According to the Company’s FORM 10-Q for the quarter ended June 30, 2000, on May 1, 2000, the Plaintiffs filed a Notice of Appeal from the Court's Memorandum Opinion and Order dated March 30, 2000. On July 10, 2000, the United States Court of Appeals for the Fourth Circuit dismissed the appeal by agreement of the parties.
As summarized by the same SEC filing, on July 9, 1999, the defendants filed a Motion to Dismiss, with prejudice, the Consolidated Amended Complaint. The Plaintiffs filed their Opposition to defendants' Motion to Dismiss on September 24, 1999. On March 30, 2000, the Court granted the Defendants' Motion to Dismiss the Consolidated Amended Complaint and as a result entered an Order and Memorandum Opinion dismissing the Consolidated Amended Complaint. The Court concluded that the Plaintiffs did not substantiate their claims that specific CRIIMI MAE officers and directors violated Section 10(b) of the Exchange Act. The Court concluded that because the Plaintiffs failed to substantiate their claims of a "primary violation" of Section 10(b) of the Exchange Act, they likewise failed to substantiate a claim against the individual Defendants as controlling persons under Section 20(a) of the Exchange Act.
Between October 7, 1998 and November 30, 1998, certain plaintiffs filed 20 separate class action civil lawsuits (the "Complaints") in the United States District Court for the District of Maryland (the "District Court" or the "Court") against certain officers and directors of the Company. On March 9, 1999, the District Court ordered the consolidation of the Complaints into a single action entitled "In Re CRIIMI MAE Inc. Securities Litigation." On April 23, 1999, a group of thirteen putative members of the class of individuals who allegedly suffered damages during the class period between
February 20, 1998 and October 5, 1998 (collectively, the "Plaintiffs") filed an Amended and Consolidated class action Complaint alleging violations of federal securities laws (the "Consolidated Amended Complaint"). The Consolidated Amended Complaint alleged generally that the defendants violated Section 10(b) of the Securities and Exchange Act of 1934 as amended (the "Exchange Act") by, among other things, making false statements of material fact and failing to disclose certain material facts. The Consolidated Amended Complaint also generally alleges that the defendants violated Section 20(a) of the Exchange Act because each defendant was allegedly a "controlling person" as that term is defined under Section 20(a).
The original Complaint alleges Criimi Mae's officers provided false reassurances to the public that Criimi Mae would not be affected by adverse business conditions affecting the financial services industry. In fact, the widening of spreads for commercial mortgage-backed securities, and related fluctuations in interest rates, permitted lenders to make collateral calls on Criimi Mae. When Criimi Mae could not meet these obligations, it was forced to declare bankruptcy on October 5, 1998. The complaint further alleges that, as a result of defendants' actions, the market price of Criimi Mae stock during the Class Period was inflated throughout the Class Period.