Political Contributions at Issue in Diamond Foods Securities Litigation

A federal court in California has reportedly ordered two plaintiffs’ law firms to disclose under seal any contributions made “either directly or indirectly by the firm or by any member of the firm to the Democratic Attorneys General Association from January 1, 2012, to present, and any communications between either law firm and the Mississippi Attorney General’s office concerning any such contribution.” In re Diamond Foods, Inc., Securities Litig., No. 11-5386 (N.D. Cal., order entered April 23, 2013).

The order follows Diamond Food’s opposition to the appointment of the Mississippi Public Employee Retirement System (MPERS) as class representative in a securities class action alleging that the food company improperly accounted for some $50 million in payments to walnut growers. When the payments, allegedly intended to artificially lower the company’s fiscal 2011 costs, were revealed, a $2.3 billion deal to acquire the Pringles brand was purportedly delayed and later fell apart, according to the putative class complaint. Additional details about the litigation appear is Issue 464 of this Update.

Diamond evidently claims that the law firms participated with Mississippi
Attorney General Jim Hood in “an apparent ‘pay to play’ arrangement” under
which Hood received political contributions from the firms in exchange for
retaining the firms and others to provide securities class action “monitoring”
services and representation when Hood sues on MPERS’s behalf. In an April 18
filing, Chitwood Harley Harnes LLP and Lieff Cabraser Heimann & Bernstein
LLP argued that the campaign contributions have no bearing on MPERS’s
ability to represent the class and that the donations had no effect on Hood’s
choice of counsel. See Law360, April 26, 2013.