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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDAORLANDO DIVISION
ROBERT KALKSTEIN, Individually and OnBehalf of All Others Similarly Situated,
Plaintiff,
CIVIL ACTION NO.
U:04,- CV, 5b1-- 02_(, - ($K
vs.
DARDEN RESTAURANTS, INC., CLARENCEOTIS, JR. and C. BRADFORD RICHMOND,
Defendants.
CLASS ACTION COMPLAINT
JURY TRIAL DEMANDED
Plaintiff, Robert Kalkstein ("Plaintiff'), alleges the following based upon the
investigation by Plaintiffs counsel, which included, among other things; a review of the
defendants' public documents, conference calls and announcements made by defendants, United
States Securities and Exchange Commission ("SEC") filings, wire and press releases published
by and regarding Darden Restaurants, Inc. ("Darden" or the "Company"), securities analysts'
reports and advisories about the Company, and information readily available on the Internet, and
Plaintiff believes that substantial additional evidentiary support will exist for the allegations set
forth herein after a reasonable opportunity for discovery.
NATURE OF THE ACTION AND OVERVIEW
1. This is a federal class action on behalf of purchasers of Darden's securities
between June 19, 2007 and December 18, 2007 inclusive (the "Class Period"), seeking to pursue
remedies under the Securities Exchange Act of 1934 (the "Exchange Act").
1
2. Darden owns and operates nearly 1,400 Red Lobster, Olive Garden, Bahama
Breeze, Smokey Bones, Capital Grille, Longhorn Steakhouse and Seasons 52 restaurants.
3. On December 18, 2007, the Company shocked investors when it announced that
its earnings for the quarter fell below expectations. Further, the Company announced that it
expected diluted net earnings per share in 2008 to be 2% to 4%, in stark contrast to the 10% to
12% projection the Company gave in August 2007.
4. Upon the release of this news, the Company's shares declined $7.74 per share, or
21.3 percent, to close on December 19, 2007 at $28.60 per share, on unusually heavy trading
volume.
5. The Complaint alleges that, throughout the Class Period, defendants failed to
disclose material adverse facts about the Company's financial well-being, and prospects.
Specifically, defendants failed to disclose or indicate the following: (1) that the Company's food
costs were rising at a higher rate than the Company admitted; (2) that same-store sales at the
Company's restaurants were experiencing negative trends; (3) that the Company's restaurants
were underperforming; (4) that the Company lacked adequate internal and financial controls; and
(4) that, as a result of the foregoing, the Company's statements about its financial well-being and
future business prospects were lacking in any reasonable basis when made.
6. As a result of defendants' wrongful acts and omissions, and the precipitous decline
in the market value of the Company's securities, Plaintiff and other Class Members have suffered
significant losses and damages.
JURISDICTION AND VENUE
7. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of
the Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule l0b-5 promulgated thereunder (17
2
C.F.R. § 240.10b-5).
8. This Court has jurisdiction over the subject matter of this action pursuant to
Section 27 of the Exchange Act (15 U. S.C. § 78aa) and 28 U.S.C. § 1331. .
9. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange
Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of the acts and transactions alleged
herein, including the preparation and dissemination of materially false and misleading
information, occurred in substantial part in this Judicial District. Additionally, Darden's
principal executive offices are located within this Judicial District.
10. In connection with the acts, conduct and other wrongs alleged in this Complaint,
defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
including but not limited to, the United States mails, interstate telephone communications and
the facilities of the national securities exchange.
PARTIES
11. Plaintiff, Robert Kalkstein, as set forth in the accompanying certification,
incorporated by reference herein, purchased Darden's securities at artificially inflated prices
during the Class Period and has been damaged thereby.
12. Defendant Darden is a Florida corporation with its principal executive offices
located at 5900 Lake Ellenor Drive, Orlando, Florida.
13. Defendant Clarence Otis, Jr. ("Otis") was, at all relevant times, the Company's
Chairman and Chief Executive Officer ("CEO").
