On Friday, June 21, 2024, Under Armour announced that, subject to court approval, it had settled a pending securities class action in the United States District Court for the District of Maryland. The settlement closes a case originally filed in February 2017, which had twice been dismissed with prejudice before finding new life after it was reported in the fall of 2019 that the Securities & Exchange Commission and United States Department of Justice had fined Under Armour for the conduct alleged here. That announcement proved the tipping point in the case, as thereafter, Judge Richard Bennett allowed the case to return from the United States Court of Appeals for the Fourth Circuit (where the dismissal had been on appeal), reversed himself on the dismissal, and ultimately certified a class and denied summary judgment and Under Armour’s motions in limine. The case was scheduled to begin a two-plus-week jury trial on July 15, 2024.
Read the Baltimore Banner’s reporting on the matter here.
At its heart, this case was about the defendants’ actions in 2015 and 2016. Through the third quarter of 2016, Under Armour had experienced 26 consecutive quarters of growth, a point that Under Armour founder, Kevin Plank, proudly reiterated as often as he could to investors. Indeed, according to Plank, that feat was shared by only one other company in the S&P 500 and he touted it to instill confidence that, notwithstanding the critical pressure that Under Armour faced from competitors like Nike and Adidas, it was all but assured of continued growth.
In reality, Under Armour began to experience a severe decline in its apparel business in or around 2015, as customer demand for the company’s core products began to wane and Under Armour failed to keep up with then-current “athleisure” trends. Faced with these and other issues, the Company abandoned its fundamental sales philosophy of competing on brand strength over price and resorted to lowering sales prices, offering promotions, and liquidating excess inventory at steep discounts. All of this occurred at a time when its chief rival, Nike, was steadily increasing average sales prices.
To preserve Under Armour’s carefully cultivated image of a fast-growing, cutting-edge sports brand on par with the Nikes of the world, it is alleged that Under Armour made false representations to the market about the strength of its growth and customer demand while downplaying or concealing the company’s ballooning inventory, liquidations, and gross margin compression. Coupled with suspicious stock sales by Plank himself and the resignation of its chief financial officer only 13 months after he took the job, the market finally began to take notice in 2017 of what had been occurring, at which time, Robbins Geller and Silverman Thompson filed their initial complaint in this matter.
A hearing on preliminary approval of the settlement will occur on July 22, 2024. If the court grants preliminary approval, it is expected that a 120 day period will follow during which objections, if any, could be lodged to the settlement. It is further expected that Judge Bennett will hold a final conference in November regarding settlement approval. If approved, this may be the first case in American history to have been dismissed twice with prejudice only to later settle for close to half a billion dollars.
On July 22, 2024, Judge Bennett of the United States District Court for the District of Maryland preliminarily approved a $434 million settlement between Under Armour and a class of investors he had previously certified. The case was set to go to trial on July 15, but the parties reached an agreement to resolve the matter in late June. A hearing on final approval will take place on November 7, 2024.
Silverman Thompson was engaged by Robbins Geller to serve as local counsel in this matter. Silverman Thompson lawyers have prosecuted and defended class actions in Maryland’s state and federal courts and across the country. To learn more about Silverman Thompson generally, or its class action practice specifically, please contact Bill Sinclair, who served as the primary Silverman Thompson lawyer handling this matter. He can be reached directly at 410.385.9116.