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Appeal Possible in Liz Claiborne Suit

Manhattan judge last week dismissed shareholders' claims that the company misrepresented its relationship with Macy's.

There might be an appeal in the works for a recently dismissed shareholder lawsuit that claimed Liz Claiborne Inc., its chief executive officer, William L. McComb, and former president Trudy Sullivan misrepresented the company’s relationships with Macy’s Inc., causing Claiborne’s stock to fall.

This story first appeared in the October 3, 2011 issue of WWD.  Subscribe Today.

Filed in 2009, the lawsuit, which deals with the class period of Jan. 16 to April 30, 2007, said that on May 1, 2007, Claiborne posted an unanticipated 65 percent decline in quarterly profit. On the same day, the apparel maker reported that Macy’s, one of its biggest clients at the time, was slashing orders, partially in response to a low-cost line called Liz & Co., which launched at J.C. Penney Co. Inc. The news caused Claiborne’s shares to decrease 17.3 percent

The plaintiffs, who were in the process of seeking class action status before Thursday’s decision, said Claiborne should have revealed its problems with Macy’s sooner, and that the failure to repurchase stock during the class period “suggests that Liz knew its stock price would plummet during the class period.”

But Manhattan District Judge Richard Holwell said Thursday that the shareholders failed to adequately show that Claiborne intended to hide its “precarious” relationship with Macy’s and dismissed the suit.

“We are contemplating filing an appeal,” said plaintiffs’ attorney Lionel Glancy, of Glancy & Binkow Goldberg LLP. “There’s no guarantee we will file an appeal, but we believe it was a very strong claim.”

The Liz Claiborne brand is now an exclusive at Penney’s under a 2009 licensing agreement.