Ninth Circuit Victory for Pomerantz in BOFI Litigation
POMERANTZ MONITOR | NOVEMBER DECEMBER 2020
Pomerantz won a major victory for investors when the Ninth Circuit Court of Appeals reversed, in part, the district court’s dismissal of a securities fraud class action against BofI Holding, Inc. (“BofI”), now known as Axos Financial, Inc., on loss causation grounds.
BofI, short for Bank of Internet, operated as the holding company for BofI Federal Bank (the “Bank”), now known as Axos Bank. The Bank provided consumer and business banking products in the United States. Pomerantz is lead counsel in this litigation, in which it is alleged that throughout the Class Period, BofI misled investors by misrepresenting and omitting material information in their public statements, the disclosure of which would have altered the risk profile of their capital. Two glaring examples are that BofI failed to disclose that: it engaged in lending, directly or indirectly, to criminals; and that it was being investigated by a number of agencies, including the Securities and Exchange Commission (“SEC”), Department of Justice, and the Federal Deposit Insurance Corporation.
The complaint identified an article that allegedly revealed the falsity of BofI’s statements immediately prior to a price drop in BofI’s stock price. Because the article admittedly relied on information obtained through a Freedom of Information Act (“FOIA”) request to the SEC, the district court held that the article could not be considered a corrective disclosure of any misrepresentation as it did not reveal any new information to the market.
On Appeal, the Ninth Circuit reversed, in part, finding that plaintiffs adequately satisfied the loss causation pleading burden. The Court held that plaintiffs may rely on a corrective disclosure derived from a FOIA response by plausibly alleging that the FOIA information had not been previously disclosed. Jeremy A. Lieberman, Managing Partner of Pomerantz, stated, “The decision is precedential in that it clarifies that defendants cannot evade loss causation allegations on the basis that information might have been previously available to the public. The alleged undisclosed information needs to be actually disseminated to the public.”
The Ninth Circuit remanded the case to the district court, where Pomerantz will continue to vigorously pursue the claims on behalf of defrauded investors. Pomerantz’s BofI litigation is led by Jeremy A. Lieberman (argued), Emma Gilmore, Brenda Szydlo and Jennifer Banner Sobers.