Estée Lauder To Hand $210,000,000 to Investors and Attorneys After Allegedly Overstating Growth Amid China Crackdown
A federal court has given final approval to a $210 million settlement resolving investor claims that Estée Lauder (EL) overstated its growth prospects amid a Chinese crackdown on a key resale market.
The deal settles securities fraud claims against the beauty giant, former CEO Fabrizio Freda and former CFO Tracey Travis over forecasts issued as the company recovered from the pandemic, reports Law Commentary.
U.S. District Judge Arun Subramanian of the Southern District of New York granted final approval on October 14th.
He awarded $63 million in attorneys’ fees plus about $760,000 in expenses after trimming the lawyers’ requested cut from 32% to 30%, which leaves an extra $4.2 million for investors.
Shareholders alleged the company leaned on daigou, an informal trade in which shoppers buy luxury goods at discounted or duty-free prices and resell them, often in mainland China, to prop up sales in Hainan.
As Chinese authorities clamped down on the daigou trade, the investors say Freda and Travis blamed weaker results on pandemic disruptions, inventory problems and a slow travel retail recovery without fully disclosing the crackdown’s impact.
On November 1st, 2023, Estée Lauder cut its outlook, citing government and retailer policies targeting unofficial sales channels as a contributing factor in the downturn. Its shares fell nearly 19% to close at $104.51.
Subramanian allowed the core claims to move forward on March 31st, 2025, according to lead counsel Labaton Keller Sucharow.
Says Subramanian in that ruling,
“Plaintiffs successfully point to several misleading omissions, and even the allegedly forward-looking statements and opinions at issue are mired in half-truths.”
The Macomb County Employees’ Retirement System, Macomb County Retiree Health Care Fund and Wayne County Employees’ Retirement System led the case and reached the settlement after discovery that produced about 124,000 documents.
Estée Lauder continues to deny wrongdoing, and the final judgment resolves the claims with prejudice, preventing the settled claims from being brought again.
The settlement covers investors who acquired shares between February 3rd, 2022, and February 3rd, 2025, and the deadline to file a claim passed on August 5th.
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