14. Defendant C. Bradford Richmond ("Richmond") was, at all relevant times, the
Company's Chief Financial Officer ("CFO") and Senior Vice President.
15. Defendants Otis and Richmond are collectively referred to hereinafter as the
3
"Individual Defendants." The Individual Defendants, because of their positions with the
Company, possessed the power and authority to control the contents of Darden's reports to the
SEC, press releases and presentations to securities analysts, money and portfolio managers and
institutional investors, i.e., the market. Each defendant was provided with copies of the
Company's reports and press releases alleged herein to be misleading prior to, or shortly after,
their issuance and had the ability and opportunity to prevent their issuance or cause them to be
corrected. Because of their positions and access to material non-public information available to
them, each of these defendants knew that the adverse facts specified herein had not been
disclosed to, and were being concealed from, the public, and that the positive representations
which were being made were then materially false and misleading. The Individual Defendants
are liable for the false statements pleaded herein, as those statements were each "group-
published" information, the result of the collective actions of the Individual Defendants.
SUBSTANTIVE ALLEGATIONS
Background
16. Darden owns and operates nearly 1,400 Red Lobster, Olive Garden, Bahama
Breeze, Smokey Bones, Capital Grille, Longhorn Steakhouse and Seasons 52 restaurants.
Materially False and MisleadingStatements Issued During the Class Period
17. The Class Period begins on June 19, 2007. On this day, the Company issued a
press release entitled "Darden Restaurants Reports 13% Increase in Annual Diluted Net EPS
From Continuing Operations; Announces Quarterly Dividend of 18 Cents Per Share; Discusses
Fiscal 2008 Financial Outlook." Therein, the Company, in relevant part, stated:
Darden Restaurants, Inc. (NYSE: DRI) today reported results forthe fiscal year and fiscal fourth quarter ended May 27, 2007. Forthe fiscal year, diluted net earnings per share from continuing
4
operations increased 13% to $2.53 from $2.24 in the prior year. Inthe fourth quarter, diluted net earnings per share from continuingoperations increased 8% to 67 cents, versus 62 cents in the prioryear.
Darden Restaurants , the world's largest casual dining company,reported that full year sales from continuing operations were $5.57billion , compared to $5.35 billion in the prior year. This 4.0%increase reflects same- restaurant sales growth at Olive Garden,Red Lobster and Bahama Breeze , as well as new restaurant growthat Olive Garden. In the fourth quarter, sales from continuingoperations increased 3.2% to $1.46 billion, driven primarily bystrong same-restaurant sales growth and new restaurant growth atOlive Garden.
"We had competitively superiorfinancial results from continuingoperations this year in what was clearly a difficult environmentfor our industry and we also made considerable strategicprogress," said Clarence Otis, Chairman and Chief Executive
Officer of Darden. "As a result, we begin fiscal 2008 in a strongcompetitive position and with great confidence we can achieve our
goal of being the best in casual dining, now and for generations.When you combine the strength and resiliency that Olive Garden,Red Lobster and Bahama Breeze demonstrated this year, thepromise that Seasons 52 continues to show, our talented anddedicated employees and the financial strength we possess, thisCompany's future is bright. And it's a future that we believe will bemarked by an acceleration in profitable sales growth, beginningwith our anticipated strong financial performance in fiscal 2008."
Fiscal 2008 Outlook
Darden expects combined same-restaurant sales growth in fiscal2008 of between 2% and 4% for Red Lobster and Olive Garden.The Company also expects approximately 3% unit growth infiscal 2008, comprised mainly ofOlive Garden restaurants.
"We expect that solid same-restaurant sales growth at Red
Lobster, Olive Garden and Bahama Breeze and strong cost
management, combined with an acceleration in new restaurant
expansion at Olive Garden, will result in 10% to 12% diluted net
earnings per share growth from continuing operations in fiscal
2008," said Otis. "We believe this is a well-supported growth
plan that reflects the emerging cost pressures in the casualdining industry and our expectation that casual dining salesgrowth will continue to be relatively soft before improving in thesecond halfofourfiscal year. " [Emphasis added.]
