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 report.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.
E-mail 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 newspaper 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 adviser 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
Hagens Berman Sobol Shapiro (HBSS) is a law firm with offices in
Seattle, Chicago, Cambridge, Los Angeles, Phoenix, and San Francisco.