At least 113 - and counting.
That's how many lawsuits have been filed through Friday against Coast Bank of Florida and its parent, Coast Financial Holdings Inc., over problem loans tied to a bankrupt home builder.
Three of the suits will be consolidated, a federal judge ruled Friday. But that's barely a ripple compared to a recent wave of lawsuits filed in state court against Coast Bank.
At least 109 have been filed in Charlotte, Highlands and Sarasota counties since June 14. The suits are by investors who used Coast Bank to finance the construction of new houses by Construction Compliance Inc. The St. Petersburg builder was unable to finish most of the houses and later filed for bankruptcy, leaving the bank potentially on the hook for $110 million in loans committed to 482 borrowers.
Another dozen or more suits likely will be filed in the coming weeks, said Alan Tannenbaum, a Sarasota attorney who has filed suits against Coast.
"I think the total's going to be 125 to 130 but they will be consolidated," he said Friday. The suits are almost identical but had to be filed separately because they pertain to individual contracts between the investors and the bank.
The suits claim the bank committed fraud and breached its fiduciary duty by allowing the homes to be sold to investors with no money down in return for promised profits once the homes were sold. The suits seek to have the investors' mortgages rescinded and forgiven by Coast Bank, which the bank is unwilling to do.
"It's unfortunate that they did that because we have worked diligently with borrowers to resolve these matters," bank spokesman Tramm Hudson said. "We're sorry it happened, but we welcome the suits because it gives us the opportunity to prove in court that these are valid loans, and they promised to repay these loans but haven't."
Coast also plans to "vigorously defend" shareholder claims that Coast Financial and several of its officers withheld pertinent information about the loans, thereby causing the bank's stock to plummet once the problem was made public, Hudson said.
U.S. District Judge Richard A. Lazzara consolidated three suits and named two investors as lead plaintiffs in the case, which seeks class-action status. Lazzara gave attorneys for investors Daniel Altenburg and Troy Ratcliff until Aug. 6 to file a consolidated suit in federal court in Tampa. The third suit in the consolidation was filed by Grand Lodge of Pennsylvania, a paternal lodge.
The consolidation doesn't include a fourth federal lawsuit filed in Fort Myers that accuses Coast of selling unregistered securities.
Despite the legal turmoil and stock drop, Coast Financial has a new major shareholder: Membrino Arbitrage Fund LP, a Delaware investment group that recently bought 326,000 or 5 percent of the company's common shares.
"Just a few loans have gotten a lot of publicity, but it's not the whole story," said James Membrino, the group's managing member and general partner.
Coast Financial (NASDAQ: CFHI) stock closed at $3.48 Friday, down 14 cents.
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