Capitol Bancorp, Limited Summary: The judge granted the motion to dismiss, kicking out certain claims with prejudice about allowing 30 days for plaintiffs to amend other sections of the complaint. The lead plaintiff entered a notice with the intent to not re-file and the judge entered a Judgment against plaintiffs and in favor of defendants dismissing the case with prejudice. Plaintiffs have filed a notice of appeal.
On July 31, 2006, the plaintiffs filed an Amended Complaint. Defendants responded with a motion to dismiss on August 30, 2006.
According to a press release dated July 31, 2006, on June 16, 2006, the U.S. District Court for the Northern District of California granted a company's motion to dismiss a securities fraud class action, ruling that the complaint failed to satisfy the particularity requirements of the Private Securities Litigation Reform Act (PSLRA) and Fed. R .Civ. P. 9(b). Shareholders of Capitol Bancorp sued the company for violations of the Securities Exchange Act of 1934 § § 10(b) and 20(a) and Rule 10b-5, and of the Securities Act of 1933 § 11. Capitol purchased shares of Napa Community Bank from shareholders of Napa in a tender offer. Minority shareholders who sold their Napa shares to Capitol alleged that Capitol engaged in fraud by offering them lower values for the stock. The shareholders claimed that Capitol intentionally deflated the book value of Napa stock prior to the exchange. Capitol moved to dismiss. To plead § 10(b) and Rule 10b-5 violations, a shareholder must allege that the defendant made a fraudulent misrepresentation or omission in connection with the sale or purchase of securities with scienter, upon which the plaintiff relied, causing the plaintiff's economic loss. In order to make a claim against an individual defendant as a control person for securities fraud under § 20(a), plaintiffs must sufficiently allege an underlying wrongdoing pursuant to §10(b). …The district court ruled that the shareholders failed to satisfy the particularity requirements of Rule 9(b) and the PSLRA. The district court dismissed all federal securities claims against Capitol but granted the shareholders the opportunity to amend their complaint.
The original class action lawsuit seeks remedies under the Securities Act of 1933 (the Securities Act"), the Securities Exchange Act of 1934 (the "Exchange Act") and California statutory and common law causes of action. Specifically, the complaint charges defendants Capitol and the Chairman and CEO of Capitol violated sections 11 and 15 of the Securities Act, 10(b), 14(e) and 20(a) of the Exchange Act, and Rule 10b-5, and California law by issuing a series of material misrepresentations and/or omissions to class members in a registration statement/tender offer filed with the Securities Exchange Commission as well as in other documents.
The complaint alleges that on or about June 30, 2005, defendant Capitol completed an offer to exchange shares (the "exchange offer") of the common stock of NCB, its controlled subsidiary, for shares of Capitol common stock. In a Form S-4 registration statement that became or was declared effective, Capitol offered to purchase all shares of all outstanding NCB common stock not already owned by Capitol for Capitol's common stock, at a purchase price of 150% of the claimed book value of NCB shares as of May 31, 2005. Pursuant to that exchange offer, Capitol acquired 404,384 shares of NCB common stock from members of the plaintiff class in exchange for shares of Capitol common stock. The purported book value of NCB stock on that date was approximately $10.545 per share; accordingly, the exchange offer was made for a purchase price of $15.817 per share. That price was substantially below the fair market value of NCB common stock as a direct result of the misrepresentations and omissions of material fact made by the defendants.
SIC Code: 6021
Industry: Regional Banks
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