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Lululemon yoga pants lawsuit properly dismissed: U.S. appeals court

A woman walks into a store of yogawear retailer Lululemon Athletica in downtown Vancouver June 11, 2014. REUTERS/Ben Nelms

By Jonathan Stempel

NEW YORK (Reuters) - A U.S. appeals court on Friday agreed with Lululemon Athletica Inc that a lawsuit accusing the retailer of defrauding shareholders by failing to reveal defects that caused yoga pants to become see-through was properly dismissed.

The 2nd U.S. Circuit Court of Appeals in Manhattan said shareholders led by the Louisiana Sheriffs' Pension & Relief Fund failed to show that Lululemon committed securities fraud by concealing the sheerness of its black Luon yoga pants, overstating its quality control, and hiding its use of deep discounts to boost market share.

Problems with Luon pants led to an expensive March 2013 recall for Lululemon, which is based in Vancouver, British Columbia.

Former Chief Executive Christine Day and company founder Dennis "Chip" Wilson were also named as defendants in the lawsuit.

"Insofar as the defendants are alleged to have omitted information from Lululemon's corporate website, filings with the SEC, press releases, or investor calls, the fund has failed adequately to plead with particularity that these omissions rendered the defendants' statements inaccurate, incomplete, or

misleading or that the defendants were otherwise under a duty to disclose such information," the appeals court said, referring to the U.S. Securities and Exchange Commission.

Robert Klausner, a lawyer for the shareholders, said no decision has been made on whether to appeal.

Friday's decision upheld an April 2014 ruling by U.S. District Judge Katherine Forrest in Manhattan.The case is In re Lululemon Securities Litigation, 2nd U.S. Circuit Court of Appeals, No. 14-1664.

(Reporting by Jonathan Stempel in New York; Editing by Grant McCool)