18. On August 2, 2007, the Company issued a press release entitled "Darden
Restaurants Reports July Same-Restaurant Sales Results." Therein, the Company, in relevant
part, stated:
Same-restaurant sales at Red Lobster increased 8% to 9% forfiscal July, which reflected a 4% to 5% increase in guest countsand a 4% increase in check average The check average increasewas a result of a 3% increase in pricing and a 1% increase frommenu mix changes . Last year, Red Lobster had an approximate 2%decrease in same-restaurant sales.
Same-restaurant sales at Olive Garden increased approximately5% for fiscal July, which reflected an approximate I% increasein guest counts and an approximate 4% increase in checkaverage. The check average increase was a result of anapproximate 3% increase in pricing and a 0% to 1% increase frommenu mix changes . Last year, Olive Garden had a 2% to 3%increase in same- restaurant sales. [Emphasis added.]
19. On September 28, 2007, the Company issued a press release entitled "Darden
Restaurants Reports 18% Increase in First Quarter Diluted Net EPS From Continuing
Operations; Announces Quarterly Dividend of 18 Cents Per Share; Confirms Fiscal 2008
Financial Outlook." Therein, the Company, in relevant part, stated:
Darden Restaurants, Inc. (NYSE: DRI) today reported diluted
net earnings per share for the first quarter ended August 26,
2007. In the first quarter, diluted net earnings per share from
continuing operations increased 18% to 73 cents, versus 62 cents
in the prior year. First quarter sales from continuing operations
were $1.47 billion, compared to $1.36 billion in the prior year, a
7.9% increase that reflects strong same-restaurant sales growth
at Red Lobster and Olive Garden, as well as new restaurant
growth at Olive Garden.
6
In the first quarter, diluted net losses per share from discontinuedoperations were one cent compared to diluted net losses per sharefrom discontinued operations of three cents in the prior year.Including losses from discontinued operations, diluted net earningsper share for the first quarter were 72 cents compared to diluted netearnings of 59 cents for the same period last year.
"This quarter we once again delivered competitively superiorfinancial results," said Clarence Otis, Chairman and ChiefExecutive Officer of Darden. "We have talented teams in ourrestaurants and restaurant support center. Guided by a provenapproach to our business that combines strong brand managementand restaurant operations excellence, they are working on the rightthings. We're delighted with how guests are responding, which isreflected in our track record of same-restaurant excellence. Itprovides a strong platform for the accelerated new restaurantgrowth we plan with the pending acquisition of RAREHospitality."
Fiscal 2008 Financial Outlook
Darden reiterated that it expects combined U.S. same-restaurantsales growth in fiscal 2008 of between 2% and 4% for RedLobster and Olive Garden, and that it expects to openapproximately 40 net new restaurants at its existing businessesthis fiscal year. As a result, the Company expects total salesgrowth from its existing businesses of between 6% and 7% infiscal 2008. The Company continues to anticipate that diluted netearnings per share growth will be 10% to 12% in fiscal 2008,excluding one-time transaction and integration related costs andthe impact ofpurchase price accounting adjustments related tothepending RARE Hospitality transaction.
Assuming the RARE Hospitality transaction closes in October2007, as expected, the Company will provide an updated fiscal2008 consolidated financial outlook including additional detailregarding the financial integration ofRARE Hospitality, when itreleases its second quarter earnings in December 2007.[Emphasis added.]
20. The statements contained in % 17-19 were materially false and misleading when
made because defendants failed to disclose or indicate the following: (1) that the Company's
food costs were rising at a higher rate than the Company admitted; (2) that same-store sales at
7
the Company's restaurants were experiencing negative trends; (3) that the Company's restaurants
were underperforming; (4) that the Company lacked adequate internal and financial controls; and
(4) that, as a result of the foregoing, the Company's statements about its financial well-being and
future business prospects were lacking in any reasonable basis when made.
