Robbins Geller Prevails Over Defendants’ Motions to Dismiss in Banc of California Litigation
In an order dated September 6, 2017, the Honorable Andrew J. Guilford of the United States District Court for the Central District of California denied in part defendants’ motions to dismiss in In re Banc of California Securities Litigation.
Banc of California is a financial holding company serving the state of California and parts of the Western United States. The case alleges that defendants violated the federal securities laws by disseminating false and misleading statements to the investing public. More specifically, plaintiffs allege that then-CEO Steven A. Sugarman’s biography in the company’s proxy misleadingly omitted information about his business connections with Jason Galanis (who was charged with securities fraud crimes after orchestrating multiple schemes). Investors learned the truth when an anonymous short seller published an extensive Seeking Alpha article citing numerous sources that revealed financial ties between Sugarman, Banc Lead Independent Director Chad Brownstein, and Galanis. After the article was published, Banc share value decreased 29%, causing investors substantial financial harm.
In response to defendants’ arguments in the motions to dismiss, the court held that the complaint allegations were “enough for Plaintiff to ‘plausibly allege that the defendant’s fraud was revealed to the market and caused the resulting losses.’” In addition, the court stated that the 29% drop is a significant change in price, making it “plausible Banc investors found the information material, and therefore that Plaintiffs have met the pleading requirements for materiality.”
In re Banc of California Securities Litigation, No. 8:17-cv-00118-AG-DFM, Order Denying Motions to Dismiss (C.D. Cal. Sept. 6, 2017).