A U.S. appellate court sitting in Manhattan has affirmed a lower court’s dismissal of a purported class-action lawsuit against Lululemon Athletica.
The lawsuit alleging securities violations was filed in 2013 by the Louisiana Sheriffs’ Pension & Relief Fund in a U.S. District Court in Manhattan and names as defendants former chief executive officer Christine Day and founder and former director Dennis J. Wilson.
The lawsuit was filed following the company’s debacle over its sheer black Luon yoga pant. The complaint alleged that had the company had someone try on the pant before shipment, or had someone exercise in the pant long enough to produce a sweat, the company would have realized that the pant was too sheer and that the color bled. It also said that the company’s statements that it had taken steps to fix the quality issues were “materially false or misleading.”
U.S. District Court Judge Katherine Forrest in her April 2014 opinion said, “This narrative requires the court to stretch allegations of, at most, corporate mismanagement into actionable federal securities fraud. This is not the law.”
She also noted requirements that must be met when pleading securities fraud claims under federal law, such as — among other things — that defendants made misstatements of material fact or omitted to state a material fact where they are under a duty to disclose, have knowledge and that the misstatement or omission is in connection with the purchase or sale of securities and that one or more of the plaintiffs relied on the misstatement or omission.
After analyzing whether the required elements and pleadings were present for the case to proceed, Forrest ordered that the lawsuit be dismissed. Louisiana Sheriffs’ Pension & Relief Fund appealed the decision.
In ruling that the lower court was correct in its analysis and decision, the Second Circuit Court of Appeals said that because the plaintiff, among other things, didn’t adequately allege any “relevant material misrepresentations or omissions, we agree with the District Court that it failed to state a claim for securities fraud.”
Court records indicate that attorneys for the pension fund have filed a notice of appeal to preserve the right to appeal the appellate court’s ruling.