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Commitments and Contingencies | 3 Months Ended
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Oct. 31, 2020
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings Chapter 11 Cases On July 23, 2020, the Debtors filed the Chapter 11 Cases seeking relief under the Bankruptcy Code. Subject to certain exceptions under the Bankruptcy Code, the filing of the Chapter 11 Cases also automatically stayed, pursuant to Section 362(a) of the Bankruptcy Code, the filing or the continuation of most legal proceedings and other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors’ bankruptcy estates, unless and until the Bankruptcy Court modifies or lifts the automatic stay as to any such claim. See Note 2 for more information about the Chapter 11 Cases. Federal Securities Class Action On June 7, 2019, plaintiff James Newman commenced a federal securities class action in the United States District Court for the District of New Jersey, naming the Company and certain of the Company’s current and former officers and directors as defendants. The Newman complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 related to the Company’s goodwill impairment accounting and statements regarding the success of the 2015 purchase of ANN and the overall performance and expected growth of the ANN brands. Plaintiff seeks damages on behalf of a proposed class of purchasers of Company securities between September 16, 2015 and June 8, 2017 (the proposed “Class Period”). On July 2, 2019, a second lawsuit was filed by Michaella Corporation. The Michaella complaint is substantially similar to the Newman complaint. Both the Michaella complaint and the Newman complaint name the same defendants, allege the same proposed Class Period, and challenge the same categories of public statements under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. On August 6, 2019, two potential lead plaintiffs (Joel Patterson and Michaella Corporation) filed motions for appointment as lead plaintiff in the Newman and Michaella actions, and to consolidate both actions. On August 23, 2019, the Court consolidated the two actions as In re Ascena Retail Group, Inc. Sec. Litig. and appointed Patterson and Michaella Corporation as joint lead-plaintiffs (“Lead Plaintiffs”). The Lead Plaintiffs’ filed an amended complaint on November 21, 2019, which shortened the class period. Defendants filed a motion to dismiss the amended complaint on February 7, 2020. The motion has now been fully briefed. However, the Company filed a Notice of Suggestion of Bankruptcy with the Court on July 27, 2020, and on July 28, 2020, the Court issued an order staying the proceedings and administratively terminated the motion to dismiss without prejudice. The motion may be re-filed at a later date. Lead Plaintiffs’ counsel has also filed an objection to confirmation of the Plan of Reorganization in the Chapter 11 Cases objection to the release of certain claims and causes of action pursuant to the Plan of Reorganization, including certain claims related to the securities class action. The Bankruptcy Court overruled the Lead Plaintiffs’ objection and confirmed the Plan of Reorganization on February 25, 2021. On the Effective Date, certain claims related to the securities class action will be released pursuant to and as set forth in the Plan of Reorganization. Given the early state of the matter, we are unable to make a determination at this time as to the likelihood of an unfavorable outcome or to estimate the amount or range of any possible loss. Derivative Actions As previously reported, on August 19, 2019, William Cunningham, a shareholder of the Company, filed a derivative action purportedly on behalf of the Company, in federal court in Delaware against certain of the Company’s current and former officers and directors. The complaint alleged that the management and the board breached their fiduciary duties by failing to exercise proper oversight of the Company, including by failing to disclose issues regarding the acquisition of ANN, the true condition of the ANN brands purchased in the acquisition, and the timing of certain impairment charges to the value of ANN’s goodwill. The plaintiff sought damages on behalf of the Company for the alleged breaches of fiduciary duty, reforms to the corporate governance and internal procedure to ensure compliance with governance obligations and applicable law, as well as an award to plaintiff of attorneys’ fees and costs incurred in pursuing this action. As previously disclosed, on September 19. 2019, Plaintiff voluntarily dismissed the action. Subsequently, on June 19, 2020 Barkha Shah, a shareholder of the Company, filed a derivative action, purportedly on behalf of the Company, in federal court in Delaware against certain of the Company’s current and former officers and directors. The complaint alleges (1) breach of fiduciary duty by the management and the Board for failing to exercise proper oversight of the Company, including by failing to disclose issues regarding the acquisition of ANN, the true condition of the ANN brands purchased in the acquisition, the timing of certain impairment charges to the value of ANN’s goodwill, and by approving certain compensation terms in Mr. Jaffe’s May 1, 2019 Transition and Separation Agreement; (2) unjust enrichment against certain present and former directors for compensation received while supposedly concealing material negative information; and (3) contribution and indemnification in the event the Company is found liable for federal securities law violations. On July 27, 2020 the Company filed a Notice of Suggestion of bankruptcy, and the case was subsequently stayed. Defendants believe they have strong defenses to these claims and will respond accordingly. Because the action is purportedly on behalf of the Company, any recovery in the action would belong to the Company. The Plan of Reorganization contemplates the release of these alleged derivative actions by the Company, which release will be effective on the Effective Date. Other Litigation The Company is involved in routine litigation arising in the normal course of business. While no assurances can be given as to the ultimate outcome of these matters, in the opinion of management, such litigation is not expected to have a material adverse effect on the Company’s condensed consolidated financial statements.

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