X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Eugene Stearns is spitting mad. The Miami attorney who marshaled the landmark $1.1 billion settlement on behalf of Exxon gas station owners usually does most of his talking about cases in the courtroom. But he is making an exception in the shareholder class action against his client, Fort Lauderdale, Fla.-based BankAtlantic Bancorp. “I’m offended by the case. I’m offended by the way it has been prosecuted,” said Stearns, a founding partner at Stearns Weaver Miller Weissler Alhadeff & Sitterson. “In my view, this is a completely made-up, frivolous claim.” Stearns has asked the court to levy sanctions against plaintiff attorneys for knowingly including false statements in the complaint filed in November 2007 to get their feet in the door. When it comes to securities fraud litigation, the BankAtlantic Bancorp trial slated for jury selection Friday could be quite dramatic. The one hearing in the litigation’s three-year lifespan was contentious, not only between the opposing parties but between Stearns and U.S. District Judge Ursula Ungaro as well. If the trial moves ahead as scheduled, it will be only the 12th since Congress clamped down on shareholder lawsuits in 1995 with the Private Securities Litigation Reform Act in 1995, attorneys in the case say. Stearns insists the parent of BankAtlantic has been targeted because it was the first to raise a red flag about bad mortgages as the national foreclosure crisis loomed. “The company did everything it was supposed to do. It made disclosures far beyond what anybody else was making,” he said. Shareholder attorney Mark S. Arisohn of Labaton Sucharow in New York said it is time banks take responsibility for deceiving the public on their nonperforming loans. “Up until now, a very few cases like this have gone to trial. It will be an event that will be closely followed by the class action bar, by the financial bar and the banking bar. It is an important case, he said. Such talk is not legal hyperbole, said Michael Perino, a professor at St. John’s University School of Law in New York, whose expertise is securities litigation. “It’s is extremely unusual for securities class action to go to trial. The vast majority of the cases settle,” he said. “We are in relatively uncharted territory.” The first amended complaint filed Jan. 12, 2009, alleged false statements were made by BankAtlantic Bancorp CEO Alan Levan to mislead shareholders, who are led in the lawsuit by State-Boston Retirement System with $3 billion in assets. Ungaro ruled Aug. 18 that four of 26 disputed statements during a March 2007 investor conference call were untrue. The jury will be asked to decide whether Levan’s statements about nonperforming loans on the watch list at the bank with $4.6 billion in assets were intentionally false and deceiving. Perino said jurors must discern whether Levan knew the information was wrong when he made the statements. “It is exceedingly difficult to prove,” he said. “That’s why there is a reluctance on all sides to go to trial. You are trying to show a person’s state of mind at the time they made the statement.” The Private Securities Litigation Reform Act was part of the Republican Party’s Contract with America, Perino said. “There was a perception there were too many frivolous lawsuits against publicly traded companies to wrangle settlements out of them,” he said. It worked well. Few cases have gone to trial. There have been settlements in high-profile cases such as Enron and WorldCom, he said. The BankAtlantic litigation, though, comes at a dicey times for banks. Home foreclosures continue to gobble up the American dream, and there has been a visceral reaction among voters to the government bailout of financial institutions but not troubled homeowners. Just choosing a jury could be a challenge. Many people have strong feelings about banks in the midst of a lingering economic downturn. Ungaro said almost all prospective jurors could have some association with the mortgage crisis, either losing a house to foreclosure or knowing someone who has lost a home. BankAtlantic, meanwhile, can ill-afford a loss after losing $72.2 million in the first half of the year. Arisohn said his case is solid and will expose the bank as purposefully deceptive. “We certainly are not suing because they told the truth,” he said. He would not address Stearns’ motion for sanctions, saying a federal magistrate will deal with the issue after trial. But Stearns is livid. He said Congress passed the Private Securities Litigation Reform Act to avoid this type of litigation. He said the first complaint would not have met the congressional litmus test if not for admittedly false statements by former bank employees. “It was done just so they could get their foot in the door,” Stearns said. “Lawyers filed these cases. They don’t have real clients. There are no real parties or interest out there.” He said the litigation has exposed his client to millions of dollars in discovery costs because what used to be water-cooler gossip is now immortalized in e-mail. But Stearns defends Levan’s statements that Ungaro found not to be true. He said the CEO was talking about a particular class of builder loans. The plaintiffs said Levan wasn’t honest about other nonperforming loans, but Stearns said the CEO stated only that there were no other “sectors” the bank were concerned about.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at customercare@alm.com

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.