The original lawsuit was filed against Carter's and certain officers and directors ("Defendants"). The action seeks to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). Specifically, the complaint alleges that Defendants issued materially false and misleading statements about their ability to turn the operations of acquired company Oshkosh B'Gosh around. On July 24, 2007, Carter's announced that it was taking a large write-down ($142.9 million) on the tangible assets/goodwill of its Oshkosh subsidiary. The Carters shares reacted negatively to the news, falling from $24.87 to $22.75 per share by the end of trading on July 25, 2007, representing an 8.5% decline in value.
On March 13, 2009, Judge J. Owen Forrester granted plaintiff Plymouth County Retirement System’s motion to be appointed lead plaintiff and approved lead plaintiff’s chosen counsel of Labaton Sucharow, LLP, and Page Perry, LLC, as lead and liaison counsel, respectively. On May 12, 2009, the lead plaintiff filed an Amended Class Action Complaint, adding violation of Section 20(A) of the Securities Exchange Act of 1934. On July 17, 2009, the defendants responded by filing a motion to dismiss the Amended Complaint.
On November 18, 2009, a complaint titled Scott Mylroie, et al. v. Carter's, Inc., was filed charging Carter's and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that Carter's statements and filings during the Class Period were materially false and misleading because they misrepresented or failed to disclose that: (a) the Company had reported certain margin support payments to major wholesale customers in incorrect periods; (b) as a result, the Company's financial results were overstated during the Class Period; (c) the Company had failed to properly recognize revenue in violation of GAAP; (d) the Company lacked adequate internal and financial controls; and (e) that, as a result of the above, the Company's financial statements during the Class Period were materially false and misleading at all relevant times. On November 24, 2009, the court found it in the interests of judicial economy and conservation of resources to consolidate the two actions filed against the defendants. The action titled Scott Mylroie, et al. v. Carter's, Inc., et al., filed in the U.S. District Court for the Northern District of Georgia, Civil Action No. 1:09-cv-03196-JOF, was consolidated with Plymouth County Retirement System v. Carter's Inc. et al, Civil Action No. 1:08-cv-02940-JOF.
On March 15, 2010, the lead plaintiff filed a First Amended and Consolidated Class Action Complaint, naming an individual officer and the company auditor as defendants in the action. On April 30, 2010, the defendants responded by filing several motions to dismiss the First Amended and Consolidated Class Action Complaint. According to the Opinion and Order signed by Judge J. Owen Forrester on March 17, 2011, the defendants' motions to dismiss were granted. Plaintiffs have been given leave to file another Amended Complaint within 60 days from the date of this Order.
On July 20, 2011, the plaintiffs filed a Second Amended Complaint and Consolidated Class Action Complaint still alleging violations of Sections 10(b), 20(a), and 20A of the Exchange Act. In September 2011, the parties entered into mediation and the action was administratively closed.
On December 21, 2011, an unopposed motion for preliminary approval of partial class settlement was filed. The proposed settlement will settle claims with the company and individual defendants. Pursuant to the Stipulation, Carter’s has agreed to pay $20 million in cash. Lead Plaintiff continues to pursue its claims against the sole non-settling defendant in the Consolidated Action, PricewaterhouseCoopers LLP.
On January 9, 2012, the defendant PricewaterhouseCoopers LLP filed a motion to dismiss the Plaintiff's Second Amended Complaint.