Item 3. Legal Proceedings
Item 3.
Legal Proceedings
We are not currently subject to any material legal proceedings. We are from time to time subject to claims and litigation
arising
in
the
ordinary
course
of
business.
These
claims
and
litigation
may
include,
among
other
things,
allegations
of
violation of banking and other applicable regulations, competition
law, labor laws and consumer
protection laws, as well as
claims or
litigation
relating
to intellectual
property,
securities, breach
of contract
and tort.
We
intend to
defend ourselves
vigorously against any pending or future claims and litigation.
The
Company
previously
disclosed
that
litigation
(the
“Litigation”)
had
been
commenced
on
July
13,
2023
by
three
individuals
who
were
shareholders
of
the
Bank
prior
to
the
Bank’s
reorganization
into
the
holding
company
form
of
organization in 2021
(the “Plaintiffs”)
against six
persons, all
of whom were
directors of
the Bank at
the relevant
time (the
“Defendants”), in the Circuit Court, Eleventh Judicial Circuit for Miami-Dade County, Florida (the “Court”) (Benes et al. v. de
la
Aguilera
et
al.)
alleging
the
Defendants
(i) caused
the
Bank,
as
directors
thereof,
to
engage
in ultra
vires
conduct by
devising
and
approving
the
exchange
transaction
effected
in
July
2021
pursuant
to
which
the
Bank’s
then
outstanding
shares of Class C and Class D preferred stock was exchanged for shares of Class A voting common stock in the
Bank (the
“Exchange Transaction”),
which action
the Plaintiffs
allege was
not permitted
by the
Bank’s Articles
of Incorporation,
and
(ii) breached
their
fiduciary
duty as
directors
of the
Bank
by
approving
and
engaging
in
the
Exchange
Transaction.
The
Plaintiffs sought the
Court to certify the
action as a class
action and to award
damages in an
amount to be
proven at trial.
The Plaintiffs sought damages exceeding $750,000
plus attorney’s fees and costs
as well as such other relief as the Court
determined to award.
The Defendants filed a motion to dismiss the Litigation with
prejudice (the “Motion”). On December 27, 2023, the Court,
after reviewing
the Motion,
the Plaintiff’s response
thereto and
the Defendant’s reply
as well
as the
oral arguments presented
by
the
parties
on
December
14,
2023,
granted
the
Motion,
dismissing
the
Litigation
with
prejudice
and
rendering
final
judgment in favor
of the Defendants
(the “Order”). The Court
reserved jurisdiction to award
costs or grant
any post-judgment
relief.
On May 1,
2024, the
Plaintiffs filed
in the Third
District Court
of Appeal for
the State of
Florida (the “Appellate
Court”)
an appeal (the
“Appeal”), appealing
the issuance
of the
Order and seeking
a reversal
of the Order.
The Plaintiffs
claimed
the Court erred by
concluding (i) the Exchange Transaction was not
ultra vires, and (ii)
that the Legacy Shareholders (which
includes the Plaintiffs)
lacked direct standing.
The Plaintiffs
filed their initial
brief and the
Defendants filed
on July 1,
2024
their answer brief (“Answer Brief”) responding to the allegations
contained in the Appeal.
Oral argument was
heard before the
Court on January
14, 2025. On
February 18,
2025, the
Appellate Court
affirmed
the lower court's ruling and dismissed
the lawsuit, in favor of the Defendants
(the “Dismissal”).
The Plaintiffs have the right
to appeal the
Dismissal,
but they have not done so as of the date of the
filing of this Annual Report on Form 10-K.
The Company believes
that the positions
in the Appeal
are legally
and factually without
merit, and it
intends to vigorously
defend against
any appeal
of the
Dismissal of
the Appeal
,
pursue any
potential counterclaims
against the
Plaintiffs
as it
deems appropriate, and seek coverage from its
insurance carriers. Furthermore, there is also no assurance
that we will be
able to secure coverage from
our insurance carriers for
any expenses incurred by us
in connection with defending
against
the Appeal.
At
this
time,
in
the
opinion
of
management,
the
likelihood
is
remote
that
the
impact
of
such
proceedings,
either
individually or
in the
aggregate, would
have a
material adverse
effect
on our
consolidated results
of operations,
financial
condition
or cash
flows. However,
one
or more
unfavorable
outcomes
in any
claim or
litigation
against
us, including
the
aforementioned Appeal
regarding the
Exchange Transaction,
could have
a material
adverse effect
on the period
in which
such claims
or litigation
are resolved.
In addition,
regardless of
their merits
or their
ultimate outcomes,
such matters
are
costly, divert management’s
attention and may materially adversely affect our
reputation, even if resolved in our favor.
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USCB Financial Holdings, Inc.
2024 10-K
There can be no
assurance that any
future legal proceedings
to which we are
a party will not
be decided adversely
to
our interests and have a material adverse effect
on our financial condition and operations.
Item 4.
Mine Safety Disclosures
Not applicable.
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51
USCB Financial Holdings, Inc.
2024 10-K
PART II