According to a press release dated June 21, 2006, Defendants Dynex Capital, Inc. ('Dynex') and Merit Securities Corporation ('Merit ') (collectively, 'Dynex'or 'defendants') move for reconsideration of or, in the alternative, for leave to take an interlocutory appeal from my Opinion and Order dated February 10, 2006 denying in part defendants' motion to dismiss. Dynex's motion for reconsideration is denied. The judge hereby certified this matter for interlocutory appeal pursuant to 28 U.S.C. § 1292(b).
As previously disclosed by the Company’s FORM 10-Q for the quarterly period March 31, 2006, on May 31, 2005, the plaintiffs filed an amended class action complaint. The amended complaint dropped all state common law claims but added federal securities claims related to the MERIT Series 12 securitization financing bonds. On July 15, 2005, the defendants moved to dismiss the amended complaint. On February 10, 2006, the District Court dismissed the claims against Messrs. Benedetti and Potts, but did not dismiss the claims against Dynex and MERIT. On February 24, 2006, Dynex and MERIT moved for reconsideration and interlocutory appeal of the District Court's order denying the motion to dismiss Dynex and MERIT.
The original class action lawsuit on behalf of all persons and entities that purchased Merit Securities Corporation Collateralized Bonds Series 13. The claims asserted arise under Sections 10 and 20 of the Securities Exchange Act of 1934. Named as defendants in the suit are Dynex Capital, Inc. (Merit's parent corporation), Merit Securities Corp., and Greenwich Capital Markets, Inc.
The complaint alleges that, during the Class Period, the prospectus disseminated by Merit, in connection with the offering of the Bonds, contained materially false and misleading information concerning the manufactured housing loans originated during 1997 through 1999, which were pooled together to serve as collateral for the Bonds. These misstatements included that the Bonds were originated in compliance with underwriting standards, when in fact, those procedures were largely disregarded. These misstatements resulted in an artificially high credit ratings and pricing. It is further alleged that the Bonds prices were inflated due to misrepresentations of the true repossession rates. The truth only began to emerge, following the disclosure of corrected repossession and foreclosure rates on February 24, 2004, as the Bonds were dramatically downgraded. Moreover, ensuing disclosures in April 2004 revealed that even Merit's "current manufactured housing collateral may be deemed impaired."
On August 06, 2008, a second amended complaint was filed. Lastly, on August 19, 2008, a stipulated scheduling order was entered. The order announced the deadlines for the defendants and plaintiffs to file any motion to dismiss by September 11, 2008 and October 16, 2008, respectively.
On October 19, 2009, an order in response to Defendants' motion was granted in part and denied in part. With respect to such claims and the corresponding Section 20(a) claims, Defendants' motion to dismiss was denied. With respect to claims of securities fraud based upon other allegedly false and misleading statements, Defendants' motion to dismiss was granted.
On October 19, 2009, Defendants' motion to dismiss was granted in part and denied in part. With respect to such claims and the corresponding Section 20(a) claims, Defendants' motion to dismiss was denied. With respect to claims of securities fraud based upon other allegedly false and misleading statements under Section 10(b), Defendants' motion to dismiss is granted.
On March 07, 2011, the Lead Plaintiffs’ motion for class certification was Granted by the Court.