According to a press release dated February 28, 2006, the Fifth U.S. Circuit Court of Appeals affirmed a district court's dismissal of a securities fraud class action suit because the putative class failed to plead its case with particularity as required by the Private Securities Litigation Reform Act (PSLRA). Financial Acquisition Partners and John May sued Amresco Inc. and its various officers and directors for securities fraud, alleging that Amresco and the officers and directors made material misstatements in conjunction with the sale of its securities pursuant to the Securities and Exchange Act of 1934 § 10(b) and Rule 10b-5. In affirming the district court's dismissal, the Fifth Circuit ruled that the district court correctly excluded Financial Acquisition's affidavit of an expert witness and correctly decided that Financial Acquisition failed to plead its case with particularity pursuant to the PSLRA. The Fifth Circuit explained that Financial Acquisition failed to meet the heightened pleading standard of the PSLRA with a group pleading for all the officers and directors. The Fifth Circuit further explained that, in order to meet the standard, Financial Acquisition should have made separate allegations for each defendant.
As summarized in the latest docket posted, on January 6, 2003, the plaintiffs filed a First Amended Complaint, and on February 24, 2003, the defendants filed various motions to dismiss. On July 28, 2003, the Court issued the Order signed by U.S. District Judge Ed Kinkeade granting the plaintiffs' motion to Amend/Correct the complaint, and the defendants' motions to dismiss were denied as moot. That same day, the plaintiffs filed a Second Amended Class Action Complaint. Further, on July 31 2004, the Court entered the Order granting the plaintiffs’ motion for appointment as lead plaintiff and approval of selection of lead counsel. Financial Acquisition Partners, LP and John D. May served as lead plaintiffs and Federman & Sherwood served as lead counsel. On September 8, 2003, the defendants filed several motions to dismiss the Second Amended Class Action Complaint. On September 30, 2004, the Court entered the Memorandum Opinion and Order granting the defendants’ motions to dismiss, and the civil case was terminated. On October 22, 2004, the plaintiffs filed an appeal.
The original Complaint alleges that Deloitte & Touche and certain of AMRESCO's officers and directors violated the federal securities laws by filing false financial reports with the SEC during the Class Period. The Complaint alleges that the Defendants knew or should have known that the reports did not properly report impairment to AMRESCO's assets in the Form 10-K, 10-Q and proxy statement during the Class Period.
NOTE: On July 2, 2001, AMRESCO voluntarily filed for bankruptcy protection under Chapter 11 and is not named a defendant in this action.