The original complaint charges ABFI and certain of its officers and directors with violations of the Securities Act of 1933. ABFI's principal business is to originate, sell and service home equity and purchase money mortgage loans secured by residences. This suit asserts claims on behalf of purchasers of ABFI's notes, subordinated money market notes, subordinated debt securities or subordinated debentures (the "Notes") purchased during the Class Period.
Specifically, the complaint alleges that throughout the Class Period, defendants issued registration statements and prospectuses containing untrue statements and material omissions concerning the operations and financial results of the Company. In November - December of 2004 with respect to some or all of the notes, ABFI stopped paying principal or interest on maturity and stopped honoring checks written on ABFI money market accounts.
The complaint further alleges that on or around December 23, 2004, the Company issued a press release stating in part that the Company currently is unable to make any payments on Notes as they become due. The press release also stated that the Company "may seek protection under the federal bankruptcy laws or may be forced into involuntary bankruptcy." Members of the class have suffered damage as a result with their Notes declining materially in value or becoming worthless.
NOTE: American Business Financial Services, Inc. is no longer a defendant because it and a number of its subsidiaries filed for protection under Chapter 11 of the Bankruptcy Code on January 21, 2005, and this lawsuit automatically stayed as of ABFI.
On January 31, 2005, the plaintiffs voluntarily dismissed one of the individual defendants named in the initial complaint. On March 30, 2005, the two pending class actions were consolidated under Master File 05-CV-232, under caption "In Re American Business Financial Services, Inc. Noteholders Litigation. That day, the Court also filed the Memorandum and Order appointing John A. Malack, Michael R. Rosati, Virgil Magnon, Sabina Langdon and S.S. Rajaram, M.D. (Hayward Pediatrics, Inc.) as lead plaintiffs and approving their selection of Berger And Montague, P.C. as lead counsel. On November 16, 2005, the plaintiffs filed an Amended Consolidated Class Action Complaint. On February 16, 2006, the defendants filed a motion to dismiss, and on January 9, 2007, U.S. District Judge Thomas N. O’Neill Jr. issued the Memorandum and Order granting in part and denying in part the defendants’ motion to dismiss. On June 5, 2007, the defendants filed a motion for judgment on the pleadings, and on July 26, 2007, Judge O’Neill granted in part and denied in part the defendants’ motion for judgment on the pleadings. On October 1, 2007, the plaintiffs filed a motion to certify the class, which was approved by the Order dated October 3, 2007. On April 4, 2008, the Judge Thomas N. O’Neill, Jr. approved the plaintiff’s motion for approval of the notice of pendency of class action. On September 19, 2008, the settlement in the amount of $16,767,500 was preliminarily approved.
On November 3, 2008, the Settlement Hearing was held and Judge O’Neill approved the settlement. On November 21, 2008, the Court entered the Memorandum and Order dismissing the Amended Complaint with prejudice. The plaintiffs’ counsel is awarded 25% of the settlement in fees and $267,946.73 in reimbursement of expenses. On December 8, 2008, an opposition to the settlement was filed, motioning for the replacement of the class counsel based on fraud and misrepresentation. On December 22, 2008, a notice of appeal was filed. On January 7, 2009, the opposition was denied.
On June 4, 2009, the Court entered the certified copy of the June 3, 2009 Order from the U.S. Court of Appeals for the Third Circuit. According to the Order, in accordance with the agreement of the parties in the above-captioned case, the matter is hereby dismissed pursuant to Fed. R. App. P. 42(b), without cost to either party.