Judge sides with PCBC in shareholder lawsuit
A federal judge in Los Angeles dismissed a shareholder lawsuit against Pacific Capital Bancorp that alleged the parent of Santa Barbara Bank & Trust hid bad loans from shareholders before announcing a $362.6 million loss last summer.
In a Jan. 28 decision, Judge Gary Klausner said the shareholder who brought the case, William Jurkowitz, didn’t show any evidence that the bank’s leaders lied or intended to deceive investors. The ruling could clear the way for victories in several other suits that make similar claims against Pacific Capital.
“From the start, we indicated that we believed that the case was without merit, so we are pleased that the judge has granted our motion to dismiss it,” Debbie Whiteley, executive vice president of investor relations and corporate communications at Pacific Capital, told the Business Times by e-mail.
Jurkowitz had sued Pacific Capital alleging that the bank’s leaders hid how many bad loans the company had on its books during its April earnings release — to the detriment of investors who saw their shares plummet after a big loss revealed in July.
But Klausner dismissed the case because Jurkowitz didn’t “point to any objectively measureable criterion that should have helped [Pacific Capital] make a more realistic assessment of their losses in April. He does not state what signs or symptoms could have put [Pacific Capital] on notice of their misestimation,” according to the judge’s ruling.
Klausner also noted that the investors gave no rationale for why the bank’s leaders would hide bad loans from investors, only to correct themselves three months later. “There is no allegation that the executives had some other pecuniary interest in the matter such as keeping their jobs or salaries,” Klausner wrote.
Pacific Capital faces four other lawsuits, two of them in federal courts and two in Santa Barbara County Superior Court. One of the other lawsuits in federal court makes nearly identical claims as the Jurkowitz case. That matter is also before Klausner, and Pacific Capital has made a similar motion to dismiss it, said Fred Clough, executive vice president and general counsel at Pacific Capital.
“I think it’s very logical to expect he will make the same ruling in that case,” Clough said in an interview.
The two lawsuits Pacific Capital faces in Santa Barbara Superior Court are what are known as shareholder derivative complaints. They depend on the outcome of the lawsuits in federal courts, Clough said, adding that the bank has moved to put them on hold.
“We have filed motions to stay those cases on the theory that for those cases to prevail, there has to be an adverse decision in the federal court,” Clough said.
The final federal lawsuit against Pacific Capital, a shareholder complaint related to the bank’s move in September to authorize its board to carry out a reverse stock split, was dismissed in November but is being appealed.
Pacific Capital’s stock closed down more than 2 percent at $1.18 on Jan. 29.