a matter of public record.”).
`
`10
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 15 of 17
`
`
`
`that [defendant] lied when he certified the filings pursuant to SOX adds nothing substantial to the
`
`scienter calculus.”). Penn’s 2019 SOX certification was “based on his knowledge,” and Plaintiff
`
`has not alleged that Penn had knowledge of any wrongdoing when he signed it.
`
`III.
`
`PLAINTIFF HAS NOT PLED LOSS CAUSATION AS TO PENN.
`
`Plaintiff’s § 10(b) claim fails for the final reason that it has not alleged any “corrective
`
`disclosure” connected to Penn’s statements. Plaintiff’s only purported corrective disclosure, the
`
`June 3, 2020 DOJ indictment (AC ¶ 252), says nothing about any of Penn’s statements and
`
`concerns no conduct occurring during the period he made them. See PetroChina, 120 F. Supp. at
`
`358 (Plaintiffs must show “underlying fraud took place during the time period covered by the
`
`purportedly false public statements”). This purported corrective disclosure thus corrected nothing
`
`concerning Penn, and it cannot establish loss causation. In re Williams Sec. Litig-WCG Subclass,
`
`558 F.3d 1130, 1140 (10th Cir. 2009) (disclosure must show “corrective information was revealed
`
`and that this revelation caused the resulting decline in price”).8
`
`IV.
`
`PLAINTIFF’S § 20(a) CLAIM MUST BE ALSO BE DISMISSED.
`
`Because Pilgrim’s has not violated any securities laws, Plaintiff’s control-person claim
`
`against Penn under Section 20(a) must also be dismissed. See In re Gold Res. Corp. Sec. Litig.,
`
`776 F.3d 1103, 1118 (10th Cir. 2015).
`
`CONCLUSION
`
`Plaintiff fails to plead the requisite particularized facts to show Penn’s statements were
`
`false when made. And Plaintiff’s attempt to plead Penn’s scienter based on statements he made
`
`
`8 The indictment fails to show loss causation for a further reason that the mere announcement of
`a federal investigation activity does not constitute a corrective disclosure. Peace Officers’
`Annuity & Benefit Fund of Georgia v. DaVita Inc., 372 F. Supp. 3d 1139, 1148 (D. Colo. 2019).
`The mere risk of fraud is insufficient to show loss causation. Id.
`11
`
`
`
`
`Case 1:20-cv-01966-RM-MEH Document 62 Filed 07/19/21 USDC Colorado Page 16 of 17
`
`
`
`several years after the underlying misconduct does not satisfy Plaintiff’s burden to plead with
`
`particularity facts giving rise to a strong inference of scienter under the PSLRA. For the foregoing
`
`reasons, Jayson Penn respectfully requests that Plaintiff’s claims as to him be dismissed with
`
`prejudice.
`
`Dated: July 19, 2021
`
`
`
`
`
`
`
`
`Respectfully submitted,
`
` /s/ Seth Aronson
`
`Seth Aronson
` O’MELVENY & MYERS LLP
` 400 South Hope Street
` Los Angeles, CA 90071-2899
` Telephone: (213) 430-6000
` Facsimile:
`(213) 430-6407
` saronson@omm.com
`
` Christopher P. Burke
` O’MELVENY & MYERS LLP
` Times Square Tower
` 7 Times Square
` New York, NY 10036
` Telephone: (212) 326-2000
` Facsimile:
`(212) 326-2061
` cburke@omm.com
`
`Jacqueline V. Roeder
`Chad D. Williams
`Davis Graham & Stubbs LLP
`1550 17th St Ste 500
`Denver, CO 80202
`Telephone: (303) 892-9400
`Facsimile