The Truth Beeins to Emerge
21. On December 18, 2007, after the market closed, the Company shocked investors
when it issued a press release entitled, "Darden Restaurants Reports Second Quarter Sales and
Diluted Net Earnings Per Share; Announces Quarterly Dividend of 18 Cents Per Share; Updates
Fiscal 2008 Financial Outlook." Therein, the Company, in relevant part, stated:
Darden Restaurants, Inc. (NYSE: DRI) today reported sales anddiluted net earnings per share for the second quarter endedNovember 25, 2007. The results include the effect of theacquisition of RARE Hospitality International, Inc. (LongHornSteakhouse and The Capital Grille), which closed on October 1,2007, as well as other items discussed below. Second quarter salesfrom continuing operations were $1.52 billion, which includes twomonths of sales (October and November) from the acquisition,compared to $1.30 billion reported in the prior year. Thisrepresents a 17% increase over the prior year, which reflects theaddition of LongHorn Steakhouse and The Capital Grille, as wellas meaningful new and same-restaurant growth at Olive Garden.
In the second quarter, diluted net earnings per share were 30cents. The Company estimates that, in aggregate, the acquisitionand other items adversely affected diluted net earnings per share
by approximately 12 cents in the second quarter. More specifically,in the second quarter : ( 1) integration and purchase accountingadjustments related to the RARE acquisition reduced diluted netearnings per share by approximately nine cents , (2) incrementalfinancing costs reduced diluted net earnings per share byapproximately four cents , (3) operating contribution and associatedtax benefits from the acquisition increased diluted net earnings pershare by approximately three cents and (4) litigation chargesrelating to the settlement of certain legal issues in Californiareduced diluted net earnings per share by approximately two cents.The Company reported diluted net earnings per share of41 cents in
8
the prior year's second quarter. In this year's second quarter,diluted net losses per share from discontinued operations were zerocompared to diluted net losses per share from discontinuedoperations of four cents in the prior year.
"While we are pleased that our sales growth this quarter onceagain outpaced our industry, we did see some sales softnessbecause of what continued to be a difficult consumerenvironment," said Clarence Otis, Chairman and Chief ExecutiveOfficer of Darden. "As a result of this softness and a tougherthan anticipated cost environment, we were unable to meet ourexpectations for earnings growth. Still, we believe ourcompetitively strong top-line is evidence of the underlyingstrength of our brands and the excellence of the teams workingto make those brands compellingfor guests. We are also makinggreat progress integrating our two newest brands, LongHornSteakhouse and The Capital Grille, and continue to expect toachieve meaningful financial and operational synergies as aresult ofthe acquisition. These synergies strengthen our ability tomeet near-term cost challenges and, longer-term, they will enableus to become an even stronger, higher value creatingorganization as we work to be the best in our industry now andfor generations. "
Fiscal 2008 Financial Outlook
Darden confirmed that it continues to expect combined U.S.same-restaurant sales growth in fiscal 2008 of between 2% and4% for Red Lobster, Olive Garden and LongHorn, and that itexpects to open approximately 65 net new restaurants this fiscalyear, including new restaurants at LongHorn Steakhouse andThe Capital Grille for October 2007 through May 2008. As aresult, the Company expects total sales growth of between 19%and 20% in fiscal 2008, including sales from LongHornSteakhouse and The Capital Grille for October 2007 throughMay 2008, compared to reported sales of $5.57 billion in fiscal2007. Given the dynamics ofthe current cost environment, whichare due in part to the impact a weaker U.S dollar is having oncommodities and the cost ofproducts Darden imports from manydifferent countries, the Company now anticipates that diluted netearnings per share growth will be 2% to 4% infiscal 2008, whichincludes the transaction and integration related costs andpurchase accounting adjustments related to the RAREHospitality acquisition. These costs and. adjustments willadversely impact diluted net earnings per share by approximately
9
five percentage points in fiscal 2008. Excluding the transactionand integration related costs and purchase accountingadjustments, diluted net earnings per share growth would be 7%to 9% infiscal 2008. [Emphasis added.]
