Jenny Craig Will Pay $9.5 Million to Settle Lawsuit

Jenny Craig Inc. on Monday agreed to pay $9.5 million to settle a protracted class-action securities lawsuit alleging, among other things, that it misled investors about its business prospects.

The Del Mar, Calif.-based weight-loss company said it settled the 3-year-old lawsuit to avoid “the escalating costs of litigation.” The company has consistently denied the allegations.

Jenny Craig Inc. was socked with four lawsuits in 1992 stemming from the company’s lackluster performance in the months following its October, 1991, initial public offering.

The lawsuits were combined into a class action in U.S. District Court in San Diego.

The suit claimed that the company forecast 20% annual earnings and revenue growth even though it knew the market for weight-loss centers was saturated. According to the suit, the company reported a drop in income seven months after it went public.

As a result of that decline in income, the price of Jenny Craig shares fell to $16.125 in May, 1992, the lawsuit said. The company’s stock went public at $21 a share.

Jenny Craig stock closed Monday at $6.75 a share, down 25 cents on the New York Stock Exchange.