Securities Class Action Dismissed Against Imperial Sugar Company

Paul, Weiss obtained the dismissal of a federal securities class action brought against our clients, Imperial Sugar Company and its former executives. Relying largely on confidential informants, the plaintiffs had alleged that our clients made material misrepresentations about the company's use of co-packers and its purchase of sugar from other refiners, as well as the status of its main sugar refinery in Port Wentworth, Georgia.

In a thorough 66-page opinion, the Southern District of Texas ruled that the plaintiffs failed to adequately plead fraud, scienter and loss causation. The court found that the company disclosed its activities to shareholders, and that allegations sourced from the purported confidential informants failed to show that the company's financial information or public statements were materially misstated. The court also determined the facts did not give rise to a strong inference that the company or its management intended to deceive shareholders. Among other arguments, the court rejected the notion that the defendants "must have known" some undisclosed or inadequately disclosed truth about the company's operations due to their positions as senior executives, and declined to apply a line of cases holding that collective corporate scienter may be inferred when the alleged misconduct is egregious. Finally, the court ruled in our favor on loss causation, holding that the company's purported corrective disclosures were too attenuated from its prior statements and that plaintiffs failed to tie an actionable misrepresentation to any corrective disclosure. The court gave plaintiffs until October 30 to amend the complaint, should they wish to do so.

The Paul, Weiss team included litigation partners Daniel Kramer and Audra Soloway.