22. On this news, the Company's shares fell an additional $7.74 per share, or 21.3
percent, to close on December 19, 2007 at $28.60 per share, on unusually heavy trading volume.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
23. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased Darden's
securities between June 19, 2007 and December 18, 2007, inclusive (the "Class Period") and
who were damaged thereby. Excluded from the Class are defendants, the officers and directors
of the Company, at all relevant times, members of their immediate families and their legal
representatives, heirs, successors or assigns and any entity in which defendants have or had a
controlling interest.
24. The members of the Class are so numerous that joinder of all members is
impracticable. Throughout the Class Period, Darden's securities were actively traded on the New
York Stock Exchange ("NYSE"). While the exact number of Class members is unknown to
Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes
that there are hundreds or thousands of members in the proposed Class. Record owners and
other members of the Class may be identified from records maintained by Darden or, its transfer
agent and may be notified of the pendency of this action by mail, using the form of notice similar
to that customarily used in securities class actions.
25. Plaintiffs claims are typical of the claims of the members of the Class as all
members of the Class are similarly affected by defendants' wrongful conduct in violation of
federal law that is complained of herein.
10
26. Plaintiff will fairly and adequately protect the interests of the members of the
Class and has retained counsel competent and experienced in class and securities litigation.
27. Common questions of law and fact exist as to all members of the Class and
predominate over any questions solely affecting individual members of the Class. Among the
questions of law and fact common to the Class are:
(a) whether the federal securities laws were violated by defendants' acts as
alleged herein;
(b) whether statements made by defendants to the investing public during the
Class Period misrepresented material facts about the business, operations
and management of Darden; and
(c) to what extent the members of the Class have sustained damages and the
proper measure of damages.
28. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as
the damages suffered by individual Class members may be relatively small, the expense and
burden of individual litigation make it impossible for members of the Class to individually
redress the wrongs done to them. There will be no difficulty in the management of this action as
a class action.
UNDISCLOSED ADVERSE FACTS
29. The market for Darden's securities was open , well-developed and efficient at all
relevant times. As a result of these materially false and misleading statements, and failures to
disclose, Darden's securities traded at artificially inflated prices during the Class Period. Plaintiff
and other members of the Class purchased or otherwise acquired Darden's securities relying upon
11
the integrity of the market price of Darden's securities and market information relating to
Darden, and have been damaged thereby.
30. During the Class Period, defendants materially misled the investing public,
thereby inflating the price of Darden's securities, by publicly issuing false and misleading
statements and omitting to disclose material facts necessary to make defendants' statements, as
set forth herein, not false and misleading. Said statements and omissions were materially false
and misleading in that they failed to disclose material adverse information and misrepresented
the truth about the Company, its business and operations, as alleged herein.
31. At all relevant times, the material misrepresentations and omissions particularized
in this Complaint directly or proximately caused or were a substantial contributing cause of the
damages sustained by Plaintiff and other members of the Class. As described herein, during the
Class Period, defendants made or caused to be made a series of materially false or misleading
statements about Darden's financial well-being and prospects. These material misstatements and
omissions had the cause and effect of creating in the market an unrealistically positive
assessment of Darden and its financial well-being and prospects, thus causing the Company's
securities to be overvalued and artificially inflated at all relevant times. Defendants' materially
false and misleading statements during the Class Period resulted in Plaintiff and other members
of the Class purchasing the Company's securities at artificially inflated prices, thus causing the
damages complained of herein.
LOSS CAUSATION
32. Defendants' wrongful conduct, as alleged herein, directly and proximately caused
the economic loss suffered by Plaintiff and the Class.
