KENNEWICK — Lamb Weston Holdings Inc. and two senior executives violated federal securities laws as the frozen potato giant implemented a software system, according to a class action lawsuit filed last month.
Lamb Weston, based in Eagle, Idaho, is one of the Tri-Cities’ largest private employers. It has more than 3,000 employees at its local offices, processing plants and research facilities.
It is a leading producer of frozen potato products sold around the world to restaurants and retailers. McDonald’s is a major customer.
The Cleveland Bakers and Teamsters Pension Fund is suing Lamb Weston, its president and CEO, Thomas Werner, and its chief financial officer, Bernadette Madarieta, alleging the company’s stock price was artificially inflated when the company misrepresented problems it was having with its new software system.
The suit was filed June 13 in U.S. District Court for Idaho.
It seeks to represent the pension fund and any investors who bought shares of Lamb Weston’s common stock between July 2023, and April 2024. The pension fund is based in Valley View, Ohio, a Cleveland suburb.
On Tuesday, Lamb Weston shares were trading at about $79 per share, 30% below their 52-week peak of $113.28, set on July 23, 2023.
3,000 employees in Mid-Columbia
The pension fund is represented by Boise attorneys Nathan Pittman and Scott McKay of Nevin, Benjamin & McKay LLP, together with several New York firms.
Several unrelated law firms issued news releases based on the case, soliciting possible plaintiffs.
Lamb Weston has not issued a formal response to the suit, which seeks a jury trial. A spokeswoman could not be reached by the Herald this week.
According to the complaint, Lamb Weston announced it had completed the design of a new Enterprise Resource Planning software system on July 25, 2023 and said it would begin implementing it across its network.
The system would interface with important aspects of the business and was meant to drive efficiency through increased automation. The company’s financial and operating systems transitioned to the new software in November 2023.
The suit claims Lamb Weston indicated it experienced the “usual bumps” as it rolled out the new system. The suit claims the comments were “false” and that defendants “knew of, or recklessly disregarded,” problems with the way the new system functioned.
The suit notes Lamb Weston and executives discussed the software in various filings to the Securities and Exchange Commission, which regulates publicly traded companies, and to analysts and in news releases.
As a result of the “premature launch,” the suit said Lamb Weston sales projections for its 2024 fiscal year “lacked a reasonable factual basis.”
The result was that “shares of Lamb Weston common stock traded at artificially inflated prices,” the suit claims.
Disclosure on April 4
Lamb Weston disclosed the challenges with the software system when it released a third quarter earning statement on April 4, a date marked by a sharp drop in its share prices that has not yet recovered.
The report showed the company lost $135 million in sales. It lowered its projected sales for the fiscal year by $330 million.
The suit claims the disclosures caused Lamb Weston stock price to fall by $19.59 per share, or over 19%.
The pension fund said it bought Lamb Weston stock at artificially inflated prices.
Lamb Weston shares trade on the New York Stock Exchange under the symbol LW.
Lamb Weston has been an independent company since 2016, when it spun out from its Chicago-based parent, ConAgra Foods.
Overnight it became one of the Northwest’s largest private companies with sales that would have placed it at about 750 on the Fortune 1000 list of America’s largest companies. It will provide a fresh view into its financial position on July 24, when it releases its 2024 fourth quarter and full year results.
Dun & Bradstreet reports Lamb Weston is currently in Fortune’s No. 616 slot based on $5.35 billion in annual revenue.
The case is Cleveland Bakers and Teamsters Pension Fund etc. v. Lamb Weston Holdings, Inc., Thomas P. Werner and Bernadette M. Madarieta, U.S. District Court, Idaho, Case No. 24-CV-282.
