CVB Securities Class Action Lawsuit Revived
The Ninth Circuit has revived a proposed securities class action accusing CVB Financial Corporation, the holding company for Citizens Business Bank, of issuing false statements about its exposure to underperforming loans. According to the recent ruling, an announcement of a government investigation into a company and the disclosure of an alleged misrepresentation can be used to demonstrate why investors lost money.
The court opinion tracks closely to a Fifth Circuit holding, in which the disclosure of a Securities and Exchange Commission (SEC) investigation related to an alleged misrepresentation, taken with a subsequent revelation of that statement’s inaccuracy, can form the basis for a theory of loss causation. In that case, Public Employees’ Retirement System of Mississippi v. Amedisys, Inc., the court ruled that announcements of government investigations were sufficient to establish loss causation when “viewed together with the totality of the other alleged partial disclosures.”
Shareholders initially sued CVB over statements made in 2009 and in its 2010 SEC filings about having “no serious doubts” about certain borrower’s abilities to repay CVB loans.
That same year, the SEC requested information on CVB’s loan underwriting process, and after disclosing the probe, shares fell by 22 percent – a total of $245 million in market capitalization. Around this time CVB wrote down $34 million in loans to the Garrett Group, a commercial real estate company. A further $48 million in loans to Garrett were listed as nonperforming.
The case has been remanded for further proceedings.
Call a Los Angeles Investment Fraud Attorney Today
If you are a shareholder with CVB or Citizens Business Bank, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles investment fraud attorney for a consultation today.