33. During the Class Period, Plaintiff and the Class purchased Darden's securities at
12
artificially inflated prices and were damaged thereby. The price of Darden' s securities
significantly declined when the misrepresentations made to the market, and/or the information
alleged herein to have been concealed from the market, and/or the effects thereof, were revealed,
causing investors' losses.
SCIENTER ALLEGATIONS
34. As alleged herein, defendants acted with scienter in that defendants knew that the
public documents and statements issued or disseminated in the name of the Company were
materially false and misleading; knew that such statements or documents would be issued or
disseminated to the investing public; and knowingly and substantially participated or acquiesced
in the issuance or dissemination of such statements or documents as primary violations of the
federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their
receipt of information reflecting the true facts regarding Darden, their control over, and/or
receipt and/or modification of Darden's allegedly materially misleading misstatements and/or
their associations with the Company which made them privy to confidential proprietary
information concerning Darden, participated in the fraudulent scheme alleged herein.
35. Additionally, during the Class Period, and with the Company's securities trading
at artificially inflated prices, Company insiders sold 439,390 shares of the Company's stock for
gross proceeds of $19,061,837. This trading by Company insiders is evidenced by the following
chart:
Date of Trade Inside Trader Number of Price per Gross Proceeds
Shares Share
October 11, 2007 McGillicudy, Cornelius III 23,250 $44.06 - $1,024,000$44.06
13
October 4, 2007 Collins, Valerie K. 35,104 $43.43 - $1,525,000$43.43
October 4, 2007 George, David C. 82,710 $43.34 $3,584,651
October 2, 2007 Lee, Eugene I. Jr. 75,000 $43.21 $3,240,750
September 27, Moullet, Barry B. 29,000 $43.21 - $1,253,0002007 $43.21
September 24, Burns, Lauire B. 31,044 $43.36 $1,346,0672007
September 24, Lyons, Daniel M. 129,416 S43.26 - $5,599,0002007 $43.26
September 21, Pickens, David T. 22,409 $44.07 - $988,0002007 $44.07June 30, 2007 Collins, Valerie K. 479 $43.86 - S21,000
$43.86
June 30, 2007 Richmond, C. Bradford 395 $43.86 - $17,000$43.86
June 30, 2007 Pickens, David T. 1,279 $43.86 - $56,000$43.86
June 30, 2007 Madsen, Andrew H. 2,623 $43.86 $115,044
June 30, 2007 Burns, Lauire B. 872 $43.86 - $38,000$43.86
June 30, 2007 Shives, Paula J. 1,072 $43.86 - $47,000$43.86
June 30, 2007 Moullet, Barry B. 738 $43.86 - $32,000$43.86
June 30, 2007 Lyons, Daniel M. 754 $43.86 - $33,000$43.86
June 30, 2007 Otis, Clarence Jr. 3,245 $43.86 $142,325
TOTAL: 439,390 $19,061,837
14
Applicability of Presumption of Reliance:Fraud On The Market Doctrine
36. At all relevant times, the market for Darden's securities was an efficient market
for the following reasons, among others:
(a) Darden's securities met the requirements for listing, and were listed and
actively traded on the NYSE, a highly efficient and automated market;
(b) As a regulated issuer, Darden filed periodic public reports with the SEC
and the NYSE;
(c) Darden regularly communicated with public investors via established
market communication mechanisms, including through regular
disseminations of press releases on the national circuits of major newswire
services and through other wide-ranging public disclosures, such as
communications with the financial press and other similar reporting
services; and
(d) Darden was followed by several securities analysts employed by major
brokerage firms who wrote reports which were distributed to the sales
force and certain customers of their respective brokerage firms. Each of
these reports was publicly available and entered the public marketplace.
37. As a result of the foregoing, the market for Darden's securities promptly digested
current information regarding Darden from all publicly-available sources and reflected such
information in the price of Darden's securities. Under these circumstances, all purchasers of
Darden's securities during the Class Period suffered similar injury through their purchase of
Darden's securities at artificially inflated prices and a presumption of reliance applies.
