S.D. Tex. Dismisses Shareholder Class Action Against Home Lender, Franklin Bank Corp., and Its Auditor and Underwriter

On March 21, 2011, Judge Keith Ellison of the Southern District of Texas dismissed, with prejudice, a class action brought by purchasers of common and preferred stock of Franklin Bank Corp., a state-chartered savings and loan bank. The plaintiffs asserted federal securities claims under Sections 11 and 15 of the Securities Act and Sections 10(b)and 20(a) of the Exchange Act against several of Franklin’s directors and officers, its independent auditor (Deloitte & Touche), and the underwriter of Franklin’s preferred stock offering (RBC Capital Markets). Those claims alleged that the defendants were liable for misrepresentations and omissions in Franklin’s various public securities filings, including omissions and misstatements about the bank’s risky, poorly documented, low quality and subprime lending. In dismissing the claims, the court found that the defendants failed to adequately plead facts that would support the falsity and/or materiality of the alleged misstatements. Franklin Decision.