Thursday, October 20, 2005

Fries Are Up

They might not be able to find that ever elusive Boardwalk game piece in that McDonald’s Monopoly Game you claim to have never played, but Plaintiffs sure have scored a victory in the securities class action pending against the ole’ Mac and Don's Steakhouse. Judge Blanche M. Manning (N.D. Ill.) started it all off with the observation that "this case stems from a factual situation which is very common in today's economic environment." What situation is that you ask? Why, the situation that "Defendants made optimistic predictions about McDonald's future economic performance," "released current financial results which were in-line with Wall Street's predictions," and when "the predictions turned out to be less than prophetic, "the stock price took a beating." Oh, that situation, why didn't you just say so?

Basically, Plaintiffs alleged "that Defendants concocted the above ‘fraudulent scheme’ to inflate McDonald's stock price so that: (1) Defendant Greenberg, who was under tremendous pressure by McDonald's board, could remain as CEO; (2) individual Defendants and other high level executives could sell their McDonald's stock at an artificially inflated price; and (3) McDonald's could issue $ 900 million in debt at lower interest rates than if its actual financial condition had been disclosed." Judge Manning didn’t go for (2) and (3), finding these allegations insufficient "to show opportunity and motivation." However, (1) carried the day on the motions to dismiss, as "defendants were high level managers who had access to reports which would lead a reasonable person to believe that the predictions being made in public statements are not accurate and/or missing relevant information."

You can read Selbst v. McDonald’s, issued September 21, 2005, at 2005 U.S. Dist. LEXIS 23093.

Nugget: "At this point in the litigation, before discovery, it would be impossible for Plaintiffs to have access to such detailed facts or for this Court to make such a determination on a motion to dismiss."

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