15
NO SAFE HARBOR
38. The statutory safe harbor provided for forward-looking statements under certain
circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.
Many of the specific statements pleaded herein were not identified as "forward-looking
statements" when made. To the extent there were any forward-looking statements, there were no
meaningful cautionary statements identifying important factors that could cause actual results to
differ materially from those in the purportedly forward-looking statements. Alternatively, to the
extent that the statutory safe harbor does apply to any forward-looking statements pleaded
herein, defendants are liable for those false forward-looking statements because at the time each
of those forward-looking statements was made, the particular speaker knew that the particular
forward-looking statement was false, and/or the forward-looking statement was authorized
and/or approved by an executive officer of Darden who knew that those statements were false
when made.
FIRST CLAIMViolation of Section 10(b) of
The Exchange Act and Rule 10b-5Promulgated Thereunder Aeainst All Defendants
39. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
40. During the Class Period, defendants carried out a plan, scheme and course of
conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing
public, including Plaintiff and other Class members, as alleged herein; and (ii) cause Plaintiff and
other members of the Class to purchase Darden's securities at artificially inflated prices. In
furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them,
took the actions set forth herein.
16
41. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made
untrue statements of material fact and/or omitted to state material facts necessary to make the
statements not misleading; and (iii) engaged in acts, practices, and a course of business which
operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to
maintain artificially high market prices for Darden's securities in violation of Section 10(b) of the
Exchange Act and Rule lOb-5. All defendants are sued either as primary participants in the
wrongful and illegal conduct charged herein or as controlling persons as alleged below.
42. Defendants, individually and in concert, directly and indirectly, by the use, means
or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a
continuous course of conduct to conceal adverse material information about Darden's financial
well-being and prospects, as specified herein.
43. These defendants employed devices, schemes and artifices to defraud, while in
possession of material adverse non-public information and engaged in acts, practices, and a
course of conduct as alleged herein in an effort to assure investors of Darden's value and
performance and continued substantial growth, which included the making of, or the
participation in the making of, untrue statements of material facts and omitting to state material
facts necessary in order to make the statements made about Darden and its business operations
and future prospects in light of the circumstances under which they were made, not misleading,
as set forth more particularly herein, and engaged in transactions, practices and a course of
business which operated as a fraud and deceit upon the purchasers of Darden's securities during
the Class Period.
44. Each of the Individual Defendants' primary liability, and controlling person
liability, arises from the following facts: (i) the Individual Defendants were high-level executives
17
and/or directors at the Company during the Class Period and members of the Company's
management team or had control thereof; (ii) each of these defendants, by virtue of their
responsibilities and activities as a senior officer and/or director of the Company, was privy to and
participated in the creation, development and reporting of the Company's internal budgets, plans,
projections and/or reports; (iii) each of these defendants enjoyed significant personal contact and
familiarity with the other defendants and was advised of, and had access to, other members of the
Company's management team, internal reports and other data and information about the
Company's finances, operations, and sales at all relevant times; and (iv) each of these defendants
was aware of the Company's dissemination of information to the investing public which they
knew or recklessly disregarded was materially false and misleading.
45. The defendants had actual knowledge of the misrepresentations and omissions of
material facts set forth herein, or acted with reckless disregard for the truth in that they failed to
ascertain and to disclose such facts, even though such facts were available to them. Such
defendants' material misrepresentations and/or omissions were done knowingly or recklessly and
for the purpose and effect of concealing Darden's financial well-being and prospects from the
investing public and supporting the artificially inflated price of its securities. As demonstrated
by defendants' overstatements and misstatements of the Company's financial well-being and
prospects throughout the Class Period, defendants, if they did not have actual knowledge of the
misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by
deliberately refraining from taking those steps necessary to discover whether those statements
were false or misleading.
