Employees' Retirement System of the State of Hawaii v. Whole Foods Market, Inc., No. 17-50840 (5th Cir. 2018)Annotate this Case
Plaintiff filed suit against Whole Foods and its executives, alleging that the company and its executives defrauded Whole Foods shareholders in violation of federal securities law by perpetuating weights-and-measures fraud against customers. The Fifth Circuit affirmed the district court's dismissal of the complaint for failure to state a claim, holding that plaintiffs failed to properly allege a material misrepresentation, scienter, or loss causation. In this case, plaintiffs failed to state a claim under section 10(b) of the Securities and Exchange Act based on defendants' comments because plaintiff failed to allege that defendants' particular statements about Whole Foods' prices were false. The court also held that defendants' comments about Whole Foods' commitments to transparency and quality, even if false, were immaterial. Furthermore, plaintiffs failed to identify a decline in stock price that shortly followed a corrective disclosure. Likewise, plaintiffs section 20(a) claims failed because they were derivative to the section 10(b) claims.