Shareholders in a class action accusing Regions Financial Corp. of misrepresenting the company’s financial status following its 2006 buyout of AmSouth Bancorp are asking for approval of the $90 million settlement that had been previously announced in May. In a notice to the court, lawyers for the shareholders said they will ask for the settlement to be approved during a Sept. 9 hearing. Additionally, the shareholders will ask for the court to approve the plans to distribute the settlement, award attorneys’ fees and approve awards to the lead Plaintiffs. As part of the settlement, Regions denied claims that it misrepresented millions of dollars’ worth of loans to keep the value of goodwill reflected in quarterly reports artificially high. Regions represented that its goodwill had been repeatedly tested during 2007 and 2008 and was properly calculated, even though the value of its real estate investments was steadily dropping, the shareholders claim.
On Jan. 20, 2009, the company made a substantial corrective disclosure, reporting $5.6 billion in losses. On that day, Region’s stock tumbled to $4.60 per share, down from $23.33 per share the previous February. In June 2012, U.S. District Judge Inge Prytz Johnson certified the class for the period from Feb. 27, 2008, to Jan. 20, 2009. Then in November, Judge Johnson granted a second motion for class certification after reviewing the evidence Regions had previously placed before the court in light of the Supreme Court’s June Halliburton II decision, in which it ruled that securities defendants may rebut the fraud-on-the-market presumption of reliance before the class certification stage by showing a lack of price impact.
In its highly anticipated Halliburton II decision, the U.S. Supreme Court in June declined to overturn its landmark Basic v. Levinson, which in 1988 established the fraud-on-the-market presumption of reliance that rests on the principle that public, material information about a publicly traded company affects the price of the company’s stock and that investors thereby rely on that information when they purchase securities. But the justices found that Defendants should be allowed to rebut that presumption of reliance before class certification by showing evidence that an alleged misrepresentation did not affect the stock’s price.
The Eleventh Circuit Court of Appeals in August asked Judge Johnson to review the Regions class certification in light of the Supreme Court’s ruling, giving Regions a chance to prove that alleged misrepresentations related to the acquisition did not actually affect the price of its stock.
The Plaintiffs are represented by Andrew J. Brown and Matthew I. Alpert of Robbins Geller Rudman & Dowd LLP; Patrick C. Cooper of Ward & Wilson LLC; Roger H. Bedford Jr. of Roger Bedford & Associates PC; and Larry B. Moore of Moore Berry & Linville PC. The case is in the U.S. District Court for the Northern District of Alabama. These lawyers did very good work in this case.
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