Judge proposes class-action lawsuit against Lululemon be dismissed

NEW YORK — Lululemon Athletica Inc. appeared poised to defeat a class-action lawsuit over a recall of its black Luon pants last year because they were too sheer.

U.S. District Court Judge Katherine Forrest released a draft decision Friday that proposes the case be dismissed.

The lawsuit by shareholders ac- cused the Vancouver-based company of failing to disclose the quality defects in its Luon yoga pants, which were partly due to cost-cutting. It also accused the company of making misleading statements and omissions that caused its stock price to become artificially inflated.

However, the draft decision by Forrest says many of the statements were “simple puffery” by the company and that no reasonable invest- or would base decisions on them.

“Statements too general to support a reasonable investor’s reliance are not actionable,” she wrote.

She agreed with Lululemon that some excerpts cited by the plaintiffs in the case as false were taken out of context, including a statement on the company’s website that the quality of its products were the “highest in the industry.”

“In context, it is unreasonable to read the website statement regarding ‘highest in the industry’ as a guarantee of no product defects,” Forrest wrote of one example.

Lululemon took a beating in the wake of the recall last year and the sudden departures of chief product officer Sheree Waterson and chief executive Christine Day.

Shares in the company fell more than 15 per cent after Day announced she was leaving the yoga- wear maker in June 2013.

Lululemon blamed the sheerness of its pants on a style change and production problems.

In court documents, Forrest also proposed dismissing a second lawsuit against 13 current or former Lululemon directors or executives for breaking securities laws.

Forrest is expected to hold a hearing to review the proposed decisions before making them final.