On May 24, 2006, the plaintiff filed a notice of appeal to the Eighth Circuit Court of Appeals from the April 2006 Judgment granting the defendants’ motions for summary judgment. On May 24, 2007, exactly one year after the lower court's dismissal of the case, the appeals court over-turned the decision and remanded the case back to the District Court for settlement proceedings. The order approving the settlement is still pending.
According to a press release dated May 31, 2006, the U.S. District Court for the District of Minnesota granted summary judgment in favor of a company that was sued by its shareholders for securities fraud, ruling that the shareholders failed to show that the company made material misrepresentations with scienter. Shareholders of Metris Cos. Inc. stock sued Metris for allegedly making material misrepresentations about its financial health, causing its stock values to be overly inflated and causing the shareholders' loss. The shareholders sued under § § 10(b) and 20(a), along with Rule 10b-5, of the Securities Exchange Act of 1934 (Exchange Act). The shareholders claimed that Metris and its officers and directors materially misstated its financial health in a series of press releases and SEC filings. Metris and its officers and directors moved for summary judgment. …The district court ruled that Metris' positive statements as to its "strong profitability" and other general predictions of growth were insufficient to state a securities fraud claim. The court found that Metris' statements were mere puffery upon which a reasonable investor would not rely, granting Metris' motion for summary judgment.
The original Complaint charges that the Company and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10-b(5). The action alleges that defendants issued a series of false and misleading statements concerning the Company's financial condition. Specifically, defendants misled the investing community concerning the existence of a Report of Examination (the "ROE") released by the Office of the Comptroller of the Currency (the "OCC"), the primary federal regulator of Direct Merchants. Moreover, the Complaint charges that defendants misled the investing community regarding the adverse material effect the ROE would have on Metris' financial condition.
The Complaint alleges that the OCC released the ROE to defendants on
November 5, 2002, but that defendants failed to reveal the existence of
the ROE to the public until April 17, 2002, and therafter misrepresented
the effect it would have on Metris. As outlined in the Complaint, the
findings of the ROE were ultimately addressed in a consent agreement
between Direct Merchants and the OCC, and obligated Direct Merchants to
restructure significant parts of its operations including its credit
policies, credit risk assessment, debt forbearance, allowance for loan
and lease losses and internal controls. The Complaint further alleges
that as a result of defendants' actions, plaintiff and the Class were