Miami-based federal judge orders Florida Patriot National shareholders' class action transferred to New York

By Karen Kidd | Jan 15, 2019

MIAMI – The U.S. District court for the Southern District of Florida recently ordered that a Florida class action on behalf of shareholders in a Florida-based outsourcing company that emerged from Chapter 11 last year be transferred to a federal court in New York.

In her 17-page order filed Jan. 2, U.S. District Court Judge Beth Bloom transferred the case, McIntire et al. v Mariano et al., to U.S. District Court for Southern District of New York.

The transfer was part of Bloom's decision to grant a motion by ODS Capital LLC, Barry A. Smith and Sunil Shah in the class action. The motion was filed by co-lead plaintiffs in a similar federal case filed in New York on behalf of shareholders of Patriot National Inc., a Fort Lauderdale-based insurance technology and outsourcing firm that ended up in bankruptcy and reorganized last year.

"The court finds that all required conditions have been met for ODS Capital LLC, Barry A. Smith and Sunil Shah to intervene in this action," Bloom said in her order.

The class action is rooted in the March 2017 class action filed by Anthony L. Gingello against Patriot National, Steven M. Mariano and Thomas Shields in New York' alleging violations of the Exchange Act. The case alleged claims on behalf of investors who purchased Patriot National securities between August 2016 and March 2017.

The suit alleged that Patriot National executives "failed to disclose that Patriot National was being run primarily for defendant Mariano's benefit rather than for the benefit of shareholders," the background portion of Bloom's order said.

The Gingello case preceded Patriot National's filing for bankruptcy protection in January 2018. The bankruptcy and reorganization was approved by the U.S. Bankruptcy Court for the District of Delaware the following May to allow Patriot National's transition of ownership from its public shareholders to Cerberus Business Finance, based in New York, and TCW Asset Management Company, based in Los Angeles, to move forward.

Patriot National successfully emerged from bankruptcy last summer under its new owners with John Rearer staying on as CEO. Patriot Nation continues to be headquartered in Fort Lauderdale and its 250 employees laid off from headquarters and six divisions across the nation the day before Thanksgiving in 2017 didn't receive severance pay.

In January 2018, Aric McIntire and Henry Wasik filed their own lawsuit in Florida's Southern District on behalf of Patriot National common stock purchasers from January 2015 and November 2017 alleging Mariano and Shields violated federal securities laws

In their motion to intervene, ODS Capital, Smith and Shah argued that McIntire case, like the Gingello case, focuses in part on misconduct in Patriot National's dealings with Guarantee Insurance Group.

In her order, Bloom said she found "an identical factual nexus" in the McIntire and Gingello class actions.  

"If the issues in this case were to be litigated in two separate courts, there would be an unnecessary waste of time, energy, and money," the order said. "Given the substantial concerns with the same issues, facts and parties simultaneously pending before two district courts, the court will exercise its broad discretion and transfer the instant action to the Southern District of New York."

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