Second Circuit Affirms Dismissal of Securities Fraud Class Action Against lululemon and Founder

The Second Circuit affirmed the dismissal of a putative securities fraud class action brought against yoga apparel company lululemon athletica inc., its former CEO, Christine Day, and its founder and former chairman of the board of directors, Paul, Weiss client Dennis "Chip" Wilson.

In a brief summary order issued only one week after oral argument, the Second Circuit affirmed an April 2014 opinion by District Judge Katherine B. Forrest dismissing claims that the defendants had defrauded lululemon shareholders by failing to reveal shortcomings in the Company's quality control procedures that caused certain of its yoga pants to become sheer when worn. The Second Circuit found that the plaintiff's arguments on appeal failed to undermine Judge Forrest's ruling that it had not adequately pled any material misrepresentations or omissions, and therefore could not state a claim under Sections 10(b) or 20(a) of the Securities Exchange Act. "Insofar as the defendants are alleged to have omitted information from Lululemon's corporate website, filings with the SEC, press releases, or investor calls," the court wrote, "the [plaintiff] has failed adequately to plead with particularity that these omissions rendered the defendants' statements inaccurate, incomplete, or misleading or that the defendants were otherwise under a duty to disclose such information." The court dismissed plaintiff's remaining arguments as without merit.

The Paul, Weiss team included litigation partners Audra Soloway, who argued the appeal on behalf of Wilson, and Michele Hirshman.