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Case Status:    SETTLED
On or around 12/03/2003 (Date of order of final judgment)

Filing Date: September 13, 2002

According to the Company’s Form 10-Q for the quarterly period ended January 31, 2004, on September 12, 2003, the Company entered into a Stipulation and Agreement of Settlement with the lead plaintiff in the Securities Suits and the plaintiff in the Derivative Suit. As part of the settlement, the Derivative Suit was refiled in the United States District Court for the Western District of Washington. On December 2, 2003, the United States District Court for the Western District of Washington granted final approval of that settlement, and dismissed the Securities Suits and the federal Derivative Suit. The state Derivative Suit was subsequently dismissed by order of the Superior Court of the State of Washington, for King County, on December 10, 2003.

The Company settled those lawsuits and paid $4.0 million to the plaintiffs. The Company also settled the previously announced Securities and Exchange Commission investigation of the Company arising from the circumstances underlying the restatement. That settlement did not require payment of any fines or penalties.

By the Notice of Pendency and Settlement, the parties reached an agreement-in-principle to settle the action. The Settlement creates a fund in the minimum principal amount of $4,000,000 in cash (the "Settlement Fund"), which is earning interest. The Settlement Fund may increase up to a total of $7,000,000 under certain circumstances. Based on an estimate of the number of shares entitled to participate in the Settlement and the anticipated number of claims to be submitted by Class Members, the average distribution from the Settlement Fund will range from approximately $0.40 per share to $0.69 per share (depending on the ultimate size of the Settlement Fund) before deduction of Court-approved fees and expenses.

If the Settlement is approved by the Court, Class Plaintiff's Counsel will apply to the Court (1) for attorneys' fees of 10% of the settlement proceeds, and reimbursement of expenses incurred not to exceed $280,000, and (2) compensation of up to $5,000 for the Class Plaintiff to reimburse it for its time and expenses, all to be paid from the Settlement Fund. Counsel for the plaintiff in the Derivative Action will share in any such fee and expense award. If the amounts requested by Class Plaintiff's Counsel are approved by the Court, the average cost would range from approximately $0.07 per share to $0.10 per share (depending on the ultimate size of the Settlement Fund). The average cost per share would also vary depending on the number of shares for which valid claims are submitted.

The original complaint charges Cutter & Bucker, Inc. and Harvey Jones, former Chief Executive Officer and Chairman of the Board, with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, by issuing a series of materially false and misleading statements to the market during the Class Period. On July 30, 2000, the start of the Class Period, defendants issued and filed with the SEC Cutter's Form 10-K for FY 2000. Defendants reported Cutter's sales revenues and income for FY 2000 and improperly included in those reported figures the $5.8 million of improperly record revenue and resulting profit on those purported sales. The FY 2000 Form 10-K also included, in the footnote to the financial statements, the false statement that "(r)evenue is recognized at the time the product is shipped to the customer. There is no right of return for customers, other than for defective products."
The complaint alleges that financial statements disseminated to the
public were false and misleading because they improperly included as
revenue $5.8 million of product that was shipped to three distributors
on consignment, in violation of the basic principle of Generally
Accepted Accounting Principles ("GAAP") that revenues cannot be booked
if the product is shipped on consignment with a right of return.
Thereafter, throughout the Class Period, defendants continued to
improperly record the $5.8 million of product as revenue with each
subsequently disseminated financial statement in violation of GAAP and
failed to disclose their improper actions or that the sales revenues,
and associated profit, would have to be reversed when the product was
returned to Cutter. Upon the product return to Cutter, defendants,
without making any disclosure, accounted for it as a reduction in sales
in FY 2001 and improperly and intentionally misallocated the product to
several of Cutter's business lines instead of the business line under
which those sales were originally and improperly booked. These improper
actions had the further effect of distorting the sales of Cutter's
business lines. On August 12, 2002, the last day of the class period,
defendants' improper actions were disclosed. Cutter's new Chief
Executive Officer, Fran Conley, issued a press release disclosing the
above alleged actions and that they would require a restatement of
Cutter' s financial statements for FY 2000 and FY2001 as the result of
improper revenue recognition and reacquisition of the consigned product
by Cutter. Conley also announced that it is believed "(t)hat some
members of the Company's former management may have received increased
incentive compensation as a result of the overstated FY2000 financial
results," and that a Special Committee had been appointed to
investigate. Also on August 12, 2002, Cutter's Chief Financial Officer
resigned. Upon the August 12, 2002 disclosures, Cutter's stock price
fell $0.58 to $3.44 per share.


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


Ticker Symbol: CBUKE
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. Washington
DOCKET #: 02-CV-1948
JUDGE: Hon. Robert S. Lasnik
DATE FILED: 09/13/2002
CLASS PERIOD END: 08/12/2002
  1. Bernard M. Gross
    1500 Walnut Street, Suite 600, Bernard M. Gross, PA 19102
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  2. Cauley Geller Bowman Coates & Rudman LLP (Little Rock, AR)
    P.O. Box 25438, Cauley Geller Bowman Coates & Rudman LLP (Little Rock, AR), AR 72221-5438
    501.312.8500 501.312.8505 ·
  3. Law Offices of Charles J. Piven, P.A.
    World Trade Center-Baltimore,401 East Pratt Suite 2525, Law Offices of Charles J. Piven, P.A., MD 21202
    410.332.0030 ·
  4. 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 ·
  5. Spector Roseman & Kodroff (San Diego)
    1818 Market Street, Suite 2500, Spector Roseman & Kodroff (San Diego), PA 19103
    215.496.0300 215.496.6611 ·
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