Orrstown Financial Services Securities Litigation
Southeastern Pennsylvania Transportation Authority v. Orrstown Financial Services, Inc., et al., Case No. 12-cv-00793 (M.D. Pa).
In May 2012, Chimicles Schwartz Kriner & Donaldson-Smith LLP (“CSK&D”) filed this federal securities class action for Southeastern Pennsylvania Transportation Authority (“SEPTA”) on behalf of: (1) all persons or entities who purchased or otherwise acquired the common stock of Orrstown Financial Services, Inc. pursuant to, or traceable to the Company’s approximately $40 million March 2010 secondary stock offering and were damaged thereby and (2) all persons or entities who purchased Orrstown Financial Services, Inc. stock on the open market between March 15, 2010 and April 5, 2012 and were damaged thereby. The Action asserts claims against Orrstown Bank, its holding company Orrstown Financial Services Inc. (collectively “Orrstown”) and certain Orrstown officers and directors under the Securities Exchange Act and the Securities Act for the making of false and misleading statements in Orrstown’s Registration Statement and Prospectus in connection with its March 2010 stock offering and in financials and reports filed with the Securities and Exchange Commission (“SEC”) from March 15, 2010 through April 5, 2012 (the “Class Period”). The action also named as defendants Sandler O’Neill and Partners, L.P. and Janney Montgomery Scott LLC, the underwriters for the March 2010 stock offering, and Orrstown’s auditor, Smith Elliott Kearns & Company. On August 20, 2012, the Court appointed SEPTA as Lead Plaintiff.
The Court Denies in Large Part Defendants’ Motions to Dismiss
After the filing of the action, Defendants filed motions to dismiss. In June 2015, the Court granted defendants’ motions to dismiss but gave SEPTA the opportunity to file a motion for leave to amend its complaint. On July 22, 2015, SEPTA filed a motion for leave to amend and its proposed Second Amended Complaint. On February 8, 2016, the Court granted SEPTA’s motion. Copies of the Court’s Opinion and the Second Amended Complaint can be accessed below.
The Defendants filed motions to dismiss the Second Amended Complaint, and briefing on the motions was completed on May 20, 2016. On December 7, 2016, the Court issued a 54-page opinion and order permitting SEPTA’s Securities Exchange Act claims to proceed with respect to financial reports and SEC filings made in 2010 through April 5, 2012, as against Orrstown Bank, Orrstown Financial Services Inc., and individual Defendants Quinn, Embly and Everly. A copy of the Court’s Motion to Dismiss Opinion can be accessed below.
The parties have engaged in substantial party and third party discovery, including expert discovery, depositions, document production and written discovery, which is ongoing.
CSK&D Is Permitted to File Amended Complaint to Reassert Section 11 Claims and Add Back Orrstown’s Two Underwriters and Former Auditor as Defendants and the Court Denies Defendants’ Attempts to Dismiss these Claims
Based on information gleaned through discovery, on April 12, 2019, SEPTA filed a motion for leave to amend and its proposed Third Amended Complaint. On February 14, 2020, the Court issued a 58-page opinion and order granting SEPTA’s motion to file the Third Amended Complaint, which allowed SEPTA to reassert its previously dismissed Securities Act Section 11 claims arising from the March 2010 offering and to add back Orrstown’s two underwriters and former outside auditor as defendants. Copies of the Court’s Opinion and the Third Amended Complaint can be accessed below.
On February 24, 2020, Defendants filed a motion asking the Court to certify for interlocutory appeal the decision granting leave to file the Third Amended Complaint. On September 2, 2021, in a unanimous, precedential opinion, the Third Circuit affirmed the district court’s ruling in Plaintiff’s favor granting its motion for leave to file a Third Amended Complaint (“TAC”). This is an important new precedent that may impact the legal landscape more broadly. Until now, no court of appeals had squarely addressed the issue whether Rule 15(c) allows ‘relation back’ of claims outside a statue of repose. The Second Circuit declined to address the issue on at least two occasions, instead finding that the particular amendments in those cases did not qualify. The decision is also the first to squarely address the interplay between Rule 54(b) and statutes of repose. A copy of the Third Circuit’s opinion can be accessed below.
On August 18, 2022, in a 150 page opinion, the Court rejected Defendants’ attempt to dismiss the action, permitting SEPTA to proceed with Securities Act claims against all entity Defendants, including the Auditor, and with Securities Exchange Act claims against the Auditor and Orrstown Defendants. A copy of the Court’s opinion can be accessed below.
The Parties Reach a Settlement-in-Principle
With the assistance of Robert A. Meyer, Esquire, an experienced mediator with JAMS, the parties have reached a settlement-in-principle to resolve all claims set forth in the Third Amended Complaint asserted by Plaintiff on behalf of it and the proposed class against Defendants, subject to the parties’ completion of a written settlement agreement. On November 7, 2022, the parties entered into a Memorandum of Understanding (the “MOU”) memorializing the parties’ agreement to settle and resolve the Action for $15 million (inclusive of attorneys’ fees, expenses and costs), and to execute and submit a formal, binding settlement agreement that provides for a mutual release of claims against all parties and the dismissal of the lawsuit with prejudice, all subject to Court approval. The parties are presently drafting the settlement papers.
If you are interested in discussing your rights as an Orrstown shareholder and/or have information relating to the matter, please contact the attorneys listed below.
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Attorneys for this case:
Nicholas E. Chimicles
Kimberly Donaldson Smith
Timothy N. Mathews