WHITE PLAINS, N.Y. , March 23, 2016 (GLOBE NEWSWIRE) -- NorthEast Community Bancorp, Inc. (OTCPX:NECB) (the “Company”), a majority owned subsidiary of NorthEast Community Bancorp, MHC (MHC), today announced the Appellate Division of the Supreme Court of the State of New York (Appellate Division) issued a ruling in favor of the MHC and its board of directors in the case brought by Stilwell Value Partners IV, L.P. in the Supreme Court of New York, New York County (Court), against the MHC and each of the directors of the MHC as defendants, and against the Company as a nominal defendant alleging, among other things, that the directors had breached their fiduciary duties by not voting to authorize a second step conversion of the MHC.
The Court had previously denied NorthEast’s motion for summary judgment in its entirety, while granting Stilwell’s motion for summary judgment in part, to the limited extent of determining that the “entire fairness standard” applies to the decision by the directors not to undertake a second step conversion. NorthEast appealed the Court’s ruling.
On March 22, 2016, the Appellate Division unanimously reversed the Court’s decision (with costs); granted NorthEast’s motion for summary judgment; and denied Stilwell’s cross motion for summary judgment. The Appellate Division found that because Stilwell bought shares of common stock of the Company pursuant to the prospectus issued in connection with its mutual holding company reorganization and minority stock issuance, it could not now complain about the facts that the prospectus disclosed: (i) that the Company and the MHC had the same board; (ii) that the MHC could control the affairs of the Company; (iii) that the MHC’s control could prevent a second-step conversion; (iv) that could be contrary to the interests of the Company’s minority stockholders; and (v) the MHC’s control could result in the perpetuation of management and directors. While Stilwell made additional arguments for affirmative relief, given the Appellate Division’s reversal of the Court’s decision, it concluded that Stilwell’s “remaining arguments for affirmative relief are academic.” The Appellate Division’s ruling granted summary judgment ending the case, but it is subject to a motion by Stilwell to the New York Court of Appeals for discretionary review of the decision.
Kenneth A. Martinek, Chairman and Chief Executive Officer of NorthEast Community Bancorp, Inc. stated that “We are very pleased with the unanimous decision of the Appellate Division. We hope that Mr. Stilwell will accept the decision of the Appellate Division and put an end to this litigation which has been ongoing since 2011.”
NorthEast Community Bancorp, Inc. is the holding company for NorthEast Community Bank. NorthEast Community Bank is a New York State-chartered savings bank that operates four full-service branches in New York and four full-service branches in Danvers, Plymouth, Framingham and Quincy, Massachusetts and loan production offices in Danvers, Massachusetts and White Plains and New City, New York.