Oakley OKs Proposal to End Lawsuit
Oakley Inc. has tentatively agreed to a $17.5-million payment to settle a lawsuit alleging that the sunglasses maker and its executives misled investors.
The Foothill Ranch company disclosed the proposed settlement in a regulatory document filed this week but did not list the amount. Financial terms were revealed by one of the plaintiffs’ attorneys.
Oakley said Tuesday that its insurance carrier, which is paying the bill, opted to settle the case. The insurance company was not identified.
“We steadfastly deny all wrongdoing in the class action [lawsuit],” Oakley spokesman Lance Allega said. “This settlement is a result of a decision our insurance company reached. No moneys will be paid out by Oakley.”
The proposed settlement, which must be signed by both sides and approved by Judge Gary Taylor, would resolve a flurry of lawsuits filed against Oakley in 1997 by shareholders. The lawsuits contended that Oakley, its top executives and others made “material misstatements and omissions” about Oakley’s products, its retail distribution practices and other matters in documents filed in connection with a secondary offering on June 6, 1996.
“We think it’s a very good settlement,” said Robert Kaplan, an attorney for the plaintiffs. “Hopefully, no one will object.”
Oakley founder Jim Jannard, in a statement Tuesday, described the proposed settlement as “a bitter pill.”
“We are extremely disappointed that the insurance company would choose to settle this since there was not one shred of evidence of any wrongdoing by anyone at Oakley,” Jannard said. The company also cautioned that the settlement is still “preliminary” and that the terms could change.
One of the 1997 lawsuits involved Pennsylvania investor Val Fichera, who sued Oakley, claiming the company, its officers, directors and underwriters misled investors about the company’s prospects in the secondary stock offering.
Fichera paid $47.63 a share in the offering. The stock later split 2 for 1. Oakley shares plunged later that year when sales to its largest customer, Florida-based Sunglass Hut International, stalled. Similar lawsuits were filed on behalf of all shareholders who bought stock between March 22, 1996, and Dec. 5 1996.
“Everyone in the investing community knows that our stock went down in 1996 because of what happened within the sunglass industry and Sunglass Hut,” Jannard said.
He was referring to an industrywide oversupply of sunglasses that caused inventories to build up at Sunglass Hut. Oakley cut off its fourth-quarter shipments to the retailer that year.
Recently, Oakley has been on the rebound. In the recently concluded second quarter, sales topped $100 million for the first time ever.
The company’s stock hit a 52-week high of $17.75 on Aug. 7. It closed Tuesday at $15.63, down 25 cents, on the New York Stock Exchange.
