Ninth Circuit Affirms Dismissal of Securities Class Action Against Sterling Financial Corporation
On May 22, 2017, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of a securities class action filed against Sterling Financial Corporation, a bank holding company of commercial bank Sterling Savings Bank. The complaint alleged that the defendants made false or misleading statements about the bank's exposure to the 2008-2009 credit crisis, the sufficiency of the bank's loan loss reserves for non-performing construction loans, and the quality of the bank's underwriting practices. Wilson Sonsini Goodrich & Rosati represented Sterling Financial and its former CEO and CFO in the matter.
Following an FDIC cease and desist order issued to Sterling Savings Bank, a shareholder plaintiff filed the original complaint in December 2009. On August 5, 2013, in a nearly 100-page order, the U.S. District Court for the Western District of Washington granted the defendants' motion to dismiss for failure to adequately plead both falsity and scienter, but gave the plaintiff leave to amend. The plaintiff filed an amended complaint. On August 13, 2014, the district court granted the defendants' second motion to dismiss, and dismissed the complaint with prejudice. The plaintiff appealed.
The Ninth Circuit affirmed the district court's dismissal, holding that the plaintiff failed to adequately plead both falsity and scienter.
The WSGR team representing Sterling Financial in the matter was led by partners Barry Kaplan and Greg Watts, and included Of Counsel Cheryl Foung and associate John Roberts. The decision caps a very successful month for the firm, during which WSGR securities litigators obtained three Ninth Circuit affirmances of securities class action dismissals.