An Illinois federal judge on Friday, January 3, 2020 certified a class action on behalf of investors suing Kraft Foods Group Inc. of manipulating the wheat commodities market to the detriment of investors. Kraft had argued that the investors’ claims and damages were too individualized to be resolved on a class-wide basis.
In a 29-page order, U.S. District Judge Edmond E. Chang rejected Kraft’s arguments. The judge opined that if the investors’ theories of liability and damages are as flawed as Kraft claims, then they will be flawed across the entire class and based on common evidence.
The lawsuit was filed in April 2015, alleging Kraft and what is now a snack-food spinoff — Mondelez Global LLC — made millions of dollars to the detriment of investors on the Chicago Board of Trade by buying huge sums of wheat futures they didn’t need while also trying to depress prices for cash-bought wheat. The red winter wheat at issue is used to make products that include Ritz crackers and Oreo cookies, according to the Complaint.
But in his ruling, Judge Chang explained that although the plaintiff admitted he didn’t rely on any representations by Kraft to make the trades, his theory of liability is based on how Kraft’s conduct affected the market “as a whole,” not on any overt misrepresentations to particular market participants. “In other words, the class members relied on ‘misrepresentations’ that were baked into the market price at the time of their transactions, rather than explicit misrepresentations directed at them specifically,” the order says.
The judge also rejected Kraft’s arguments that the differences in when class members traded wheat futures make the issues too individualized to be resolved on a class-wide basis. The judge said that problem can be resolved “mechanically” and is not enough to defeat certification.
He also rejected Kraft’s arguments that class certification is inappropriate due to the different statutes of limitations governing the investors’ claims, citing the First Circuit’s 2000 decision in Waste Management Holdings Inc. v. Mowbray, which held that individualized statute of limitations determinations do no automatically preclude class certification.
“Generally speaking,” the judge wrote, “the fraud on the market theory will frame the limitations defense, which means that the limitations defense will succeed or fail based on class-wide proof.”
Judge Chang added that the proposed class is ascertainable, even if it includes different types of traders who could have been harmed by the conduct but weren’t.
The case is Harry Ploss v. Kraft Foods Group Inc. et al., case number 1:15-cv-02937, in the U.S. District Court for the Northern District of Illinois.
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