Just weeks before trial in the case was scheduled to being, the parties to the Under Armor securities class action lawsuit have agreed to settle the case for $434 million, according a company SEC filing. The case had recently survived the defendants’ motion for summary judgment. According to the lead plaintiffs’ counsel, the settlement represents the second-largest securities suit settlement in the Fourth Circuit. The settlement is subject to court approval. A copy of the company’s June 21, 2023, filing on Form 8-K can be found here. Plaintiffs’ counsel’s June 21, 2024, press release about the settlement can be found here.

The securities class action lawsuit against Under Armour and certain of its directors and officers was first filed in 2017. The complaint, as subsequently amended, alleged that the defendants had used a variety of techniques – such as pulling sales from subsequent periods forward to early periods or convincing retailers to take product early – to mask the company’s declining sales volume after years of growth. The case had a convoluted procedural history that, among other things, included a trip to the Fourth Circuit. The district court ultimately denied the defendants’ motion to dismiss. More recently, on February 26, 2024, the district court denied the defendants’ motion for summary judgment. Trial in the case was scheduled to commence on July 15, 2024.

However, on June 21, 2024, the company filed a statement with the SEC on Form 8-K in which the company reported that the case had been settled in exchange for the company’s agreement to pay $434 million.

Readers learning of this sizeable settlement may well ask where the money is coming from to fund the deal. In its 8-K filing, the company said:

The Company presently expects to pay the settlement amount using balance sheet cash and/or borrowings under its revolving credit facility. However, the Company currently expects a portion of this amount (less than 20%) to be offset by director and officer liability insurance policies. As previously disclosed, the Company remains in ongoing litigation with certain of its insurance carriers regarding this matter, and there is no guarantee that the litigation with the insurance carriers will be resolved in the Company’s favor.

As I noted above, lead plaintiffs’ counsel said in their press release about the settlement that that this settlement represents the second largest ever settlement of a securities suit in the Fourth Circuit. (The case is pending in the District of Maryland.) As for where this settlement ranks on the overall list of securities settlements, it appears that this settlement, if it were to be finalized, would be among the top 50 largest settlements ever, approximately the 43rd largest or so. (It is a remarkable observation that even a settlement this large does not even appear to break into the top 40 all-time settlements.)

This settlement is noteworthy on many levels, including the fact that it was accomplished so close to the trial date. Another feature of this settlement that is noteworthy to me is the fact that the company appears to be funding the majority of the settlement out of its own resources. While D&O insurance apparently will be making some contribution toward the settlement (subject to the outcome of pending coverage disputes), the D&O insurance is funding only a small portion of the settlement. I have added this observation to my general file notes about securities litigation, as a data point to use to respond to the cynics who say that securities litigation is a fight solely about the D&O insurance that doesn’t otherwise signify anything.