According to the Puget Sound Business Journal, the suit was dropped because former Sterling employee Cory Deter said he never agreed to be involved in the case, and did not give permission for his name to be used by attorneys.
The suit, intended to be a class action, was filed last week on behalf of Deter in federal court in Eastern Washington. As have many of these so-called “stock drop” suits, the lawsuit alleged that Sterling failed to protect employees’ investments in company stock through their 401(k) plans. However, on Thursday, the suit was dismissed by Seattle-based Hagens Berman Sobol Shapiro, the law firm that filed the complaint.
In an interview with the Puget Sound Business Journal, Deter said he gave Pennsylvania-based law firm Brodsky & Smith LLC, which was also working on the litigation, initial permission to represent him, but never filled out necessary paperwork to officially retain the firm. He also said he did not give permission for the firm to use his name as the lead plaintiff and hadn’t reviewed the complaint before it was filed.
“I’m just kind of disgusted,” Deter said, according to the report. “I don’t have anything against Sterling or their management.”
Deter worked in Sterling’s commercial banking department between 2006 and October 2009, when he left the bank voluntarily for another job, according to the report. He lost about $3,000 — less than a month’s worth of pay — in his 401(k) as a result of Sterling’s stock drop, and that led him to respond to a query by Brodsky & Smith on Google Finance regarding a potential class action, according to the Business Journal.
Andrew Volk, an attorney at Hagens Berman who is working on the Sterling litigation, told the Business Journal that his firm was told by Brodsky & Smith that Deter had reviewed the complaint. As soon as Volk became aware of the misunderstanding, he said, the firm pulled the lawsuit, according to the report.
Email communication provided to the Business Journal by Deter between him and Jason Brodsky, an attorney with Brodsky & Smith, shows that Deter did give email permission in late December for the firm to represent him, but he said “I need to find time to do the paperwork.” Deter then told the Business Journal that he left on vacation to the Caribbean for two weeks, and without filling out the paperwork – only to come back and find that the suit had been filed.
“It’s laughable that I’m the poster boy for this,” said Deter, according to the report.
Meanwhile, Hagens Berman Shapiro filed another suit last week in U.S. District Court of Eastern Washington with a different former Sterling employee (Philip Laue) as the lead plaintiff. The suit contains similar allegations as the first complaint and also seeks class-action status.
“No qualified financial advisor would encourage rank-and-file employees to invest more than a modest amount of retirement savings in company stock, but actually advise against it,” said HBSS managing partner Steve Berman in a press release. “Employees often interpret a match in company stock as an endorsement of the company and its stock. In this case, Sterling matched the stock employees invested in the 401(k) plan with worthless Company Stock, further putting the pension fund at risk.”
In announcing the new suit, Berman said the bank failed to disclose the company’s massive financial problems caused by inadequately secured loans in commercial real estate, construction and land loans, and masked by allegedly improper accounting. The lawsuit charges that the company deliberately misled employees and shareholders on the value of the stock and failed to secure adequate reserves against its credit portfolio.
Hagens Berman Sobol Shapiro (HBSS) is a law firm with offices in Seattle, Chicago, Cambridge, Los Angeles, Phoenix and San Francisco.
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