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Update on BofI Whistleblower Litigation

We previously reported in March and last October on a whistleblower litigation brought by Charles Erhart, a former Bank of Internet Holding, Inc. (BofI) internal auditor.  On December 3, 2015, in a separate action, the shareholders of BofI brought a derivative suit, based in part on the facts of the whistleblower case, claiming BofI’s board of directors engaged in multiple schemes that caused a drop in stock price.  On May 11, 2018, the United States District Court for the Southern District of California tentatively dismissed a sizeable portion of the suit due to the claims being “unripe.”  In Re: BofI Holding, Inc. Shareholder Litigation, No. 3:15-cv-02722.

BofI shareholders filed a putative class action securities fraud suit when BofI’s stock price fell over 30% after news broke of the whistleblower litigation. The suit was dismissed in March 2017. The present suit was brought against the bank’s directors and officers for knowingly breaching their duties, taking no action after learning Erhart was fired despite his whistleblower status, disregarding internal controls, and producing misleading securities disclosures, among other actions.

The company moved for a judgment on the pleadings, and the court found  “derivative plaintiffs do not state a ripe claim when it is dependent on the conclusion of securities or whistleblower litigation regarding the same conduct.”  As a result, the plaintiffs have two options: (1) filing an amended complaint and proceeding with the claims that are ripe and supported by sufficient allegations of Article III standing, or (2) seeking to stay the case until the whistleblower litigation concluded.

As for the original whistleblower case, Erhart v. BofI Holding, Inc., No. 15-cv-02287, a jury trial has been set for June 11, 2019.

© 2020 Proskauer Rose LLP. National Law Review, Volume VIII, Number 137



About this Author

Lloyd B Chinn, Financial, Whistleblower Attorney, Proskauer Law Firm

Lloyd B. Chinn is a Partner in the Labor & Employment Law Department and co-head of the Whistleblowing & Retaliation Group. He litigates employment disputes of all types before federal and state courts, arbitration tribunals (e.g., FINRA, JAMS and AAA), and before administrative agencies in New York and across the country. Lloyd's practice ranges from litigating compensation disputes to defending whistleblower, discrimination and sexual harassment claims. Although he represents employers in a wide range of industries, including law, insurance, health care, consulting, media,...

Harris M Mufson, Class/Collective Action Attorney, Proskauer
Senior Counsel

Harris Mufson is a senior associate in the Labor & Employment Law Department and a member of the Employment Litigation & Arbitration and Whistleblowing & Retaliation Groups.

Adept at counseling clients at every turn of the litigation process, Harris represents employers in a variety of industries, including financial services, health care, entertainment, sports and legal, with respect to a wide range of labor and employment law matters. These include compensation disputes, employment discrimination and retaliation, whistleblowing,...

Austin McLeod, employment lawyer, Proskauer
Law Clerk

Austin D. McLeod is a law clerk in the Labor & Employment Department.

Austin assists clients in a range of labor and employment matters. Prior to joining Proskauer, Austin interned at the PGA TOUR and worked as a litigation paralegal at a major financial services company.

During law school, Austin worked as a labor relations law clerk for the National Football League. He also served as a staff editor of the NYU Journal of Intellectual Property and Entertainment Law and President of the Student Lawyer Athletic Program.