The number of securities-related lawsuits filed in the U.S. has been rising rapidly in recent years, particularly after M&A transactions and other significant corporate developments are announced.
S&P Global Market Intelligence is now keeping track of such cases filed against companies in our covered industries. The following information is compiled on a best-efforts basis twice monthly.
Minneapolis-based U.S. Bank NA has filed a lawsuit against Bank of America Corp. in connection with a 2007 contract for the sale of residential mortgage-backed securities, in which the former is a trustee. According to the suit, BofA unit First Franklin Financial Corp. certified that the loans were of a certain quality and promised to either cure the breach or repurchase the loan if it turned out to be defective; U.S. Bank later discovered thousands of defective mortgage loans and alleged it was not notified of the issues.
JPMorgan Chase & Co., Citigroup Inc., Barclays PLC, Royal Bank of Scotland Group PLC and UBS Group AG are facing a class-action lawsuit alleging that they conspired to manipulate foreign exchange rates between Jan. 1, 2008, and Oct. 15, 2013. The suit, filed by Australian law firm Maurice Blackburn Lawyers, contends that traders used chat rooms to communicate directly with each other to coordinate the rigging of foreign exchange benchmark rates, control the pricing of spreads and trigger client stop-loss orders and limit orders, to bolster their own companies' profits.
A class-action lawsuit was filed against Wichita, Kan.-based Equity Bancshares Inc. for touting its operations when, in reality, it lacked the needed internal controls to assess credit risks, which made it likely that it would record major losses on substandard loans. On Jan. 24, the company disclosed that one credit relationship was downgraded to Watch, resulting in its shares dropping more than 6% to $32.15. On April 22, the company recorded a $14.5 million provision for loan losses against this credit relationship and shares plummeted more than 16% to close at $24.71.
Class-action litigation was filed by a purported shareholder of Fredericksburg, Va.-based Virginia Partners Bank against the company and certain board members in connection with a planned merger-of-equals deal with Salisbury, Md.-based Delmar Bancorp. The lawsuit claims that a deal-related registration statement omitted or misrepresented material information concerning the analyses performed by Virginia Partners Bank's financial adviser, Sandler O'Neill & Partners LP and that there was not proper disclosure of potential conflicts of interest with Sandler.
Intuit Inc. is facing a number of lawsuits and regulatory inquiries related to the provision and marketing of its free online tax preparation programs. The New York Department of Financial Services has been investigating Intuit, H&R Block Inc. and two other tax preparation companies for allegedly hiding their free offerings, which would violate an agreement between the tax software industry and the Internal Revenue Service.
Former Sears Holdings Corp. Chairman and CEO Eddie Lampert, through Transform Holdco LLC, an affiliate of his hedge fund ESL Investments Inc., sued the Sears estate for failing to deliver "hundreds of millions of dollars of assets" in connection to the asset purchase agreement that pulled the department store chain out of bankruptcy. Lampert had acquired Sears and its remaining assets for about $5.2 billion to save the retailer from bankruptcy.
Two months after the deal closed, however, the old Sears sued Lampert, other insider shareholders and directors, claiming they defrauded creditors by transferring company assets until it had insufficient capital. Lampert's party is now demanding a trial and no less than $130 million in compensatory damages, saying Sears' actions "imposed undue liabilities on Transform and deprived it of bargained-for assets, funds, and other value."
Integrated oil and gas
Activist investor Carl Icahn filed a lawsuit against Occidental Petroleum Corp., claiming its "fundamentally misguided and hugely overpriced acquisition" of Anadarko Petroleum Corp. destroyed shareholder value. The lawsuit requests a court to force Occidental to open its files on the Anadarko deal to Icahn and other investors so they can determine whether additional action to block the purchase is required, adding that Occidental's leadership would never have pursued Anadarko if it was interested in maximizing shareholder value.
Mortgage brokers and services
Troy, Mich.-based Flagstar Bank FSB sued Michael Hild, the head of recently closed mortgage originator Live Well Financial Inc., for unpaid loans worth more than $82 million. The amount covers the principal, interest and expenses incurred by Live Well on a commercial loan made in 2017, with about $69.2 million still owed to Flagstar, and a warehouse loan made in 2016, with about $13.3 million still owed.
McDonald's Corp. is facing 25 new sexual harassment complaints from its workers, claiming that inappropriate conduct of a sexual nature occurred at the company's restaurants across 20 cities, labor group Fight for $15 said in an emailed statement. The workers are calling on McDonald's to effectively implement and enforce a zero-tolerance policy against sexual harassment.
Starbucks Corp. is facing two lawsuits alleging that the company exposed its customers and staff in New York City to a poisonous and potentially lethal pesticide toxin, Dichlorvos, or DDVP, released by Hot Shot No-Pest Strip, a pesticide brand made by Spectrum Brands Holdings Inc. In the first suit, a former store manager claims he was abruptly fired in 2018 after he complained about the misuse of the airborne pesticide in a Starbucks location.
The other case claims that 10 Starbucks customers were exposed to the pesticide in multiple New York City restaurants over a three-year period, USA Today reported. The lawsuits claim that Starbucks uses the pesticide to keep its stores free from cockroaches and other pests, but the chemical is harmful to humans.
The government of Brazil filed a lawsuit against British American Tobacco PLC and Philip Morris International Inc. to recover public health expenses related to the treatment of 26 tobacco-related diseases linked to smoking and second-hand smoke over the last five years, Reuters reported.