Welspun says ‘Egyptian Cotton’ related US lawsuits not yet material

welspunWelspun said it believed that two complaints against the company for allegedly using non-Egyptian cotton may or may not be allowed to proceed as class action lawsuits, and are therefore not yet ‘material’.

The company was responding to a question by the stock exchanges of India on media reports that alleged that millions of dollars were being sought from the Indian textile manufacturer for mislabeling its products via a class action lawsuit.

Unlike a regular lawsuit, a company hit by a class action lawsuit has to reimburse and pay damages to everyone involved or wronged in the case, which increases the total quantum of fines and penalties.

“The Central allegation in both complaints is that certain Welspun sheeting products were not “100% Egyptian Cotton.” Neither complaint challenges the Safety or fitness of these products. Both complaints allege that the amount in controversy exceeds $5 million,” Wespun said.

“However, neither complaint Seeks a specified amount of damages or provides a methodology for determining damages. Nor has either action been certified for class treatment by the relevant courts, which is required under US law before an action may proceed on a class basis, and no motion to obtain Such certification has been made yet.

“Accordingly, we believe that these actions are only in the preliminary stages, and that it cannot be determined at present whether they will even be permitted to proceed as class actions. Consequently, we believe that these actions cannot be determined to be material at this point in time.”

Welspun engaged Kirkland & Ellis LLP, a leading US law firm, to defend these matters in the US. It has also appointed AZB & Partners, a leading Indian law firm, as its legal advisers in India.

The first complaint was filed in the United States District Court for the Southern District of New York on August 29, 2016, whereas the Second complaint was filed in the United States District Court for the Eastern District of Missouri, Eastern Division on August 31, 2016.