Case Page

 

Case Status:    SETTLED
On or around 03/17/2006 (Date of order of final judgment)

Filing Date: March 22, 2000

According to the Final Judgment and Order of Dismissal with Prejudice entered on March 17, 2006, and signed by U.S. District Judge Joseph H. McKinley, Jr., the Court approves the settlement set for in the Stipulation, and the Court hereby dismisses with prejudice and without costs (except as otherwise provided in the Stipulation) the Litigation against the Defendants. That day, the Court further entered separate Orders approving the Plan of Allocation and awarding Lead Plaintiffs’ Counsel’s attorneys’ fees and reimbursement of expenses as well as reimbursement of Lead Plaintiffs’ expenses.

By the Notice of Pendency and Settlement of Class Action, a settlement in the amount of $19,100,000 in cash has been reached by the parties. A hearing will be held on March 3, 2006, for the purpose of determining (1) whether the proposed Settlement is fair, reasonable and adequate and whether it should be approved by the Court; (2) whether the proposed Plan of Allocation is fair, just, reasonable and adequate; (3) whether the application of Lead Counsel and Lead Plaintiffs for an award of attorneys’ fees and expenses should be approved; and (4) whether a Judgment should be entered dismissing the Litigation with prejudice as against Defendants.

According to the same Notice, throughout 2002-2004, the parties engaged in extensive merits discovery and litigated several motions. The parties have engaged in extensive settlement efforts. Beginning in December 2004, counsel for the Lead Plaintiffs made settlement demands that were within the combined policy limits of certain of the Defendants’ insurers, Genesis Insurance Company (“Genesis”) and Westport Insurance Corporation (“Westport”), if, in fact, any insurance coverage were available under those policies, a highly contested issue between the Defendants and Genesis and Westport. Genesis and Westport did not agree to pay the amount demanded. On June 21, 2005, after extensive negotiations, the Lead Plaintiffs and the Defendants executed a Stipulation of Settlement and related documents (the “First Proposed Settlement”) under which the Defendants would not have contested the entry of judgment against them; the Defendants would have assigned their claims against Genesis and Westport to the Lead Plaintiffs; and the Lead Plaintiffs would have agreed to seek satisfaction of the judgment only from Genesis and Westport. On July 8, 2005, Lead Plaintiffs moved for preliminary approval of the First Proposed Settlement. The Court granted preliminary approval on September 15, 2005, over the objection of Genesis and Westport. Thereafter the parties, Genesis and Westport made further attempts to resolve this action, including another settlement conference with Magistrate Judge Goebel. These negotiations culminated in this Settlement for $19.1 million, which supersedes and replaces the First Proposed Settlement.

On July 13, 2000, Judge Joseph H. McKinley, Jr. consolidated the nine pending cases and appointed five lead plaintiffs to represent the Class. On September 11, 2000, plaintiffs filed their consolidated complaint, alleging that defendants Fruit of the Loom, Inc.’s officers and its auditors, Ernst & Young, LLP (“E&Y”) violated the Securities Exchange Act of 1934. On November 14, 2000, the defendants filed their motion to dismiss, and on November 16, 2000, defendant E&Y filed its motion to dismiss. Plaintiffs opposed both motions to dismiss on January 12, 2001. On June 27, 2001, Judge McKinley denied defendants’ motion to dismiss and granted E&Y’s motion to dismiss. Plaintiffs were given leave to file an amended complaint against E&Y which was dismissed with prejudice on March 27, 2002. On July 15, 2002, Magistrate Judge E. Robert Goebel consolidated this action with New England Health Care Employees Pension Fund v. Fruit of the Loom, Inc., No. 1:98CV-99-M, for all discovery purposes. Later, on January 15, 2004, Judge McKinley granted plaintiffs’ motion for class certification and appointed Bernard Fidel, Yitz Grossman and Stanley Mical as representatives of the Class. Plaintiffs then appealed the dismissal of E&Y which was heard by the Sixth Circuit on April 21, 2004. The Sixth Circuit Court of Appeals upheld the dismissal of E&Y on December 16, 2004.

