By Order entered on February 1, 2002, the Court granted, with prejudice, defendants' motion to dismiss the lawsuit for failure to state a claim. Plaintiffs agreed to voluntary dismissal after determining, following further investigation by counsel, that they would be unable to prove materiality. Plaintiffs and plaintiffs' counsel have not received nor have they been promised any consideration for their agreement to dismiss the action. The dismissal is with prejudice as to the named and lead plaintiffs only.
The lawsuit was first filed on December 29, 1999. Thereafter, Skechers investors filed several similar lawsuits. In June of 2000, the United States District Court for the Central District of California consolidated the actions, and pursuant to the Private Securities Litigation Reform Act of 1995 appointed lead plaintiffs and lead counsel.
The original complaint asserts claims against Skechers U.S.A. Inc. and its Chief Executive and Chief Financial Officers for violation of sections 11 and 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5. Claims for violation of the Securities Act were also asserted against DeutscheBanc, Alex Brown and Prudential Securities. The lawsuit alleged that the prospectus and registration statement issued in connection with Skechers' IPO was materially false and misleading for failing to describe threats that had been made by R. Griggs, a Skechers competitor, to bring a trademark infringement claim against Skechers.
More specifically, the complaint alleges that during the Class Period, defendants knew, but did not disclose that a major competitor of Skechers was in fact asserting an intellectual property claim against Skechers and that Skechers had negotiated a stand-still agreement with its competitor regarding the dispute. On June 9, 1999, Skechers successfully completed its initial public offering, selling 7 million shares to the public at $11 per share and netting proceeds of $69.7 million. Five days after the IPO, on June 14, 1999, after Skechers broke its standstill agreement and filed a pre-emptive lawsuit against its competitor, the competitor sued Skechers for "deliberate" and "systemic copying" of its designs, and also charged that Skechers had negotiated a standstill agreement solely as a ploy to prevent the filing of the competitor's lawsuit until after Skechers completed its IPO. When Skechers finally disclosed the existence of the legal claim against it on June 16, 1999, Skechers common stock declined in value.
By order dated June 7, 2000, the court appointed Kirby McInerney & Squire as lead counsel for the proposed class of Skechers investors. The consolidated complaint was filed on June 1, 2000. Defendants moved to dismiss the complaint on July 12, 2000. On August 25, 2000, plaintiffs filed a memorandum of law opposing dismissal of their complaint. On September 25, 2000, the Court conducted a hearing on defendants' motion. By order dated June 20, 2001, the court dismissed the action, but granted plaintiffs leave to amend the complaint. However, as stated above, Plaintiffs agreed to voluntary dismissal after determining, following further investigation by counsel, that they would be unable to prove materiality.