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James River Group Holdings, Ltd.

Case Details

Class Period: August 1, 2019 - May 5, 2021
Date Filed: July 09, 2021
Case Number: 3:21-cv-0444
Jurisdiction: Eastern District of Virginia
icon-casetype Case Type: Securities Case

Case Summary

On July 9, 2021, Saxena White and its Co-Counsel filed a securities fraud class action against James River Group Holdings, Ltd., and certain of its senior executives, for violations of the Securities Exchange Act of 1934. The complaint alleges, on behalf of all persons or entities that purchased James River common stock during the relevant time period, that Defendants made false and misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects, thus artificially inflating the Company’s stock price and causing investors to suffer substantial losses when the truth eventually emerged.

James River is a Bermuda-based holding company that owns and operates a group of specialty insurance and reinsurance companies. In 2014, James River ramped up its Commercial Auto Division by underwriting a new type of insurance policy that covered Rasier LLC , a subsidiary of the ride-sharing company Uber Technologies, Inc.

The Complaint alleges that, during the class period, Defendants made materially false and misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects in violation of the Exchange Act and SEC Rule 10b-5. Specifically, Defendants failed to disclose (1) that James River had not adequately reserved for its Uber policies; (2) that James River was using an incorrect methodology for setting reserves that materially understated the Company’s true exposure to Uber claims; (3) and that, as a result, James River was forced to increase its unfavorable reserves in subsequent quarters even after cancelling the Uber policies. As a result, Defendants’ statements about James River’s business, operations, and prospects during the relevant time period lacked a reasonable basis and were materially false and misleading.

The truth emerged through two disclosures that caused James River’s stock price to fall and investors to suffer substantial losses. First, on October 8, 2019, James River announced that it had delivered a notice of early cancellation, effective December 31, 2019, for all insurance policies issued to Uber, though the Company remained contracted to provide coverage for future claims related to the period the Company’s Uber policies were in effect, known as runoff. James River also disclosed an adverse development between $55 and $60 million—primarily related to Uber policies for the 2016 and 2017 underwriting years. In response to this news, James River’s stock price fell $11.06 per share, or more than 22 percent. Significantly, despite the runoff coverage commitment, Defendants assured investors that James River’s issues with Uber were behind it and that the Company had adequately reserved. These misrepresentations and omissions caused the Company’s stock to continue trading at artificially inflated prices.

Then, on May 5, 2021, eighteen months after the Company announced its cancellation of the Uber contract, and after repeated assurances to investors that the legacy contract posed no challenges, James River shocked the market by disclosing an additional $170 million of unfavorable reserves related to the Uber policies. In response to this news, James River’s stock price plunged $12.27 per share, or more than 26%.

On September 22, 2021, the Court appointed Employees’ Retirement Fund of the City of Fort Worth and the City of Miami General Employees’ and Sanitation Employees’ Retirement Trust to serve as Lead Plaintiffs and Saxena White P.A. to serve as Co-Lead Counsel.

On November 19, 2021, Lead Plaintiffs filed an amended complaint that further detailed and refined the fraud allegations by extending the class period, identifying ways in which Defendants violated Generally Accepted Accounting Principles (GAAP), laws and regulations governing internal controls, and including additional allegations about the Defendants’ intent to deceive investors.

However, after Lead Plaintiffs discovered significant new evidence in an unrelated bad-faith action against James River’s specialty insurance operating subsidiary, Lead Plaintiffs asked the Court for permission to file a second amended complaint in order to include new allegations bolstered by this substantial new evidence. On September 9, 2022, the Court granted Lead Plaintiffs’ motion to file a second amended complaint. The briefing for Defendants’ motion to dismiss the second amended complaint concluded on November 14, 2022.

On August 28, 2023, the Court issued an opinion denying Defendants’ motions to dismiss the second amended complaint in its entirety. In its order, the Court repeatedly highlighted Lead Counsel’s extensive investigation of the claims, underscoring that by “[l]everaging interviews with former employees and [other relevant] litigation testimony,” Lead Plaintiffs’ complaint alleged a “pattern of systemic, purposeful under-reserving” for the Company’s Uber-related claims that “cannot be squared with Defendants’ stated opinions that reserves qualified as ‘reasonable’ and ‘adequate.’”

On December 7, 2023, after several mediation sessions and follow-up negotiations, the parties agreed to settle the action.

On December 22, 2023, Lead Plaintiffs filed an unopposed motion for preliminary approval of settlement. The proposed settlement provides $30 million in cash for the benefit of the Class.

On January 26, 2024, the Court preliminarily approved the settlement. The final settlement approval hearing will be held on May 24, 2024.