CBL & Associates Properties, Inc.
- Company Name
- CBL & Associates Properties, Inc.
- Stock Symbol
- Class Period
- November 8, 2017 to March 26, 2019
- Motion Deadline
- July 16, 2019
- Eastern District of Tennessee
The complaint charges CBL and certain of its officers with violations of the Securities Exchange Act of 1934. CBL, through its two operating subsidiaries, is a real estate investment trust or REIT. The Company owns, develops, acquires, manages and operates regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office and other properties.
In 2016, a class action was filed against the Company in Florida federal court alleging that CBL had entered into leases providing that CBL would charge its tenants for electricity at cost, but instead CBL marked up the electricity bills by large amounts and pocketed the difference (the “Overbill Litigation”). In 2019, CBL was forced to settle the Overbill Litigation by paying the class 100% of damages ($60 million) and an additional $28 million to cover its adversary’s attorneys’ fees.
The complaint alleges that during the Class Period, defendants failed to disclose that the Company was a defendant in the Overbill Litigation, which could result in tens of millions or even hundreds of millions of dollars in liability. According to the complaint, defendants completely ignored their disclosure obligations under the federal securities laws, motivated by a desire to avoid bad publicity with regard to their dishonest conduct. As a result of this information being withheld from the market, CBL securities traded at artificially inflated prices during the Class Period, with CBL’s stock price reaching a high of more than $6 per share.
Then on March 26, 2019, CBL issued a release announcing the settlement of the Overbill Litigation, but omitting the amount of the settlement. The amount of the settlement was included in a Form 8-K filed with the SEC that day, which stated that the Company was to “set aside a common fund with a monetary and non-monetary value of $90 million . . . to be disbursed to class members.” On this news, the price of CBL shares fell 25%.