Armstrong Flooring has agreed to pay $3.75 million to settle a shareholder’s lawsuit that alleged management “deceived” and “defrauded” him and other recent investors.
In disclosing the settlement Tuesday, the Lancaster-based company noted that the accord is subject to the approval of federal court in Los Angeles, where the litigation was filed. It would be paid by Armstrong’s insurance.
The class action lawsuit was filed by shareholder Michael Chupa, who lives in California, in November 2019.
In the 20-page lawsuit, Chupa allegesthat Armstrong “made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects.”
Instead, Armstrong made “positive statements” that “were materially misleading and/or lacked a reasonable basis,” Chupa maintains, in order to support an “artificially high” and “overvalued” stock price.
The “fraudulent scheme” tricked investors into buying company stock, a decision that proved costly when Armstrong then announced sizable corporate losses, triggering a “precipitous decline” in the stock’s price, Chupa alleges.
Armstrong, which denies the allegations, disclosed the settlement in a filing with the U.S. Securities and Exchange Commission.