Lululemon Athletica has been hit with a lawsuit accusing it of defrauding shareholders by hiding defects in yoga pants whose sheerness led to a costly recall, and concealing talks that led to the sudden departure of its chief executive.
The lawsuit in the U.S. district court in Manhattan was filed by a shareholder on Tuesday, three weeks after Lululemon Chief Executive Christine Day announced her surprise exit after 5½ years at the helm, calling it a personal decision.
It is separate from a May lawsuit filed in Delaware Chancery Court that accused Lululemon directors of boosting possible executive bonuses just before the recall.
Lululemon did not immediately respond to requests for comment.
Day stepped down three months after the athletic wear retailer recalled women's yoga pants containing its proprietary Luon fabric after determining the pants were too sheer.
The Vancouver, British Columbia-based company has said that recalling the stretchy, snug-fitting black pants could reduce profit this year by up to $40 million. It returned the pants to store shelves last month.
Lululemon has long been known for clothes that could withstand many years of wear and washes.
Tuesday's lawsuit was filed by Houssam Alkhoury, a Natick, Mass., resident who had bought 7,500 Lululemon shares.
It contended that Lululemon, Day and company founder and Chairman Dennis "Chip" Wilson hid defects in the yoga pants, which resulted in part from cost-cutting, and that the company was forced to sell them at a discount to preserve market share.