The original complaint charges Fruit's two top officers with violations of the Securities Exchange Act of 1934. The complaint alleges that during the 3rdQ and 4thQ 1998, Fruit told investors it was materially reducing its levels of finished goods and raw materials inventory by curtailing production at its maquiladora facilities for several days in each of those quarters and that Fruit expected strong sales growth in 1999-2000. On April 21, 1999, Fruit reported its 1stQ 1999 results, including sales of $408 million and a loss of $.13 per share, compared to year earlier EPS of $.43. Fruit said these disappointing results were due to an inability to manufacture sufficient product to meet strong demand. As a result, Fruit forecast that its 1999 sales would be about 2.1 billion, generating EPS of over $1.35, followed by 2000 EPS of over $2.00, yielding 1999 free cash flow of 275 million. During June 1999-August 1999, Fruit projected a 3rdQ 1999 profit, better 2nd half 1999 results, 1999 free cash flow of $200+ million and represented that the production problems were now largely resolved and its plants were running at capacity. But then, on November 4 1999, Fruit revealed it had suffered an astonishing loss of $166.4 million in the 3rdQ 1999 on sales of just $548 million, a loss of $2.49 per share. This huge loss was not only due to Fruit's poor and out-of-control operations, but also a massive $60 million write-off of over-valued and non-existent inventory, a $20 million loss on cotton futures contracts and a $10 million charge for a loss on a supply contract from a previously sold facility. In December 1999, Fruit ran out of money and filed for bankruptcy. On March 17, 2000, Fruit announced its 4thQ and year end 1999 results, including a staggering loss of $398.5 million in the 4thQ 1999. Instead of achieving success with its operational reorganization, recovering from its production problems, achieving expense reductions and growing revenues, net income and EPS, as well as the strong cash flow as defendants had forecast for Fruit during most of the Class Period, Fruit, in fact, suffered declining revenues, huge losses and massive cash flow deficits because its MIS and inventory and production control systems were defective, its reorganization had failed and it could not overcome its production problems, leading to massively escalating expenses, all of which resulted in Fruit's bankruptcy. Fruit's stock became virtually worthless, inflicting millions of dollars of damage on class members.

Note: On December 29, 1999, FTL Inc. and 32 of its subsidiaries filed
voluntary petitions for relief under Chapter 11 with the Bankruptcy Court. The
bankruptcy cases of the Debtors are being jointly administered, for procedural
purposes only, before the Bankruptcy Court under Case No. 99-4497(PJW).

COMPANY INFORMATION:

Sector: Consumer Cyclical
Industry: Apparel/Accessories
Headquarters: United States

SECURITIES INFORMATION:

Ticker Symbol: FTLAQ
Company Market: NASDAQ
Market Status: Public (Listed)

About the Company & Securities Data


"Company" information provides the industry and sector classification and headquarters state for the primary company-defendant in the litigation. In general, "Securities" information provides the ticker symbol, market, and market status for the underlying securities at issue in the litigation.

In most cases, the primary company-defendant actually issued the securities that are the subject of the litigation, and the securities information and company information relate to the same entity. In a small subset of cases, however, the primary company-defendant is not the issuer (for example, cases against third party brokers/dealers), and the securities information and company information do not relate to the same entity.
COURT: W.D. Kentucky
DOCKET #: 00-CV-00048
JUDGE: Hon. Joseph H. McKinley Jr.
DATE FILED: 03/22/2000
CLASS PERIOD START: 09/28/1998
CLASS PERIOD END: 11/04/1999
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA)
    600 West Broadway, 1800 One America Plaza, Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA), CA 92101
    800.449.4900 · support@milberg.com
  2. Wechsler Harwood LLP
    488 Madison Avenue 8th Floor, Wechsler Harwood LLP, NY 10022
    212.935.7400 · info@whhf.com
  3. Weiss & Yourman (New York, NY)
    The French Building, 551 Fifth Ave., Suite 1600, Weiss & Yourman (New York, NY), NY 10126
    212.682.3025 212.682.3010 · info@wyca.com
No Document Title Filing Date
COURT: W.D. Kentucky
DOCKET #: 00-CV-00048
JUDGE: Hon. Joseph H. McKinley Jr.
DATE FILED: 07/27/2001
CLASS PERIOD START: 09/28/1998
CLASS PERIOD END: 11/04/1999
PLAINTIFF FIRMS NAMED IN COMPLAINT:
  1. Lerach Coughlin Stoia Geller Rudman & Robbins LLP (San Diego)
    655 West Broadway, Suite 1900, Lerach Coughlin Stoia Geller Rudman & Robbins LLP (San Diego), CA 92101
    619.231.1058 619.231.7423 ·
  2. Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA)
    600 West Broadway, 1800 One America Plaza, Milberg Weiss Bershad Hynes & Lerach LLP (San Diego, CA), CA 92101
    800.449.4900 · support@milberg.com
No Document Title Filing Date
No Document Title Filing Date