In the first securities class action jury verdict to arise out the credit crisis, on Thursday November 18, 2010, the jury in the BankAtlantic securities lawsuit in federal court in Miami returned a verdict in the plaintiffs’ favor, finding seven of the statements at issue to have been false, and awarding damages of $2.41 per share. According to sources, this damage measure translates to total damages of as much as $42 million.
The case went to the jury last week after more than four weeks of trial, testimony from 13 fact witnesses and one expert witness. The verdict form the jury was required to complete ran to some 53 pages. At the outset of the trial, the lead defense counsel had characterized the claim as a "completely made-up, frivolous claim."
In their completed verdict form, the jury found the company and two of the five individual defendants to be liable for seven of the 19 statements at issue. The two defendants held liable are the company’s CEO, James Lavan, and its CFO, Valerie Toalson. All of the statements for which the defendants were found liable had been made in 2007. The completed jury verdict form can be found here.
As reflected here, the plaintiffs’ complaint had alleged that the defendants had made misleading statements about the bank’s loan portfolio from October 2006 through October 2007 and had "materially understated reserves for real estate loan losses on its financial statements, and thus materially overstated net income." The plaintiffs alleged that the defendants (the bank holding company and five of its individual directors and officers) had made misleading statements about the quality of the bank’s loan portfolio, the bank’s exposure to loan losses and the bank’s loan loss reserves.
As noted here, the plaintiff’s initial complaint had failed to survive the defendants’ motion to dismiss, but the amended complaint survived the defendants’ renewed dismissal motion.
According to information compiled by Adam Savett, the Director of Securities Class Actions at the Claims Compensation Bureau, since the enactment of the PSLRA, there had previously been only nine securities class action lawsuits based on post-PSLRA conduct that have actually been tried to a jury verdict. (Another seven cases alleging post-PSLRA conduct went to trial but were compromised or otherwise resolved prior to verdict. An additional eleven securities cases have gone to trial post-PSLRA but involved pre-PSLRA conduct.)
In other words, the verdict in the BankAtlantic case represents only the tenth securities class action lawsuit verdict since the enactment of the PLSRA based on post-PSLRA conduct.
The current tally (taking into account post-verdict proceedings and reflecting only the current status of post-verdict proceedings) is as follows: Plaintiffs 6, Defendants 4. (The scoreboard is subject to revision pending the outcome of additional proceedings in several of the cases.)
With the plaintiffs’ verdict in the BankAtlantic case, the securities class action jury verdict scoreboard (taking into account post-verdict proceedings and reflecting only the current status of post-verdict proceedings) is as follows: Plaintiffs 6, Defendants 4. (The scoreboard is subject to revision pending the outcome of additional proceedings in several of the cases.)
The BankAtlantic case will now undoubtedly head into post trial motions, and perhaps even later appeals. As has been shown in the Apollo Group securities class action case (about which refer here), in which there the plaintiffs’ jury’s verdict has been set aside in post trial motions only to have the verdict reinstated on appeal, the verdict itself can effectively wind up as only one stop in a very long procedural grind. Stay tuned for further proceedings.
In a statement to The D&O Diary, Matthew Mustokoff, a partner in the Barroway Topaz law firm said "The jury’s verdict vindicates our position from the outset that this was a case with merits and it delivers a message that a financial institution can’t mislead their shareholders about the riskiness of its loans." The Barroway Topaz firm was co-lead counsel for the plaintiff on the case. The other lead attorneys were Andrew Zivitz of the Barroway Topaz firm and Mark Arisohn of the Labaton Sucharow firm.
A November 18, 2010 South Florida Business Journal article describing the verdict can be found here.