Phi Finney McDonald has become the third law firm to target a class action against Retail Food Group (ASX: RFG) following a string of damning revelations in February which wiped more than $550 million from the company's market capitalisation.
The firm announced it will be investigating the class action against RFG for engaging in misleading and deceptive conduct and breaching its continuous disclosure obligations to the ASX.
Phi Finney McDonald joins Maurice Blackburn and Bannister Law as the trio of firms that are currently investigating a class action against RFG.
Earlier this year, a report by Fairfax media surfaced that RFG had been maintaining an exploitative business model from June 2015 up until the company went into a trading halt on 28 February 2018.
According to Maurice Blackburn, the company then failed to inform the market of its "true state of affairs".
Phi Finney McDonald's class action will allege that from at least April 2017, RFG failed to disclose financial risks associated with its franchise model and deteriorating franchise networks, which include the Pizza Capers, Donut King and Brumby's brands.
The firm will also argue that RFG misled its investors regarding the company's financial position when it released a profit guidance in August 2017 that lacked reasonable grounds.
Phi Finney McDonald director Tim Finney says shareholders are "right to be angry about RFG's conduct" and that his firm is seeking compensation on behalf of those who have suffered substantial loss and damage as a result.
"RFG's board knew about the critical defects in the franchise model and the financial crisis afflicting many of its franchise networks for some time," says Finney.
"However, RFG investors were only made aware of these issues because of media reports released in December 2017.
"Even after that time, RFG continued to deny that there was any structural dysfunction within its franchise model. RFG didn't properly come clean about the serious difficulties its franchise networks were facing until March 2018.
"By concealing these serious issues from the market, RFG caused its shares to trade at an artificially inflated price."
Phi Finney McDonald's proposed class action is backed by litigation funder IMF Bentham.
IMF's investment manager Matt Kennedy says that following close examination of RFG's conduct, his team considers that investors have "strong grounds" to seek compensation for their losses.
It's been a busy week for Phi Finney McDonald after yesterday when it officially launched a class action in the Federal Court against financial services giant AMP.
AMP is also under fire from a further two class actions, one brought by Quinn Emanuel Urquhart & Sullivan in the Supreme Court of New South Wales and the other currently still under investigation by Slater and Gordon.
Business News Australia
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