NetBank, Inc. - Securities Class Action

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Copyright (c) 2001
Stanford Law School

NetBank, Inc. Summary: The original class action complaint was filed against Netbank and two if its senior officers for alleged violations of sections 10b and 20 of the Securities Exchange Act of 1934 in the United States District Court for the Northern District of Georgia. Specifically, it is alleged that the defendants repeatedly represented, beginning in May 2006, that NetBank was restructuring its operations to rid its strong core banking business from high risk non-conforming loan origination operations and other business segments which detracted from the performance of its core business. Defendants claimed its restructuring was largely complete by February 2007 and that investors could rely on the book value of the Company as reflecting its true value. However, defendants shocked investors by disclosing that as of May 21, 2007, NetBank's core banking business was so deficient in meeting regulatory capital requirements that bank regulators compelled NetBank to consummate a $2.5 billion asset sale at a significant $60-70 million loss in order to cover NetBank depositors as required by law. The Company's common stock price fell 66% -- from $1.75 per share on May 18, 2007 to $0.59 per share on May 21, 2007 on massive volume of 11,190,400 shares -- over forty-five times the previous day's volume.

Further, on August 6, 2007, NetBank announced that its wholly owned retail mortgage business, Market Street Mortgage Corporation ("Market Street"), was completely valueless. NetBank also announced that the NASDAQ securities exchange was delisting the Company's common stock from trading. On August 7, 2007, NetBank's stock price dropped to $0.14 per share from its previous day's close of $0.20 per share, a 30% drop in one day on massive volume of 5,190,600 shares. Finally, on September 17, 2007, the purported buyer of NetBank's assets announced that it had terminated its purchase of the NetBank assets, announced on May 21, 2007, because it had become "clear" that NetBank would not be able to meet its regulatory requirements. NetBank's stock price then closed at $0.08 per share on September 17, 2007.

NetBank, Inc. operates as a holding company that offers retail banking, mortgage banking, business finance, and ATM and merchant processing services in the United States.

On April 21, 2008, the Court entered the Order signed by U.S. District Court Judge Beverly B. Martin consolidating the two class actions and appointing Robert A. Brown as lead plaintiff and approving Berger & Montague as lead counsel. On July 3, 2008, the lead plaintiff filed a Consolidated and Amended Class Action Complaint. On September 12, 2008, a stipulation of dismissal was filed as to one of the individual defendants. On September 15, 2008, the Court approved the stipulation. The defendants also filed a motion to dismiss which is currently pending before the Court.

On January 29, 2009, District Court Judge Beverly B. Martin denied the motion to dismiss the Consolidated and Amended Class Action Complaint. The parties are currently engaged in discovery. On April 17, 2009, the lead plaintiff filed a motion to certify the class. On August 7, 2009, Judge Martin granted the motion to certify the class. On September 4, 2009, Judge Martin granted the pending motion to stay the action and all pending motions. The Plaintiffs may move to reopen this action any time within 30 days of the conclusion of the mediation. On September 25 and October 2, 2009, the plaintiffs filed motions to reopen the action. The motions were granted on March 29, 2010.

On March 25, 2011, the defendants filed a motion for partial summary judgment.

According to the Order signed by Judge Timothy C. Batten, Sr., on April 11, 2011, all proceedings in this matter, excluding those related to the preliminary and final approval of the settlement and the administration thereof, are stayed. On or before April 26, 2011, the parties shall: (a) submit the proposed terms of settlement and related matters for preliminary approval by the Court; or (b) propose a reasonable date certain by which such the proposed terms of settlement and any related matters shall be submitted for consideration by the Court.

On July 27, 2011, Judge Timothy C. Batten, Sr., signed the Order granting the Unopposed Motion Preliminarily Approving the Class Settlement. The Settlement Fairness Hearing was set for November 9, 2011. According to the Order and Final Judgment entered on November 9, 2011, Judge Timothy C. Batten, Sr., approved the $12.5 million settlement. The judge also approved the plan of allocation and motion for attorneys' fees and expenses. The action is now dismissed with prejudice.

INDUSTRY CLASSIFICATION:
SIC Code: 6036
Sector: Financial
Industry: S&Ls/Savings Banks

COMPANY/ISSUER NAME:	NetBank, Inc.
COMPANY/ISSUER TICKER:	NTBK.PK
COMPANY WEBSITE:	http://www.netbank.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Johnny R. Adcock, et al. v. NetBank, Inc., et al.

COURT: N.D. Georgia	DOCKET NUMBER: 07-CV-02298
JUDGE NAME: Hon. Beverly B. Martin
DATE FILED: 09/19/2007	SOURCE: Notice of Filing
CLASS PERIOD START: 05/01/2006	CLASS PERIOD END: 09/17/2007
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Chitwood Harley Harnes LLP (Atlanta) 2300 Promenade II; 1230 Peachtree Street, N.E., Atlanta, GA, 30309 (voice) 888.873.3999, (fax) 404.876.4476, info@chitwoodlaw.com Schoengold Sporn Laitman & Lometti PC 19 Fulton Street, Suite 406, New York, NY, 10038 (voice) 212.964.0046, (fax) 212.267-8137, shareholderrelations@spornlaw.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 2

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint
Type: Complaint		Date on the document: 09/17/2007
Order
Type: Order of Consolidation		Date on the document: 04/21/2008

REFERENCE COMPLAINT

In Re NetBank, Inc. Securities Litigation

COURT: N.D. Georgia	DOCKET NUMBER: 07-CV-02298
JUDGE NAME:
DATE FILED: 07/03/2008	SOURCE: Docket
CLASS PERIOD START: 03/16/2005	CLASS PERIOD END: 05/21/2007
TYPE OF COMPLAINT: Consolidated Complaint
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Robbins Geller Rudman & Dowd LLP (San Francisco) 100 Pine Street, Suite 2600, San Francisco, CA, 94111 (voice) 415.288.4545, (fax) 415.288.4534, _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE REFERENCE COMPLAINT
Consolidated and Amended Class Action Complaint
Type: Complaint		Date on the document: 07/03/2008
Order
Type: Order		Date on the document: 01/29/2009
Notice Of Pendency Of Class Action
Type: Notice		Date on the document: 10/21/2010
Order Preliminarily Approving The Class Settlement And For Providing Notice To The Class
Type: Order		Date on the document: 07/27/2011
Corrected Order Awarding Plaintiff's Counsel Attorneys' Fees and Reimbursement of Costs and Expenses
Type: Order		Date on the document: 11/09/2011
Order and Final Judgment
Type: Summary Judgment		Date on the document: 11/09/2011
U.S. District Court Civil Docket
Type: Docket		Date on the document: 12/24/2011

OTHER DOCUMENTS
Class Action Complaint - Jury Trial Demanded
Case Name and/or Number: Arash Vhdat, et al. v. NetBank, Inc., et al.
Type: Complaint		Date on the document: 10/22/2007

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