Maryland Circuit Court Dismisses Derivative Complaint against Defendants Farmland Partners Inc., its Officers and Directors
Farmland Partners Inc. (NYSE: FPI) announced that the Maryland Circuit Court dismissed shareholder derivative claims against the company and its officers, stemming from allegations made by a short-seller. The claims were based on purportedly false statements regarding undisclosed loans to farmers. The court ruled that the plaintiffs failed to prove their demands for litigation were wrongfully refused. CEO Paul Pittman stated this dismissal brings the company closer to resolving ongoing litigation and reducing unnecessary costs.
- Court dismissal of derivative claims clears a legal hurdle for Farmland Partners, potentially stabilizing stock prices.
- The ruling affirms the board's investigation process and decision-making, enhancing investor confidence.
- Ongoing litigation, including the Rota Fortunae and Turner actions, could still impact the company's resources and focus.
- Allegations from the short-seller continue to create uncertainty and potential reputational risk for Farmland Partners.
DENVER, June 16, 2021 /PRNewswire/ -- Farmland Partners Inc. (NYSE: FPI) (the "Company" or "Farmland") today announced that the Maryland Circuit Court for Baltimore City has dismissed pending shareholder derivative claims brought by two Farmland shareholders against the Company, its officers and board of directors.
Derivative Complaints Based on Solely on False and Misleading Statements in a "Short and Distort Attack"
Plaintiffs' demands arose from a "short-and-distort" attack on Farmland, in which an anonymous short-seller writing under the pseudonym "Rota Fortunae" later disclosed as Quinton Mathews, published an article on Seeking Alpha alleging fraud at the Company, including allegations that the company had improperly failed to disclose certain loans that it had made to farmers as material related-party transactions. As its author and his co-conspirators intended, the post caused a substantial decline in the Company's stock price. In the days after the post was published, the Company investigated the allegations, concluded that they were unfounded, and released a detailed public response rebutting the allegations. The Company later sued Rota Fortunae for defamation, disparagement, intentional interference with prospective business relations, unjust enrichment, and violations of the Colorado Consumer Protection Act (the "Rota Fortunae Action"). Rota Fortunae's motion to dismiss the Rota Fortunae Action was denied and that case remains ongoing. As a result of the publication of the false and misleading article, a federal securities class action was filed against the Company, its CEO Paul Pittman, and its CFO Luca Fabbri, adopting some of Rota Fortunae's allegations (the "Turner Action"). That case remains ongoing, as well.
Background of Derivative Claims
After those suits were filed, Plaintiffs Shawn Luger and Brent Hustedde separately served litigation demands on the members of the Company's board of directors (the "Demands"). Plaintiffs demanded that the board pursue claims against the Company's officers and directors based on the allegations in the Rota Fortunae Post and in the Turner Action. However, the Company and the board had already investigated the allegations extensively both in connection with the Company's initial response to the Rota Fortunae Post and in connection with the board's oversight of the ongoing Rota Fortunae and Turner Actions. The board responded to Luger's demand, informing him that the board was fully aware of Rota Fortunae's allegations, had investigated them, and had concluded that the allegations were without merit and that pursuing legal action based on Rota Fortunae's allegations would not be in the Company's best interest. Luger and Hustedde then filed shareholder derivative complaints in the Maryland Circuit Court for Baltimore City (the "Court"), seeking to step into the Company's shoes and sue the Company's officers and directors on the Company's behalf. Both Luger and Hustedde argued that they should be permitted to act on the Company's behalf because the Board "wrongfully refused" their Demands.
The Court's Ruling in Favor of Farmland Partners Inc. and Other Defendants
The Court consolidated the two cases and Plaintiffs filed a consolidated shareholder derivative complaint (the "Complaint"). The Company then moved to dismiss the Complaint, arguing that the Complaint failed to plead facts showing either that the board's investigation in response to the demands was not conducted independently and in good faith or that the board's decision not to pursue claims based on Rota Fortunae's allegations was unreasonable. The Court agreed and granted the Company's motion to dismiss for lack of derivative standing finding that Plaintiffs failed to plead facts showing that the Board acted wrongfully when it refused Plaintiffs' Demands.
First, the Court concluded that Plaintiffs "failed to establish facts that show more than mere suspicions that Plaintiffs' litigation demands were wrongfully refused in regard to the board's duty to conduct an investigation or otherwise act on an informed basis."
Second, the Court concluded that Plaintiffs "failed to state facts" showing "more than mere suspicions that Plaintiffs' litigation demands were wrongfully refused in regard to the Board's obligation to carry out its fiduciary independently and in good faith."
Finally, the Court found "no founded claims which allege that the Board did not honestly believe" it was "acting in the best interest of Farmland Partners in their decision to refuse Plaintiffs' litigation demands."
Having found no factual support for Plaintiffs' claims that the board wrongfully refused the Demands, the Court ordered that Luger and Hustedde's claims be dismissed.
"This is one step closer to putting the entire short and distort attack behind us," said Paul A. Pittman, the Company's Chairman and CEO. "We will continue to work towards a successful resolution of the Rota Fortunae and Turner Actions until we can finally eliminate unnecessary litigation costs and obtain justice for the Company and its shareholders."
About Farmland Partners Inc.
Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns approximately 157,000 acres in 16 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota and Virginia. We have approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014. Additional information: www.farmlandpartners.com or (720) 452-3100.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the federal securities laws, including, without limitation, statements with respect to the Rota Fortunae Action and the Turner Action. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "should," "could," "would," "predicts," "potential," "continue," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. For a description of certain of such factors see the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, and the Company's other filings with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
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SOURCE Farmland Partners Inc.
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