Tapestry and Capri are aiming to shut down the investor lawsuit that followed the collapse of their $8.5 billion merger, arguing that plaintiffs are improperly recasting the companies’ public statements about the merger as securities fraud. In opening briefs, the companies and certain executives told a federal court in Delaware that the revised complaint merely repackages the same internal documents, FTC litigation testimony, and competition theories that failed to survive dismissal earlier this year.
The case stems from the FTC’s successful challenge to Tapestry’s proposed acquisition of Capri, a $57-per-share deal that would have united Coach, Kate Spade, and Stuart Weitzman with Michael Kors, Jimmy Choo, and Versace. After the FTC sued in April 2024 to block the transaction, alleging that it would eliminate competition in an “accessible luxury” handbag submarket by combining Michael Kors with Coach and Kate Spade, Judge Jennifer Rochon granted a preliminary injunction in October 2024.
Tapestry and Capri abandoned the deal soon after, prompting Capri investors to file a securities suit accusing the companies and certain executives of misleading the market about the deal’s regulatory prospects, its likely impact on competition, and the market in which the brands competed.
The original complaint did not get far. In March, the Delaware court dismissed it without prejudice, finding that many of the challenged statements were non-actionable opinions or forward-looking statements and that the plaintiffs had not sufficiently alleged fraudulent intent. The amended complaint, filed in April, narrows some of the challenged statements and adds a new “scheme liability” theory, but Tapestry and Capri argue that those changes do little to cure the defects the court already identified.
The Companies’ Case for Dismissal
Tapestry maintains that the amended complaint still targets the same core themes the court already addressed: whether and when the deal would close, whether the merger was pro-consumer or pro-competitive, and how the companies described the market in which their brands competed. In Tapestry’s telling, none of those statements amounts to actionable securities fraud. The company argues that its statements about the deal’s expected closing were protected by the PSLRA’s safe harbor and did not amount to securities fraud.
It also asserts that the amended complaint still does not turn the companies’ statements about competition and market structure into viable securities claims, and that the claims against Tapestry fail because the named plaintiffs bought Capri stock, not Tapestry securities.
Capri makes a narrower version of the same argument, contending that the amended complaint abandons the earlier timeline allegations against the Capri defendants and instead homes in on a smaller set of Capri statements about the competitive landscape and the merger’s likely effect on competition. Those include descriptions of the luxury industry as “fiercely competitive” and “highly fragmented,” as well as assertions that the transaction would not “limit, reduce, or constrain competition.”
The Michael Kors-owner argues that the amended complaint still does not cure the court’s earlier conclusions on fraudulent intent and safe harbor protection and separately attacks the new scheme liability theory as an attempt to recast merger advocacy as securities fraud.
THE BIGGER PICTURE: The new briefings tee up a question that is likely to recur in the wake of other failed or blocked deals: when does optimistic deal advocacy become securities fraud? Tapestry and Capri’s answer is that it does not – at least not on the facts alleged here. Their core position is that the amended complaint still conflates an unsuccessful antitrust defense with actionable deception, using the FTC’s win and Judge Rochon’s preliminary injunction ruling as a basis to retroactively label the companies’ merger rhetoric false.
If the Delaware court agrees, the ruling could help define how far companies can go in publicly defending contested deals before failed merger rhetoric becomes the basis for securities claims.
The case is In re: Capri Holdings Ltd. Securities Litigation, 1:24-cv-01410 (D. Del.).
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