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From Securities Regulation Daily, August 7, 2015

Complaint alleges something rotten at Whole Foods

By Rodney F. Tonkovic, J.D.

A class action complaint claims that Whole Foods failed to disclose that it overcharged customers. According to the complaint, the natural food retailer routinely overstated the weight of pre-packaged products, resulting in customers paying too much, and that the company consequently made false statements about its business, operations, and prospects (Markman v. Whole Foods Market, Inc., August 6, 2015)

Summary. In June 2015, the New York City Department of Consumer Affairs announced that it had uncovered "systematic overcharging" for pre-packaged foods at Whole Foods' eight local stores. Having surveyed 80 different types of products, the Department reported "thousands" of potential violations. Whole Foods responded that the Department's allegations were "overreaching" and that it would defend itself vigorously. On this news, Whole Foods stock fell 0.47 percent, to close at $40.57 on June 23, 2015.

On July 29, 2015, Whole Foods issued a press release and Form-8-K announcing lower-than-expected quarterly results. In an earnings call that day, the company's CEO and CFO attributed these results to the New York weights and measures audit and the fact that it became national news. Afterwards, Whole Foods' common stock dropped by over 11 percent, closing at $36.08 on July 30.

The class period begins on November 22, 2013, when Whole Foods filed its annual report for the quarter and fiscal year ended September 29, 2013. In this and each filing through May 12, 2015, the complaint alleges that Whole Foods misrepresented and failed to disclose the overstated weights and resulting false statements about its business, operations, and prospects. As a result of this conduct, the complaint alleges, the class members suffered significant losses and damages.

Relief. The complaint alleges violations of the antifraud and controlling person provisions of the Exchange Act. The plaintiff demands a jury trial and seeks that the action be maintained as a class action, damages, pre- and post-judgment interest, and attorney fees and costs.

The case is No. 1:15-CV-681.

Attorneys: Sammy Ford, IV (Abraham, Watkins, Nichols, Sorrels, Agosto & Friend) for Yochanan Markman.

Companies: Whole Foods Market, Inc.

MainStory: TopStory FraudManipulation TexasNews

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