Monday, October 10, 2005
8th Circs affirm 12b6 dismissal and summary judgment for Acceptance Insurance Company and key executives in shareholder suit alleging that Ins. Company failed to disclose enough information on effect California court ruling would have on size of construction insurance claims. Insufficient pleadings to show violations of Section s 11 and 15 of the Federal Securities Act.WORLD-HERALD 08/29/05 In re Acceptance Insurance Litigation: Jerome S. Richman v. Acceptance Ins. Co. Case No. 04-2078 District of Nebraska, October 7, 2005 Dismissal of Section 11 and 15 of the Securities Act claims in shareholder liability suit regarding the adequacy of reserves by insurer are affirmed, as the shareholders failed to assert facts that the reserves were in adequate in light of the (California Supreme Court's) Montrose decision. Denial of motion to amend complaint was not an abuse of discretion, as amendment would be futile. Grant of summary judgment on Exchange Act claim was also proper, as scienter requirements were not met. Evidence supporting scienter was inadmissible under Daubert standards.. The 8th Circuit Court of Appeals agreed last month with the U.S. District Court in Omaha that it should have dismissed a five year old shareholder lawsuit against Acceptance Insurance Cos. Plaintiffs bought shares of Acceptance stock between March 10, 1998, and Nov. 16, 1999. The shareholders had alleged that Acceptance and officers Kenneth Coon, Georgia Mace and John Nelson had issued "false, misleading and incomplete information" in public documents and press releases, saying the company was in good financial condition Because of those statements, the lawsuit said, some people bought shares of company stock. The lawsuit also included Acceptance directors and financial advisers. After the company announced on Nov. 15, 1999, that it would take a charge of $50 million to shore up its reserves because of added insurance claims, the value of its stock fell by $300 million. Acceptance filed for protection under the U.S. Bankruptcy Code earlier this year. A key reason for Acceptance's financial trouble, the appeals court said, was a court ruling in California that broadened the potential claims it would have to pay under insurance policies it had written to cover construction companies. After that court ruling, Acceptance's reserves were not adequate to meet its future claims. Appeals Judges Michael J. Melloy, Gerald W. Heaney and George G. Fagg ruled that the shareholder groups did not show that the company or its officers made false or misleading statements or omitted information in their financial reports. Acceptance issued general statements about the possible adverse effect of legal rulings, including possible losses, the appeals court said. Attorneys for the shareholder group did not return calls seeking comment on the ruling. Those filing the lawsuit were the Lawrence I. Batt P.C. Profit Sharing Plan and Trust; Jerome S. Richman, co-trustee of the Joe Sonken Trust; Diana L. Kinder; and the Barbara Winer Revocable Trust.
Posted by stan_sipple at 8:07 AM