LGPS fund nets share of $434 million Under Armour settlement

The North East Scotland Pension Fund has landed a windfall from a legal case in the US after sportswear manufacturer Under Armour tabled a $434 million (£342.7 million) settlement.

The settlement relates to allegations that the company released “materially false and misleading statements and [failed] to disclose adverse information about Under Armour’s business and operations to investors”, according to Robbins Geller Rudman & Dowd, the law firm leading the class action suit.

The company has denied the allegations throughout.

The North East Scotland Pension Fund – part of the Scottish Local Government Pension Scheme (LGPS) – was the lead plaintiff.

In a statement, a spokesperson for the pension fund said: “We are pleased to have helped secure this exceptional outcome. We decided that stepping forward to lead the litigation and hold defendants accountable was an appropriate exercise of our stewardship role, and we welcomed the opportunity to do so.”

The North East Scotland Pension Fund manages £6.2 billion in assets on behalf of more than 77,000 members. It is the third largest LGPS fund in Scotland.

Mark Solomon, partner at Robins Geller and counsel to the LGPS fund on the case, said the settlement marked “an important win for investors and a strong message to the directors and officers of public companies”.

The US financial regulator, the Securities and Exchange Commission (SEC), had previously fined Under Armour $9 million in relation to the allegations, but Solomon said this much larger settlement “underscores the critical role pension funds can play in holding companies accountable”.

About the case
According to Robins Geller, Under Armour used a “pull-forward revenue recognition scheme that masked declining demand for its products”.

The company had, the lawsuit alleged, repeatedly reassured investors that an extended period of consecutive high-growth quarterly updates would continue, despite falling demand. The lawsuit claimed that financial results were “manipulated”.

Investors took legal action after Under Armour’s chief financial officer resigned in 2017, the company reported a significant drop in revenue and its share price fell by more than 25%.

Under Armour has always denied any wrongdoing, both in the SEC case and in this settlement.

In a statement, Under Armour said: “The company has consistently denied the accusations and entered into this agreement in principle, which is not an admission or finding of fault or wrongdoing, given the costs and risks inherent in litigation.”

“We firmly believe that our sales practices, accounting practices, and disclosures were appropriate, and deny any wrongdoing in this case,” said Mehri Shadman, Under Armour’s chief legal officer and corporate secretary.

“Today’s announcement allows us to move past this more than seven-year-old matter so we can avoid the ongoing distraction of litigation and provide certainty to the business at a time when we are executing on important strategic priorities.”

The settlement is subject to approval by the courts in the US. If approved, Robins Geller said it would be one of the top 50 largest such recoveries in US history.