Just for Feet Settlement

In an unusual occurrence, the outside directors of Just for Feet have agreed to settle a lawsuit brought by Charles Goldstein, the bankruptcy trustee.  According to the Wall Street Journal, the directors agreed to pay $41.5 million to settle the claims which brings the total settlement for outside creditors to approximately $80 million (Deloitte & Touche agreed to a $24 million settlement, and $15 million was paid by the founder’s estate and his son).

Many are concerned that such a result broadens the usual narrow liability for outside directors.  However, according to one of the attorneys, Eric Breithaupt of the Birmingham firm Christian & Small, the company could have been saved if bankruptcy had been filed earlier.  Additionally, the trustee claimed that there were too many conflicts of interest which led to the company’s downfall.  Among them, Randall Haines was the President of Compass Bank which was also one of the company’s primary lenders. 

Clearly, this case stands for the premise that executives and directors of corporations must take an active roll to insure that conflicts are avoided and that decisions must be informed decisions, not blind ones.  Corporate decisions can be wrong as long as they are thoughtful and not fraught with conflict.

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