RH, Inc. Executives Under Investigation for Potential Breaches of Fiduciary Duties
Schubert Jonckheer & Kolbe LLP has launched an investigation into whether certain officers and directors of RH, Inc. (NYSE: RH) breached their fiduciary duties by causing the company to issue false and misleading statements related to the company’s severe RH Modern inventory shortages. RH is a retailer of luxury home furnishings, but sources its products from third-party manufacturers, most of which are located overseas.
The investigation concerns the company’s failure to disclose key challenges with its RH Modern branded products from March 26, 2015 through June 8, 2016. RH launched RH Modern on March 26, 2015, describing the product line as “the most important and significant new home furnishings business to be launched in the last 15 or 20 years,” and repeatedly assured investors that RH was “prepared for the launch.” In truth, however, there was a near complete lack of available inventory. As a result of these inventory issues, the company experienced significant customer complaints and canceled orders. RH withheld most of this critical information from investors, until June 8, 2016, when the company announced that RH had issued $18 million in customer accommodations related to its RH Modern inventory challenges.
On February 2, 2017, a federal securities action was filed against the company and certain officers and directors. On February 26, 2018, the Hon. Yvonne Gonzalez Rogers denied RH’s motion to dismiss allowing the litigation to proceed. The Court found that plaintiffs in the action adequately alleged that RH’s “rosy representations concealed that RH Modern was suffering from a severe lack [of] inventory and defendants were receiving customer complaints and canceled orders regarding the same.”
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