21st Century Holding Company (NASDAW: TCHC) Investor Securities Class Action Lawsuit 07/27/2007

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Company Name(s): 
21st Century Holding Company
Case Name: 
21st Century Holding Company Shareholder Class Action Lawsuit 07/27/2007
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Approved
Affected Securities
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
Class Period Begin: 
Class Period End: 
Court of Filing: 
U.S. District Court for the Southern District of Florida
Settlement Amount: 
Deadline to Participate in Settlement: 

January 29, 2010 - The court approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys’ fees and expenses, and dismissed the action with prejudice.

September 9, 2009 - Parties filed a stipulation of settlement.

November 7, 2008 - The court granted in part and denied in part the defendants' motion to dismiss.

February 25, 2008 - The defendants filed a motion to dismiss.

January 22, 2008 - The lead plaintiff filed an amended complaint.

November 20, 2007 - The lead plaintiff and lead counsel were appointed.

October 25, 2007 - All cases were consolidated.

September 25, 2007 - Lead plaintiff motions were filed.

July 27, 2007 - An investor in shares of 21st Century Holding Company (NASDAW: TCHC) filed a lawsuit in the U.S. District Court for the Southern District of Florida against 21st Century Holding Company over alleged violations of Federal Securities Laws in connection with certain allegedly false and misleading statements made between October 3, 2006 and May 3, 2007.

The complaint charges 21st Century Holding Company and certain of its executive officers with violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and S.E.C. Rule 10b 5 promulgated thereunder. Among other things, plaintiff claims that defendants’ material omissions and dissemination of materially false and misleading statements concerning 21st Century Holding Company’s business and prospects caused 21st Century Holding Company’s stock price to become artificially inflated, inflicting damages on investors. 21st Century Holding Company is an insurance holding company that engages in insurance underwriting, distribution and claims processing, primarily in the United States. 21st Century Holding Company is authorized through its wholly owned subsidiaries to underwrite homeowners’ property and casualty insurance, commercial general liability insurance, and personal automobile insurance in various states with various lines of authority.

The Complaint alleges that during the Class Period defendants reported 21st Century Holding Company’s financial results in a positive manner and issued positive financial guidance touting 21st Century Holding Company’s purportedly strong financial performance and prospects. Defendants, however, failed to fully disclose, and their assertions misleadingly failed to take into account, (i) the negative effect on 21st Century Holding Company’s financial performance and prospects resulting from their decision to increase loss reserves through the hiring of new actuaries; (ii) the increased competition from the state-backed Citizens Property Insurance Corp.; and (iii) the impact of increased reinsurance rates, and as a result of the foregoing, during the Class Period Defendants made false and misleading statements of present fact and financial guidance which misrepresented 21st Century Holding Company’s business and financial performance.

On May 3, 2007, 21st Century Holding Company shocked the market when it announced disappointing financial results for the first quarter of 2007 and substantially lowered its previously issued guidance for 2007 from $4.50 per share to $2.00 to $2.50 per share. The May 3, 2007 press release also reported that prepaid reinsurance premiums had grown from $8,671,572 in the first quarter of 2006 to $16,972,078 in the first quarter of 2007. Loss and loss adjustment expenses had increased from $7,568,843 to $14,102,655 during that same period. In a conference call that day, 21st Century Holding Company’s CFO attributed the disappointing quarterly results, which were below market expectations, to the increased cost of reinsurance.

This negative news caused 21st Century Holding Company’s share price to plunge the next day by $8.94 — a drop of more than 44% from the previous day’s closing price of $19.11, to close on May 4, 2007, at $11.05 per share on extremely heavy volume of over two million shares traded.