Federal District Court Judge James Graham in Columbus, Ohio, has rejected a settlement of a lawsuit between Abercrombie & Fitch Co. and a Florida pension plan that would have required the retailer to beef up its corporate governance policies.
The decision Friday is a preliminary one based on the court’s finding that “plaintiff has not demonstrated that the proposed settlement provides fair consideration to absent shareholders in exchange for a broad release of claims.” The pension plan filed a derivative lawsuit on behalf of Abercrombie, the corporation, against its directors and management.
Judge Graham noted that Abercrombie would pay nearly $2.8 million in legal fees for the plaintiff, but that no other payments — such as to shareholders — would be made. In addition, shareholders of the retailer would release all claims against the company, as well as both current and former board members and executives for any conduct relating to the allegations. Those allegations concern mismanagement issues.
Related Galleries
Abercrombie’s board denied any wrongdoing in the August settlement, the terms of which call for the appointment of a chief ethics and compliance officer. In addition, executive pay will be more closely tied to performance.
The settlement came shortly after the lawsuit was filed on the same day by Florida pension plan City of Plantation Police Officers’ Employees’ Retirement System. The lawsuit sought a closer tie-in between executive compensation and performance, as well as limitations of access to non-public data by third parties. Michael Jeffries, chief executive officer, is alleged to have received more than $140 million since 2008. The lawsuit also alleged that Jeffries allowed certain privileges to his life partner, who is not an employee of the company.
The court is requiring that a copy of its decision be sent to all Abercrombie shareholders so they can be apprised of the matters raised in the lawsuit.
A spokesman for Abercrombie declined comment. Mark Lebovitch, an attorney at Bernstein Litowitz Berger & Grossman representing the plaintiff, did not return a call for comment by press time.