22 November 2010
Following a four-week trial and three days of deliberations, a nine-member jury concluded that Florida-based BankAtlantic Bancorp and two of its executives intentionally misled investors about the bank’s troubled real estate loan portfolio during 2007’s economic downturn. The jurors found that BankAtlantic, CEO Alan B. Levan and CFO Valerie Toalson knowingly made eight false or misleading statements in financial filings with the Securities Exchange Commission regarding the extent of high risk loans in its so-called “land loan” portfolio.
The plaintiffs had demanded damages of $3.52 per share. Working their way through the complex, 52-page verdict form, the jury ultimately awarded damages of $2.41 per share to investors who purchased the company’s stock between April 26 and October 26, 2007. The total amount of damages has not been determined, though it has been reported to be upwards of $40-50 million.
This was the first securities class action stemming from the financial crisis to reach a jury verdict—indeed, it is very rare that securities class actions are tried at all. Most securities fraud class actions end either in Rule 12(b)(6) dismissals or in settlements. This was only the twelfth securities fraud class action to go to trial since the enactment of the Private Securities Litigation Reform Act in 1995.
Given the rarity of jury trials of this nature, and the inherent unpredictability of jury trials generally, it would be unwarranted to interpret this verdict as a bellwether of public sentiment. However, the verdict may embolden plaintiffs’ firms to make larger settlement demands, or more credibly threaten to take cases to trial. In any event, it certainly highlights the importance of using motion practice to eliminate claims and to reduce class size, thereby limiting potential exposure in the event of a trial.
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