A contentious divide in the leadership of Republic First Bancorp, Inc. (Republic First) has now resulted in a third lawsuit against the company, this one filed by shareholders. Early last year, Republic First’s eight-person board of directors was evenly split into two camps: one led by former Republic First CEO, Vernon Hill, II, and another led by Harry Madonna, who had been CEO of Republic First prior to Hill. The two groups held conflicting views on the future of Republic First, with Hill’s faction seeking an expansion of retail banking operations and Madonna’s in favor of selling the company. The dispute between the two groups quickly became a public issue as Madonna’s group of directors issued a press release in March of 2022 accusing Hill and his associates of self-dealing and mismanagement. As a result of the letter, Republic First’s independent auditor expressed concerns about its forthcoming work with the company, and Republic First was unable to file its Form 10-K for the 2021 fiscal year until those concerns were addressed and the audit completed.
The competing factions, equal in number, remained deadlocked until the death of a board member in May of 2022. This passing left Madonna’s faction with a majority of the votes, which they quickly used to oust Hill from his position as chairman of the board. In response, Hill’s cohort filed suit in the District Court for the Eastern District of Pennsylvania seeking, among other things, a preliminary injunction and the appointment of a custodian to manage Republic First. The district court granted the requested appointment, but later that year, the Third Circuit Court of Appeals vacated the lower court’s order.
Less than six months later, Republic First was faced with additional litigation when Hill and InterArch, a company owned by Hill’s wife, filed suit against the bank in the Eastern District of Pennsylvania. Hill and InterArch’s suit alleges claims arising from Republic First’s use of specific marketing material, including copyright and trademark infringement, tortious interference, and breach of contract. That lawsuit followed Hill’s removal as CEO in what Hill alleged was a “vindictive campaign” against him.
This month, Republic First’s legal problems have continued to multiply as shareholders have now asserted that the current board of directors, including Madonna, is responsible for claims of breach of fiduciary duty, unjust enrichment, and waste. The plaintiffs allege the current board is responsible for Republic First’s steep drop in value, from over $5.20 per share in early 2022 to as low as $0.62 per share recently. The facts alleged in the plaintiffs’ complaint cite events dating back to the March 2022 press release (and earlier), asserting that Madonna and other directors acted contrary to the interests of Republic First, causing operating losses and the suspension of dividend payments to shareholders. In response, Republic First claims that the suit is meritless and that the board, despite any criticism, is taking a series of steps to improve profitability and create long-term value for shareholders.
We will continue to monitor this litigation and post updates.