Five former outside directors of Just for Feet paid $41.5 million over the past six months to settle a lawsuit, in a case likely to fan fears among directors about personal liability for corporate misdeeds. The trustee for Just for Feet's creditors appointed by the court, Charles Goldstein from Protiviti, Inc., filed suit in 2001 charging the former JFF directors with conflicts of interest and misrepresentations. For example, the charges note that Randall Haines, a former JFF director, was president of Compass Bank in Birmingham, Ala., which was one of the company's primary lenders.
In September of last year, four of the five former directors – Michael Lazarus, a managing partner at Weston Presidio Capital Management; John Berg, managing partner at Dorset Capital Management, LLC; Warren Smith, a managing director at TH Lee Putnam Ventures; and Edward Croft, a founder of Croft & Bender, LLC – paid a combined $40 million to settle the trustee's case against them. Last month, Mr. Haines paid $1.5 million to settle the trustee's claims.
In a separate lawsuit settled in August, the estate of JFFs founder and former CEO Harold Ruttenberg agreed to pay $15 million along with his son Don Ruttenberg to settle a similar lawsuit. In 2005, the younger Ruttenberg pleaded guilty to criminal charges and was sentenced to a 20-month prison term.
Deloitte & Touche, JFF's independent auditing firm, agreed to pay $24 million to settle the trustee's allegations. So far, the creditor's trustee recovered about $80 million on behalf of the Just for Feet creditors.