BBX Defeats Shareholder Lawsuit in Case That Could Trim Merger Litigation
The Fourth District Court of Appeal strikes a shareholder suit challenging BFC Financial's acquisition of BBX.
March 21, 2018 at 02:21 PM
3 minute read
Fort Lauderdale-based real estate holding company BBX Capital Corp. defeated a shareholder lawsuit in a Wednesday appellate decision that may cut down on Florida litigation challenging planned mergers.
The Fourth District Court of Appeal unanimously affirmed the dismissal of BBX shareholder Shiva Stein's lawsuit against the company over its 2016 acquisition by BFC Financial Corp. The court ruled Stein didn't allege specific facts showing the deal was unfair, a requirement for filing securities litigation rather than using the statutory remedy of tendering her shares for appraisal.
“Although she speaks of 'procedural shenanigans' in her initial brief, the focus of her complaint is on her perceived lack of access to information regarding the merger,” Fourth DCA Judge Alan Forst wrote, with Judges Robert Gross and Jeffrey Kuntz concurring. “However, an adequate remedy at law exists — a court-supervised independent appraisal, wherein she would be entitled to the same discovery rights as parties in other civil proceedings.”
BFC attorney Eugene Stearns said he believes the decision will be “widely cited” in a world where about 90 percent of proposed mergers lead to shareholder claims of unfairness.
“A lot of corporate participants simply pay them to go away,” said Stearns of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami. ”It becomes a cost of the deal to pay off the plaintiffs lawyers and the class reps who file these cases.”
Stearns said he believes the decision will be a step in the right direction to discourage shareholders from filing similar cases.
“Some plaintiffs lawyers … were eroding what the Legislature intended when it created a vehicle for shareholders to complain about corporate actions they disagreed with,” he said.
Stein's breach of fiduciary duty lawsuit alleged the 2016 deal, in which BFC acquired the 19 percent of BBX it did not already own, “significantly undervalued BBX with flawed calculations.” She also claimed BBX minority shareholders were not fully informed about the details of the transaction. Stein declined to go the appraisal route.
Broward Circuit Judge Jack Tuter dismissed her lawsuit for a lack of specific allegations, and the appellate court agreed: “Here, the claims of breach of fiduciary duties are largely based on speculative and conclusory allegations that do not specifically assert fraud or material misrepresentation.”
The decision adds to a busy year for BBX's lawyers, mostly wrapping up litigation involving the 2012 acquisition of BankAtlantic by BB&T Corp. BankAtlantic's holding company became BBX. BBX and BFC are now out of the banking business and focused on real estate, timeshare and chocolate companies.
Last May, Stearns led a legal team that defeated Securities and Exchange Commission investor fraud allegations against BBX and its CEO Alan Levan. In November, BBX sued the Federal Deposit Insurance Corp. over the withholding of severance payments for executives.
In the Stein case, BBX was represented by Akerman attorneys Brian Miller and Samantha Kavanaugh of Miami. Miller did not respond to a request for comment by deadline. Stearns Weaver represented BFC.
Stein's attorneys were Emily Komlossy and Ross Appel of Komlossy Law in Hollywood and Gustavo Bruckner and Gabriel Henriquez of Pomerantz in New York. Komlossy did not respond to a request for comment by deadline.
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