Sprouts Farmers Market Hit with Shareholder Suit

March 25, 2016

James W. Johnson discusses the impact on the removal of the Sprouts Farmers Market case to federal court

Shareholders of Sprouts Farmers Market have proposed a class action against the grocery chain, claiming the company failed to reveal the impact of produce price deflation on its results prior to a $559.4 million follow-on offering last year. The Public Employees' Retirement System of Mississippi filed the shareholder suit in Arizona state court on March 4, declaring that Sprouts Farmers Market were negligent in preparing the offering documents linked to a March 2015 share sale. The company removed the case to federal court Wednesday.

Shareholders said that Sprouts was aware of a deflationary trend in produce prices in the months leading up to that final offering, but in its conversation of the matter in presenting documents, it made no suggestion that deflation would have a measurable impact on the company’s results.

Labaton Sucharow partner James W. Johnson told Law360 Friday that the removal to federal court was improper and that he expects it to be remanded.

“Under well-established Ninth Circuit case law, defendants’ attempt to remove this case to federal court will be unsuccessful. We look forward to prosecuting the claims in state court as soon as plaintiff’s motion for a remand is granted,” Johnson said.