On February 26, 2020, the Hon. Robert M. Dow, Jr., U.S. District Judge for the N.D. of Illinois, granted Lead Plaintiff Public Employees’ Retirement System of Mississippi’s (“MSPERS”) motion for class certification. The Court rejected each of Defendants’ arguments that MSPERS was subject to unique defenses and therefore an inadequate lead plaintiff and that the proposed damages model was insufficient. The certified class includes investors who purchased TreeHouse Foods, Inc. common stock between January 20 and November 2, 2016.
Defendants argued that MSPERS was inadequate as a lead plaintiff because it relied on an investment manager for its investment decisions. As the Court noted, this is a common practice and it is quite likely that other investors also relied on the advice of third parties. The Court also found that the investment manager’s purchase of additional stock after the corrective disclosure in November 2016 does not indicate that the advisor did not rely on the market price of the common stock.
The Court also recognized that MSPERS was an adequate lead plaintiff, in part because it is the “‘exact type of sophisticated institutional investor that Congress intended to lead securities class actions under the PSLRA.’” The Court rebuffed Defendants’ attacks on MSPERS’s representatives, finding that they illustrated a preparedness to participate in discovery and “testified in detail about the specifics of the alleged fraud and [MSPERS’] investment in this case.” The small points of discrepancy in their testimony did not prevent them from serving as lead plaintiff.
The Court also found that Lead Plaintiff’s financial expert (Chad Coffman) properly found that damages were subject to common proof. The Court recognized that the “out of pocket” calculation method based on an event study has been widely adopted, and that Mr. Coffman’s reports in particular have been accepted on class certification dozens of times. The Court also rejected Defendants’ argument that Mr. Coffman inadequately addressed the level of inflation in the price of common stock during the class period, noting that Defendants “do not cite a single case where class certification was denied because of limitations in the proposed inflation formula.”