Court rejects Fruit of the Loom holder challenge

An unanimous 6th Circuit Court of Appeals quashed an attempt by shareholder James J. Hayes of Annandale, Va., to set aside the settlement. Hayes said he didn't receive notification in time to object to the deal.

Judge Julia Smith Gibbons, writing for the three-judge panel, said Hayes wasn't hurt by the lack of notice because he filed an objection that the judge in the case turned down.

"Indeed, in the instant action, it does not appear that Hayes himself suffered prejudice as a result of the untimely notice, as the district court considered and rejected his objection to the settlement on the merits," Gibbons wrote.

The settlements in question stem from lawsuits accusing the company's former top officeholders of lying to analysts to boost Bowling Green, Ky.-based Fruit of the Loom's stock. The suits were filed by people and pension plan agencies that bought stock in the company in the mid-1990s.

The settlements, reached in March 2006, covered stock purchases between July 24, 1996, and Sept. 5, 1997, and from Sept. 28, 1998, through Nov. 4, 1999. Notice of the settlements were sent to more than 29,000 stockholders through various stockbrokers. Hayes said he received the settlement notice after the deadline to object. He filed an objection anyway, which was rejected.

Eric Isaacson, a San Diego, Calif., based attorney who represented the stockholders, was disappointed that the court allowed Hayes to appeal.

"I'm pleased, however, that the Court found the notice procedures followed were more than adequate to notify class members of the terms of the settlements reached," Isaacson said "It's a shame that one class member's complaints about a communications problem between him and his personal stockbroker wound up holding things up in these settlements for more than two years."

Hayes did not immediately return a message seeking comment on Friday.

The lawsuits, filed in 1998 and 2000 in U.S. District Court in Bowling Green, accused former Chief Executive William Farley and acting Chief Financial Officer C. William Newton of managerial incompetence and deception that inflated the company's stock price.

Fruit of the Loom filed for Chapter 11 bankruptcy protection in 1999 shortly after posting a net loss of $576.2 million. Its 66 million shares of outstanding common stock dropped in value from about $44 per share in early 1997 to just more than $1 by the spring of 2000.

Fruit of the Loom emerged from bankruptcy protection in 2002 when it was bought by Warren Buffett's Berkshire-Hathaway Inc.