46. As a result of the dissemination of the materially false and misleading information
and failure to disclose material facts, as set forth above, the market price of Darden's securities
18
0
was artificially inflated during the Class Period . In ignorance of the fact that market prices of
Darden 's securities were artificially inflated, and relying directly or indirectly on the false and
misleading statements made by defendants , or upon the integrity of the market in which the
securities trades, and/or in the absence of material adverse information that was known to or
recklessly disregarded by defendants , but not disclosed in public statements by defendants during
the Class Period, Plaintiff and the other members of the Class acquired Darden 's securities during
the Class Period at artificially high prices and were damaged thereby.
47. At the time of said misrepresentations and omissions , Plaintiff and other members
of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiff and the
other members of the Class and the marketplace known the truth regarding the problems that
Darden was experiencing, which were not disclosed by defendants, Plaintiff and other members
of the Class would not have purchased or otherwise acquired their Darden securities, or, if they
had acquired such securities during the Class Period, they would not have done so at the
artificially inflated prices which they paid.
48. By virtue of the foregoing, defendants have violated Section 10(b) of the
Exchange Act and Rule lOb-5 promulgated thereunder.
49. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and the
other members of the Class suffered damages in connection with their respective purchases and
sales of the Company's securities during the Class Period.
SECOND CLAIMViolation of Section 20(a) of
The Exchange Act Against the Individual Defendants
50. Plaintiff repeats and realleges each and every allegation contained above as if
fully set forth herein.
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51. The Individual Defendants acted as controlling persons of Darden within the
meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level
positions, and their ownership and contractual rights, participation in and/or awareness of the
Company's operations and/or intimate knowledge of the false financial statements filed by the
Company with the SEC and disseminated to the investing public, the Individual Defendants had
the power to influence and control and did influence and control, directly or indirectly, the
decision-making of the Company, including the content and dissemination of the various
statements which Plaintiff contends are false and misleading. The Individual Defendants were
provided with or had unlimited access to copies of the Company's reports, press releases, public
filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly after
these statements were issued and had the ability to prevent the issuance of the statements or
cause the statements to be corrected.
52. In particular, each of these defendants had direct and supervisory involvement in
the day-to-day operations of the Company and, therefore, is presumed to have had the power to
control or influence the particular transactions giving rise to the securities violations as alleged
herein, and exercised the same.
53. As set forth above, Darden and the Individual Defendants each violated Section
10(b) and Rule lOb-5 by their acts and omissions as alleged in this Complaint. By virtue of their
positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of
the Exchange Act. As a direct and proximate result of defendants' wrongful conduct, Plaintiff
and other members of the Class suffered damages in connection with their purchases of the
Company's securities during the Class Period.
WHEREFORE, Plaintiff prays for relief and judgment, as follows:
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(a) Determining that this action is a proper class action under Rule 23 of the
Federal Rules of Civil Procedure;
(b) Awarding compensatory damages in favor of Plaintiff and the other Class
members against all defendants, jointly and severally, for all damages
sustained as a result of defendants' wrongdoing, in an amount to be proven
at trial, including interest thereon;
(c) Awarding Plaintiff and the Class their reasonable costs and expenses
incurred in this action, including counsel fees and expert fees; and
(d) Such other and further relief as the Court may deem just and proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated : April 4, 2008 Respectfully submitted,
By: s/Maya S. SaxenaMaya S. Saxena
SAXENA WHITE P.A.Maya S. [email protected] E. White, [email protected] S. [email protected] N. Federal HighwaySuite 257Boca Raton, FL 33431Tel: 561 394-3399Fax: 561 394-3382
SCHIFFRIN BARROWAY TOPAZ &KESSLER, LLPD. Seamus Kaskela
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[email protected] M. [email protected] King of Prussia RoadRadnor, PA 19087Tel: (610) 667-7706Fax: (610) 667-7056
Attorneys for Plaintiff
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