The original complaint charges Washington Mutual, Inc., and certain of its officers and/or directors with violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder.
The complaint alleges that throughout the Class Period, Defendants issued false and misleading statements regarding the Company's ability to grow in the face of any expected interest rate increases, as well as the Company's purported financial hedging strategies. On June 29, 2004, investors learned the truth about the Company after Defendants issued a press release announcing a very significant earnings and net income shortfall which far exceeded any guidance previously sponsored and endorsed by Defendants. According to this release, increases in interest rates had, in fact, impacted the Company's mortgage banking business to such an extent that earnings for the full year were revised to as low as $3.00 per share, compared to the up to $4.80 per share guidance provided at the inception of the Class Period. In addition, Defendants had not properly hedged the Company's interest rate risk such that is was now having a material adverse impact on Washington Mutual, Inc. Following the publication of this surprising and belated news, the Company's common shares fell to $36.50 per share, from a closing price of $41.31 per share on June 29, 2004; a decline of nearly 12%.
On December 1, 2004, the Court entered the Order appointing lead plaintiffs and lead counsel. On March 1, 2005, the plaintiffs filed a Consolidated Amended Class Action Complaint. The defendants responded by filing a motion to dismiss the Consolidated Amended Class Action Complaint on May 17, 2005. On November 17, 2005, the Court entered the Order granting in part and denying in part the motion to dismiss. The plaintiffs’ claims against certain individual defendants were dismissed. Plaintiffs’ claims on behalf of individuals who sold put options during the Class Period were dismissed. In June 2006, the plaintiffs appealed the district court’s partial
denial of their motion to dismiss a securities fraud action.
On October 14, 2008, defendant Washington Mutual filed a notice of bankruptcy.
On January 22, 2009, the Court entered the Mandate from the U.S. Court of Appeals. According to the Opinion, the Ninth Circuit vacated the order of the District Court with regard to the PSLRA scienter requirement and remanded the case to the district court for further proceeding.
On October 1, 2009, Judge John C. Coughenour granted in part and denied the defendants’ motion to dismiss Consolidated Amended Complaint. Certain defendants were dismissed and claims against the remaining defendants were allowed to proceed.
On March 22, 2010, the plaintiff filed a motion to certify the class. The motion was granted on January 6, 2011. On October 5, 2011, the plaintiffs filed a motion for or preliminary approval of class action settlement and approval of settlement notice. According to the Settlement Agreement, the proposed settlement is in the amount of $41.5 million to be funded by insurance proceeds. The settlement was preliminarily approved on December 2, 2011. The final settlement hearing is set for June 5, 2012.