According to the Company’s FORM 10-K for the fiscal year ended December 31, 1998, the Company is a party to various legal proceedings resulting from the ordinary business activities relating to its operations. On February 25, 1998, the Company announced that the claims against it in the shareholders lawsuits filed in October 1998 in the United States District Court, District of Minnesota have been dismissed with prejudice. The Complaints had alleged securities fraud and other claims related to a decline in the Company's stock price. The lawsuits were dismissed through a Stipulation and Order entered into by counsel for the plaintiffs and defendants, and ordered by the Federal District Court. This dismissal was agreed to and ordered prior to the case having been certified as a class action and without payment to the named plaintiffs or their counsel.
The complaint charges Fingerhut and Metris and certain of its officers and directors with violations of the federal securities laws by issuing a series of false statements about Metris' financial performance that were materially false and misleading in that Metris was prematurely recognizing revenue and costs. By issuing these allegedly false and misleading statements, the defendants artificially inflated Metris stock price juicing it to a Class Period high of $80.75 on August 14, 1998 and allowing Metris top insiders to enhance the value of the securities they would receive in connection with the September spin-off which, in the aggregate, exceeded $20 million worth of Metris stock. When the true facts concerning Mertis' revenue recognition were revealed Metris' stock collapsed and plummeted $14.875 per share.
The complaint was filed on behalf of persons who purchased or otherwise acquired the common stock of Metris Companies, Inc. during Class Period. This includes all persons for acquired Metris common stock in connection with the September 25, 1998 distribution of Metris common stock by Fingerhut Companies, Inc.