Gordon Gamm v. Sanderson Farms, Inc., 944 F.3d 455

Plaintiffs Gordon Gamm and Don Pritchard purchased Sanderson Farms stock between Dec. 17, 2013 and Nov. 17, 2016 and brought a Section 10(b)/Rule 10b-5 securities fraud suit claiming nondisclosure of an antitrust conspiracy rendered SEC statements false.
Plaintiffs alleged that Sanderson and other large poultry producers colluded from about 2008 to restrict supply (destroying hens/eggs, exporting/dumping inventory) and to manipulate the Georgia Dock price index, with data-sharing via Agri Stats facilitating coordination.
Plaintiffs identified specific SEC filings and repeated statements that they claim were misleading because they failed to disclose the alleged collusion and attendant regulatory/litigation risk.
The district court dismissed the second amended complaint with prejudice under Rule 12(b)(6) for failure to plead the underlying antitrust conspiracy with the particularity required by Rule 9(b) and the PSLRA.
The Second Circuit affirmed, holding that where nondisclosure of illegal activity is the basis for a 10(b) claim, plaintiffs must plead the facts of the alleged illegal acts with particularity and that plaintiffs here failed to allege the essential elements of an antitrust conspiracy (agreement, restraint, interstate effect).
The court did not reach scienter, reliance, or Section 20(a) control-person issues because the falsity/particularity deficiency was dispositive.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a securities-fraud complaint alleging nondisclosure of illegal activity must plead the facts of the underlying illegal acts with particularity	Gamm: No heightened pleading beyond Rule 8 for predicate antitrust facts; complaint gave sufficient factual detail	Sanderson: The PSLRA and Rule 9(b) require particularized facts for allegations made on information and belief, including predicate illegal acts	Court: Yes — when nondisclosure of illegal activity is the basis for falsity, underlying illegal acts must be pleaded with particularity; affirmed dismissal
Whether plaintiffs sufficiently alleged an antitrust conspiracy (agreement/plus factors; restraint; interstate commerce)	Gamm: Alleged supply reductions, Agri Stats data-sharing, industry meetings, and Georgia Dock manipulation as circumstantial plus factors	Sanderson: Allegations are conclusory, lack specifics (who, when, volumes, communications), and amount to permissible parallel conduct	Court: Allegations were insufficient — plaintiffs pleaded only parallel conduct and speculation, failed to allege agreement or the other antitrust elements with particularity

Novak v. Kasaks, 216 F.3d 300 (2d Cir. 2000) (PSLRA requires particularity for allegations made on information and belief)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (agreement in antitrust cases cannot rest on parallel conduct alone; plus factors required)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: sufficient factual matter to state a plausible claim)
Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) (fraud pleadings must specify statements, speaker, time/place, and reasons why fraudulent)
ATSI Commc’ns v. Shaar Fund, 493 F.3d 87 (2d Cir. 2007) (Rule 9(b) serves to give defendants fair notice and guard against strike suits)
Maric v. St. Agnes Hosp. Corp., 65 F.3d 310 (2d Cir. 1995) (elements of an antitrust claim)
Mayor & City Council of Balt. v. Citigroup, 709 F.3d 129 (2d Cir. 2013) (conscious parallelism can support inference of agreement only with plus factors)
Todd v. Exxon Corp., 275 F.3d 191 (2d Cir. 2001) (plus factors for inferring conspiracy from parallel conduct)
Decker v. Massey-Ferguson, Ltd., 681 F.2d 111 (2d Cir. 1982) (policy against making open-ended fraud accusations without specifics)
In re Tyson Foods, Inc. Sec. Litig., 275 F. Supp. 3d 970 (W.D. Ark. 2017) (similar dismissal of securities suits premised on alleged poultry price-fixing due to pleading deficiencies)