Levitt Corporation Case 01/25/2008
JULY 2011 - According to the Notice:
Statement of Class Recovery Under the Settlement
Pursuant to the settlement described herein, a One Million Nine Hundred Fifty Thousand Dollar ($1,950,000) cash Settlement Amount has been established. If all Class Members elect to participate in the settlement, Lead Plaintiff estimates that the average recovery per damaged share of Levitt common stock under the settlement is $0.20 before deduction of Court-awarded attorneys’ fees and expenses and costs of mailing and administration. Lead Plaintiff intends to seek attorneys’ fees of up to thirty-three and one-third percent (33-1/3%) of the $1,950,000 Settlement Amount, or up to $649,999.99, plus expenses incurred in connection with prosecution of this Litigation in the approximate amount of $100,000. Such requested attorneys’ fees and expenses would amount to an average of approximately $0.077 per damaged share of Levitt common stock. In addition, the class recovery will be reduced by costs of mailing and administration (see Question 10 below). Please note that these amounts are only estimates. Depending on the number of claims submitted, when during the Class Period a Class Member purchased or otherwise acquired his or her Levitt common stock, and whether the Levitt common stock was held at the end of the Class Period or sold during the Class Period, and if sold, when shares were sold, an individual Class Member may receive more or less than this average amount. A Class Member’s actual recovery will be a proportion of the Net Settlement Fund (defined below), determined by that Claimant’s recognized loss (i.e., a claim proved by timely submission of a valid Proof of Claim and Release form) as compared to the total recognized losses of all Class Members. This proportional allocation is called “proration.” See the Plan of Allocation beginning on Page 6 for more information.
Under the relevant securities laws, a Claimant’s recoverable damages are limited to the losses attributable to the alleged securities law violations. Losses that resulted from factors other than an alleged securities law violation are not recoverable from the Settlement Fund. For purposes of the settlement herein, a Class Member’s distribution from the Settlement Fund will be governed by the proposed Plan of Allocation described below at Page 6, or such other Plan of Allocation as may be approved by the Court.
Statement of Claims, Issues, Defenses, and Potential Outcome of Case
Lead Plaintiff alleges that Defendants violated federal securities laws (specifically, Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission) by making false and misleading public statements and omissions about the financial condition of Levitt and its subsidiary Levitt and Sons (“LAS”) during the Class Period. Lead Plaintiff alleges that Defendants were aware – but concealed from the investing public – that: LAS was in much worse financial condition than publicly represented; as a result of the foregoing, and by failing to record an impairment in the value of its homebuilding inventory at LAS in a timely manner, Levitt was materially overstating its publicly-reported financial results and balance sheet; the Company’s loans and advances to LAS would not be recovered as the subsidiary lacked the financial resources to pay in the foreseeable future; and that LAS was insolvent.
In August 2007, Company disclosures sparked concerns that a planned acquisition of the Company by BFC Financial Corp (“BFC”) would be abandoned. On August 15, 2007, the Company announced that the merger agreement with BFC had been terminated. Subsequently: on October 11, 2007, Levitt announced that it would incur $160-$170 million in impairment charges; on November 9, 2007, it was announced that LAS filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code; and on December 11, 2007, Levitt’s Chief Financial Officer resigned. Upon these disclosures, Levitt stock, which during the class period had traded at above $13 per share, fell to less than $2 per share.
The Defendants have at all times denied and continue to deny Lead Plaintiff’s allegations. The parties reached the settlement described in this notice after the Court granted in part and denied in part Defendants’ motion to dismiss the Amended Complaint.
The parties disagree on both liability and damages and do not agree on the average amount of damages per share of Levitt common stock that would be recoverable if Lead Plaintiff was to have prevailed on each claim alleged. At the time the settlement was reached, Lead Plaintiff faced the possibility that some or all of the claims would be dismissed before trial. Had the case gone to trial, Defendants would have asserted that they complied with federal securities laws and would also contest: (1) the amount of damages, if any; (2) the extent to which the various statements that Lead Plaintiff complained of were, in fact, materially false and misleading, (3) the extent to which such statements influenced (if at all) the trading prices of Levitt’s common stock at various times during the relevant time period; and (4) the extent to which those statements were made with the necessary state of mind to support Plaintiff’s Exchange Act claims. Thus, had this action continued, Lead Plaintiff and the proposed Class faced the possibility that they would not obtain any recovery. This settlement enables the Class to recover a percentage of the alleged damages as calculated by Lead Counsel in conjunction with their consultants, without incurring any additional risk. Specifically, this settlement recovers over 13.7% of the maximum of $14.2 million in damages that Lead Counsel believes the Class could possibly have recovered had it prevailed at trial on all of its claims.3 As a result, Lead Plaintiff and Lead Counsel believe this settlement is a fair and reasonable recovery.
JANUARY 2008 - According to a press release dated January 25, 2008, the complaint charges Levitt and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Levitt, together with its subsidiaries, operates as a homebuilding and real estate development company in the southeastern United States.
According to the complaint, on January 31, 2007, Levitt announced that it agreed to merge with BFC Financial Corp (“BFC”). Based on BFC stock’s closing price on the previous trading day, the proposed transaction valued Levitt stock at $14.41 per share - a premium of 32 percent over the closing price of $10.88 per share on the previous trading day. The complaint alleges that, during the Class Period, defendants issued materially false and misleading statements and failed to disclose: (i) that the Company’s Levitt and Sons subsidiary was in much worse financial condition than publicly represented. Levitt and Sons was saddled with excessive amounts of unneeded and overpriced land which would not be feasible to develop for some time. Furthermore, Levitt and Sons was struggling to complete projects it had already begun and in many instances was failing to complete construction of homes that it had already sold as it lacked the financial resources to follow through on its contracts; (ii) that as a result of the foregoing, the Company was materially overstating its financial results because it was failing to timely record an impairment in the value of its homebuilding inventory at Levitt and Sons. Although Defendants acknowledged the difficult housing market, their public statements failed to advise investors of the true financial condition of the Company; (iii) that the Company’s loans and advances to Levitt and Sons would not be recovered as the subsidiary lacked the financial resources to pay now and in the foreseeable future; and (iv) that Levitt and Sons was insolvent.
Then, on August 15, 2007, the Company announced that the merger agreement with BFC had been terminated, without giving any explanation. Upon this news, shares of the Company’s stock fell $0.79 per share, or over 21%, to close at $2.96 per share. Subsequently, on November 9, 2007, it was announced that Levitt and Sons filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code.